1. Agree on the purpose.  Why does your organization want an endowment? You may be surprised that Board and staff have different ideas about the role an endowment would play. Is it to provide some relief from fundraising? Pay for new programs? Start a satellite office?  What you use it for will help you figure out how big your endowment should be.

2. Authorize the endowment. This is a Board move, signaling its commitment to create the fund and hold the money in perpetuity. The endowment becomes part of their financial responsibility, and will be included as a separate line item in financial reports.

3. Create an endowment policy. You must create a policy that specifies how the interest income from the endowment will be used. The challenge of creating a policy is to make it broad enough to meet your needs without being too vague. Take time to think through the details, and include how the endowment will apply to expected change and growth.

4. Create an invasion policy. It sounds violent, but “invasion” refers to using the endowment principle. You wouldn’t do so unless circumstances are dire or you would be using it to pay for another long-term asset, like a building. Most policies stipulate that the principal can only be used if the organization is in danger of closing. Some Boards rule that the principal can be used to balance the budget for one or two years, and others rule that it can’t be touched at all, ever. It’s also important to detail how much of the principal can be taken and when it must be paid back. Last, invasion policies should specify who has the authority to decide whether to use the endowment principal—the whole Board, a percentage, the executive committee?

5. Develop a gift acceptance policy. You may have a gift acceptance policy in place before you start an endowment. But whether you’re adapting an existing policy or starting fresh, you’ll need to decide what types of gifts you’ll accept, who has the authority to accept them, and under what circumstances. Will you take buildings? Land? Expensive collectibles you may not be able to sell? If you decide to accept stock, are there sectors or companies that you don’t want to support? Complications associated with non-monetary gifts are why some experts recommend nonprofits start with a policy to accept cash, securities, and life insurance only.

The gift acceptance policy is also where you’ll have to explore the possibility of restricted gifts. If someone wants to endow a particular program, what will you do?

6. Establish an investment policy. An investment policy will state whether you’ll invest entirely for income or you’ll have a mix of investments to grow the principal and income. Will you require socially responsible investing, choosing screens to filter out tobacco or gun companies, or those that don’t support unions, for example? And how will you set or rank these priorities?

7. Create an investment committee. Once your endowment is established, your Board should create an investment committee. Non-Board members such as donors can be part of the committee as well. Although the committee manages the fund, the Board must still take responsibility for monitoring it. It’s important to have strong faith in the knowledge and intentions of the committee.

With your endowment authorized and policies in place, you can announce the fund and start including it in your fundraising efforts. You can also conduct an endowment campaign, with specific goals and timelines, which we’ll cover next week.

Social justice organizations work for systemic social change based on principles of equality, solidarity, and human rights. They include groups focused on progressive taxation and legislation and the rights of vulnerable and marginalized populations. They strive to eliminate disparities in areas such as health, housing, and education, and to create a level playing field for social and economic opportunity.

The report, published by the Foundation Center, analyzed the giving of 54 foundations that actively support social justice organizations. Grants from these foundations fell to below 2007 levels in 2009, the researchers say, and they’re unlikely to bounce back until at least 2015.

Social justice funding was on the rise in the first part of the decade, spurred in part by a “sense of optimism for the future with the start of the Obama administration,” according to a previous Foundation Center study published in 2009.

The new report, Diminishing Dollars, found that smaller foundations suffered the biggest losses and were most likely to have decreased giving for social justice. Grantees in the field are also typically small, community-based or member-led organizations without substantial financial resources. They have small, dedicated funder bases and high vulnerability to funding cuts. The report’s authors write that these groups “often lack the capacity to compete with larger nonprofits for public funds or for funding from more ‘mainstream’ foundations as the environment becomes both increasingly competitive (due to scarce resources) and focused on scalability and outcomes.” They rely on the funders that are struggling most to recover in the current economy. According to projections, foundations in the field with less than $50 million in assets will have 17 percent less in 2015 than they did before the crash.

The report notes that in response to the downturn, many foundations in the field have changed their processes and policies. They are spending less, either by changing review criteria, refusing unsolicited proposals, or funding only existing grantees. For this reason, the authors write, newer organizations and those seeking new funders will have a tough time securing grants in the next few years.

It’s no secret that the wealth gap is increasing, along with the social disparities it creates. Given the grim outlook for grants, social justice organizations will likely have to turn to non-foundation funding if they intend to stick around. It will become even more critical for most to build a solid base of individual donors who support their goals and means. At the same time, other mission-driven nonprofits will need to incorporate social justice advocacy and organizing into their work, and bring their funders along.

Read the Foundation Center report, Diminishing Dollars, here.

An endowment is money set aside to invest in mutual funds or certificates of deposit. Endowments are permanent savings accounts, and nonprofits that intend to stick around use them to generate income for ongoing needs and capital for long-term growth.

To start an endowment, an organization puts aside money as principal and a small percentage of that principal (typically five percent) is used for annual needs. In years when the principal increases more than that percentage, the organization has more money it can use. When the principal doesn’t increase, the nonprofit can still take out five percent of the asset without affecting the principal too much.

During a market crash, even the principal may lose value, and there may be nothing to use for operating expenses. With a good mix of investments, an endowment can usually tolerate economic flux, but it should always be part of a nonprofit’s diversified income stream.

In addition to boosting annual income and long-term financial security, endowments are useful for several reasons. Most importantly for some organizations, endowments enable people to make larger gifts than they would through an annual fund. Donors who make large one-time gifts appreciate that their gift is an investment and will help support a nonprofit’s long-term growth.

Having an endowment is also very important if you expect your organization to be the recipient of bequests. For the most part, people who write nonprofits into their wills want their donations to go into a permanent fund.

One potential benefit of an endowment is that it can provide unrestricted income for operating or program needs. If donations to the endowment are no-strings attached, they help nonprofits be self-determining. Endowment income can be used to prioritize operating or program support, invest in capacity building, and respond to new opportunities. Sometimes principal from endowments can be used for capital purchases and loan collateral as well.

But not always. There have been notorious lawsuits when endowment gifts are linked to certain donor stipulations with which organizations have been accused of not complying. This can happen when a donor dies and no terms were developed for changing how the funds can be spent.

There are plenty of other reasons not to start an endowment. First, managing an endowment is more work for staff and Board. Investment policy can also be contentious, and leaders may not agree about controversial investments. Most importantly, like any investment, endowments represent a financial risk, and as we saw in the post-Madoff years, they can disappear in a flash.

Some critics point to millions of dollars sitting in the endowments of large institutions, suggesting that the practice disconnects nonprofits from their constituencies and compromises their missions. If a nonprofit has that much money, they say, it should be doing more.

More ideologically, endowments are perceived by some as contributing to the privatization of services that our tax dollars should be paying for. Endowment money is diverted from the tax stream but it isn’t used directly for tax-exempt activities.  Should nonprofits be building tax-free nest eggs to compensate for government spending cuts?

Nonprofit leaders considering starting an endowment should carefully consider the pros and cons. If they wish to forge ahead, they’ll also need to agree to how their endowment will be used—open a new office? Expand a program? Raise salaries or staff retirement benefits?

Next week, the logistics of starting an endowment. In the meantime, we’d love to hear from you. Experiences with endowments? Questions or opinions?

This week, the Susan J. Komen Foundation brought another lesson in how a lack of open communication can result in massive public backlash.

On Tuesday, the story broke that Komen would withdraw its longtime funding of many Planned Parenthood affiliates, due to a new policy that prevents grants to organizations under investigation.

Since early fall, Planned Parenthood has been the target of an investigation initiated by Republican Representative Cliff Stearns of Florida into whether government money was spent on abortions.

This morning, Komen Foundation CEO Nancy Brinker released a statement reversing the decision to defund Planned Parenthood, after an enormous outpouring of criticism, online organizing, and a direct request from 26 Democratic senators.

The statement included a public apology for what Komen described as “recent decisions that cast doubt upon our commitment to our mission of saving women’s lives.” Although it goes on to say that “politics has no place in our grant process,” and that only “criminal and conclusive” investigations will affect its funding decisions, it’s unclear whether the foundation is really backing down. Just yesterday, the foundation said the investigation was not the cause of the cuts, and that the real issue was that Planned Parenthood did not directly provide mammograms. The statement issued this morning doesn’t address that concern at all. While some are celebrating the statement as a victory, others are saying it leaves open the possibility that Planned Parenthood’s future grant applications could be rejected.

But even before its current skirting, the foundation made a grave error in delaying its response to an angry public. By not addressing its decision in due time, and letting its critics speak for it, Komen once again demonstrated how a lack of a communications plan can crush an organization’s reputation in a matter of days.

Abortion is clearly one of the most politically divisive issues in the country, and Komen also received praise for its actions from anti-abortion advocates. But regardless of our personal positions and whether or not our work deals with hot button issues, we can all take another lesson from Komen in what not to do in a crisis: stay silent.

In the age of social media, word travels fast. Within a few hours of the AP story breaking, Planned Parenthood sent a fundraising email out to its network, asking supporters to replace the money that Komen pulled for breast cancer screenings for low-income women. It was only minutes before Facebook and Twitter blew up with pro-Planned Parenthood, anti-Komen response.

For two days, the Komen Foundation said zilch. No press release, nothing on the website. It didn’t update its Facebook page, although it did delete critical comments and add a post welcoming Energizer as a new sponsor (leading to a flurry of negative comments on Energizer’s Facebook page and a call to boycott the company.) It didn’t respond via its active Twitter feed,  although somehow it found time to tweet about prostate cancer found in a mummy.

Komen officials ended their silence on Thursday, attempting to manage public outrage. In a conference call with the media, Brinker said the decision was due to changes in its grantee selection process and had nothing to do with Planned Parenthood’s role as an abortion provider.

Brinker’s explanation was not only late, but evasive. It was already clear that the decision was related to a politically motivated investigation, not a simple change in administrative process. A top public health official at Komen even resigned over the decision. By not responding to the criticism and then pretending the decision was unrelated to such a highly controversial social issue, the foundation broke the trust of many of its supporters.

This isn’t Komen Foundation’s first bad PR move. Remember the Buckets for the Cure campaign? Or when the foundation sued smaller nonprofits for using the phrase “for the cure”?

How will the Komen Foundation move forward in the face of an even bigger blowup? It will have a lot of work to do to repair its image. But as a lesson in the value of preparation, honesty, and respect for people on all sides of an issue–hopefully the third time’s a charm.

Ever seen those job descriptions with 200 job duties and 300 qualifications and nothing about the people or the purpose? Gee, you probably said, sounds fun. I’d love to work there.

You don’t want the perfect jobseeker to pass your job posting by. And you don’t want robo-resumes from underqualified job candidates. How can you craft a job description that helps, not hinders, the hiring process?

Writing a job description is marketing. It’s  selling your organization–mission, culture, and brand—to the candidate you want.

Last week we talked about where to post your opening. Today, some dos and don’ts of the standout job description.

1. Headline the mission of your organization. Jobseekers should understand your purpose and values right away.

2. Briefly explain your structure and operating model. Include budget, staff size, where your money comes from and your key programs.

3. Describe the vibe. Give jobseekers a sense of your organizational culture. Everyone wants a job that’s fun and interesting. (But don’t lie. You might need to actually make the job fun and interesting first. And don’t use the word “dynamic.”) Market what matters, like “we brainstorm over Thursday night tacos and Friday is Bring your Dog to Work Day.”

4. Who is your ideal candidate? Craft one good sentence about the skills, personality, and background you’re hoping to find.

5. Thoughtfully frame the job. State the key responsibilities, framing them as opportunities rather than drudgery.

6. It’s a description of the job, not the person leaving it. A new hire is an opportunity to thoroughly analyze and articulate what your organization needs. Your mental starting point shouldn’t be “everything the last guy did.”

7. Don’t be vague. “Support the program directors in accomplishing their goals”? Waste of space.

8. You’re not a sweatshop. Don’t list three pages of responsibilities and qualifications. Superwoman doesn’t need a job, so be realistic. (While we’re at it, you’re also not a circus, so let’s not mention juggling, m’kay?)

9. Explain the relationships. Describe how the position works with others, not just through reporting or supervising, but also through collaboration and coordination.

10. A degree is just a degree. Consider honestly whether you need someone with a certain degree. Liberal arts education has a long history of training people to think and write well. Does it really matter whether the candidate got her master’s in Cuban poetry? Probably not, but it does matter that she can analyze questions, articulate ideas, understand people, and solve problems.

11. Technology is transferable. Don’t include a long list of  software applicants must know. If you chose your technology well, it can be taught. If you choose your candidate well, she can be taught.

12. List a salary range. Most useless expression in a job description? “Salary commensurate with experience.” Why waste a candidate’s time, or your own?

13. Brag on your benefits. List the key employee benefits your organization offers, like health insurance, retirement, and professional development.

14. Who you gonna call? Out of respect for candidates and their former employers, don’t ask for references with the resume. Jobseekers shouldn’t have to ask for references for every job they apply to, only those for which they’re being considered. But prepare them: “References will be required from candidates selected for interviews.”

15. Shakespeare would write an awkward cover letter.  If you don’t want to read “I believe my skills will be an asset to your blah, blah…,” then say what do you want to read. The cover letter should be a writing sample and an introduction to the candidate as a person. Ensure you don’t get formulaic cover letters by giving guidelines. Organizer: “Describe your vision for racial justice.” Artistic director: “What is your favorite opera and why?” Health counselor: “In your experience, what are the best pathways to promote smoking cessation and dietary change?”

Agree? Disagree? Got any tips to share for nonprofit job descriptions?

Battin rated 31 sites from both the employer’s and the jobseeker’s perspective, naming Idealist the best all-around site, OpportunityKnocks the best nonprofit site, and Simply Hired the best commercial site.

If you’re searching for a nonprofit job, about to start recruiting, or haven’t found the candidates you want, Blue Avocado’s list is a good place to start. Each site is described in terms of ease of navigation, free vs. paid services, numbers of job listings, and whether it posts jobs directly from employers or aggregates jobs posted elsewhere. The list also cites additional jobseeker tools to create cover letters, set up alerts for new listings, and track applications. Some sites allow employers to search resumes and purchase recruitment services as well.

Should you even post your job opening on a national site? Some nonprofit leaders hesitate to post jobs on  Idealist and OpportunityKnocks because they don’t think the job is “big enough” to attract candidates to move from another location. But keep in mind that jobseekers move for all kinds of reasons besides a paycheck—for a spouse’s job, to be near aging parents or new grandkids, or for the love of barbecue. Also, local talent may be looking for the right opportunity in a wider market because they haven’t found it in yours…yet.

In addition to dedicated job websites, you’ll want to increase effective exposure by publicizing your job opening through more targeted channels. We recommend:

1. Nonprofit associations, like ours. Alliance members get free job listings on our site, and non-members pay $65. Our website gets thousands of hits each month by visitors from all over the Mid-South.

2. Field-specific listservs and newsletters. If your organization is part of a national coalition, membership association, or trade organization, send your posting to its listserv or member newsletter. If job candidates are likely to belong to a professional society (like the Association of Fundraising Professionals or the American Dietetic Association,) look for their job listing services as well. Don’t forget issue-area listservs and Facebook groups through which you’d find candidates who are passionate about your cause.

3. Consultants and consulting networks. Just because someone is working as a consultant doesn’t mean they’re not open to the right staff opportunity. If you’ve worked with a really good grant writer or HR consultant, or hear of someone who has, let them know you’re looking. Circulate the job posting to consulting firms as well (but be clear in the description you are hiring for a staff member, not a contractor.)

4. Academic departments at local colleges and universities. Sure, you can send your posting to Career Services. But don’t forget about faculty, staff, graduate students, research assistants, alumni, and others. Most academic departments have their own internal listservs that reach a wide group of current and former associates. Need a communications director? Let English and journalism departments know. A policy analyst? Get in touch with the political science folks. A health educator? Send the posting directly to the School of Public Health.

5. Your own website. Don’t hide job announcements deep in About > People > Opportunities. Put a button on your front page that says “We’re hiring a development director” and links to a detailed description. Also post the information on emails, blogs, your Facebook page, and Twitter.

Next week, tips for effective job descriptions and some great examples.

Can you do something about it?

According to a large survey by the American Psychological Association, 75 percent of Americans say that money is a great sources of personal stress. A widespread lack of financial security, say Gallup scientists, is one of the most critical factors influencing peoples’ quality of life and sense of wellbeing.

For most nonprofit leaders, the idea that financial stress is not just a personal problem but also an organizational problem—-an expensive one—might not be so obvious. But financially stressed workers are less productive on the job, and they’re on the job less.

People who have financial stress have higher levels of insomnia, ulcers, migraines, back pain, anxiety, depression, and heart attacks. Although it’s hard to monetize the links between money and stress, MetLife research estimates the incremental medical costs of a financially distressed employee at $300 a year.

According to the Gallup studies, the annual per-person cost of lost productivity is $28,800 for workers with the lowest wellbeing scores. For workers who are at the midpoint of what they call the “struggling” zone, the cost is $6,168. For employees with the highest levels of wellbeing, the cost of lost productivity is only $840 a year.

Another study, by the Personal Financial Employee Education Foundation (PFEEF), found that 30 to 80 percent of employees in financial distress spend time at work dealing with their personal financial problems, depending on the workplace. For this group, the average number of hours spent on dealing with financial problems at work is between 12 and 20 hours a month.

You might think the problem is simply pay—not enough of it. According to the research, however, wellbeing isn’t directly correlated with salaries or pay raises, but with overall financial security. Although salary is part of the equation, it’s this sense of security that is linked to fewer sick days and lower health expenses. Workers who feel secure also have less “presentee-ism,” the problem of being unwell, unfocused, and unproductive while on the job.

With mounting evidence that financial stress takes an enormous toll on workplace productivity, more employers are seeking ways to help their workers.

Employee wellness programs began as a way for employers to try and lower health care costs. Many organizations found that subsidizing gym memberships and smoking cessation programs and offering other preventive incentives improved workers’ health and decreased their medical expenses.

But as the definition of wellness expands to include financial security, wellness programs now include those that help employees budget wisely, build savings, and avoid crushing debt.

So what can employers do if financial stress is affecting employees and the bottom line?

1. Identify the problem. Survey employees about financial stress. PFEEF offers a free tool to measure financial stress.

2. Bring in information. Hold seminars to help employees learn the basics of financial literacy or learn more about specific topics such as managing debt and preparing for retirement. (Be careful whom you choose–presenters should not be from companies that want to sell you something!)

3. Introduce a financial wellness program. Once you understand how financial issues are impacting your organization, you may want to take a strategic, long-term approach to the problem. A financial wellness program provides multiple resources to help employees resolve and avoid financial stress. These programs include web-based education, live workshops, and one-on-one credit counseling and financial coaching. The following resources can help:

The National Endowment For Financial Education website features information about financial education programs and publications.

The Personal Finance Employee Education Foundation site includes extensive research articles, tools for assessing financial health, and resources for workplace financial wellness programs and services.

The National Foundation For Credit Counseling is a nonprofit providing credit management information, including a directory of nonprofit credit counseling agencies across the country.

America Saves is a national nonprofit that provides information about savings topics such as finding money to save, building wealth through homeownership, and compound interest.

The American Savings Education Council, a program of the Employee Benefit Research Institute Education and Research Fund, offers publications and interactive online tools such as a retirement savings calculation worksheet and the Retirement Personality Profiler.

 The Certified Financial Planner Board of Standards provides consumer information about financial planning topics and information about how to find a certified financial planner.

 Financial Security in Later Life is a site developed by the Federal government and many universities that includes a variety of online financial education resources, with a focus on planning for retirement and long-term care.

Investing For Your Future is a detailed online home study course in basic investing developed by a consortium of ten land-grant universities.

Also, the proposal deadline is two days away.

Most of us have found last-minute grant opportunities and asked ourselves if we can pull off a proposal in time.  Sometimes it pays off. Sometimes it’s a flop, a waste of resources, a futile exercise in exhaustion. We pull staff from other work, scramble to find current data, make too-quick program decisions, dash off messy, unclear prose.

Of course the best way to avoid eleventh hour grant writing is to conduct regular funding research and have a grant writing plan in place.  But when a new opportunity with a quick turnaround appears, what should we do?

1. Confirm the deadline and the form of submission. (Many foundations still require hard copies of proposals sent through the mail.)
2. Determine whether a letter of inquiry (LOI) or short pre-proposal is requested instead of a full-length proposal. A LOI is not only shorter, but also requires less narrative and budget detail.
3. Carefully read and think through the questions or guidelines you’ll need to answer or address, and what it will take to do this.
4. Ask if major decisions need to be made about a program or service for this submission. Consider what you need to know to make the decisions, who should be involved, and how much time is needed.
5. Determine how much of what you need to write is already written. Can you draw most of the content from another proposal?
6. Estimate how much time is needed to write a strong proposal or LOI, determine who would write it, and consider it in the context of this person’s other work. Is this proposal worth prioritizing? Don’t forget to allocate staff time for proofreading and submission.

One way to be prepared for last-minute deadlines is to establish and maintain a grants file to house and organize your grant writing information. Keep the contents of this file updated and you’ll have a solid foundation on which to draft proposals, even with little time to spare. Having your ducks in a row can help you decide whether an unexpected deadline is worth the investment, and can take some of the pain out of the process if you do apply. You should include:

1. A copy of each LOI and proposal you’ve written in the last year or two.
2. A copy of each grant report from the last year or two.
3. A list of funders and grants awarded over the last three to five years.
4. Your latest Annual Report.
5. Your current strategic plan.
6. A summary of current, accurate, targeted needs data, e.g., unemployment levels in your county, disease prevalence, college attrition rates. Don’t forget sources!
7. A summary of impact data, gleaned from evaluations and assessments of your programs and services.
8. Short descriptions and bios for all key staff, including responsibilities and qualifications. Also keep your org chart current.
9. Current Board list.
10. Annual operating budget and income/expenses for most recent fiscal year and for current year-to-date.
11. Itemized program/project budgets with current sources of committed and pending revenue.
12. A copy of your 501(c)(3) confirmation.
13. Your most recent audited financial statement or Form 990, depending on budget size.
14. Letters of agreement from collaborating organizations.
15. Press clippings, notice of awards, or Web links to information on your work.

Happy New Year, from all of us at the Alliance!

According to the Alliance’s new report on Mid-South nonprofits and the economy, local organizations have yet to see any of the upswing that financial analysts say is underway. Charitable giving is still depressed, poverty and unemployment are high, and the public finance crisis has cut millions of dollars from nonprofit programs.

Downstream and In Demand III is based on a survey of 116 local nonprofit leaders about how their organizations and operating environment were affected by the recession in FY 2011. As in past years, rising poverty and another wave of funding cuts have strapped nonprofit budgets. More than one-third of respondents told us they reduced or eliminated services this year, and thirty percent ended the year with an operating deficit.

Our research shows that Mid-South nonprofits are tenacious and innovative in dealing with tough times. Their leaders have taken bold steps to analyze program costs and make strategic budget decisions. They’ve invested in staff and technology, honed their marketing and fundraising functions, and sought out partnerships and collaborations that cut costs and increase impact. Nonetheless, most are worried about how they’ll continue to serve their clients under current conditions, and how the Mid-South community will contend with persistent poverty and a frayed safety net.

Key findings from Downstream III include:

• 60% of respondents lost a major funding source this year.
• 50% of participants experienced reduced funding from a long-time funding source this year.
• Most funding cuts in FY 2011 were from Federal grants and contracts and United Way.
• 66% of participants have less than six months of cash reserves available, and almost one-third of these have less than one month of reserves.
• More nonprofits are turning to earned income to compensate for shrinking funding. 35% of participants reported that earned income  increased as a proportion of total revenues in FY 2011.
• Only 24% of respondents developed a contingency plan in FY 2011, suggesting that many others have not prepared for an uncertain future.
• Government contracts pose an increasing challenge for organizations that rely on them. More than 80% of participants with government contracts were not fully reimbursed for the cost of services they provide, and many others say late reimbursement and mid-stream cuts significantly affected their operations.
• Staff raises and benefits were reported as a crucial means of maintaining service quality, but the ability to invest in these is strongly correlated with size. Small organizations were much less likely to have given raises or hired new positions, and significantly more likely to have reduced or frozen salaries.

Want to know more about how the recession has affected local nonprofits? Check out Downstream and In Demand III to learn more about funding trends in the Mid-South and their implications for our community. Find out how nonprofits are working to secure their missions, preserve critical programs, and serve more people, and what’s needed from funders, public officials, and others to sustain their work. We welcome your thoughts and questions on the report and we’d love to hear about your own experiences with recession-era challenges and strategies.

Wishing you and your loved ones very happy holidays,  from the Alliance for Nonprofit Excellence.

With continued high unemployment and the end of Federal stimulus programs, states will have cut a total of $38.5 billion from only three programs—social services, Medicaid, and education—in FY 2011 and 2012.

Even when employment rebounds, it will take several years for state budgets to recover, say the authors of The Public Finance Crisis: Can Philanthropy Shoulder the Burden? It will take at least a year for the benefits to translate to more taxes for state budgets, and another year or more for them to be reflected in state expenditures.

The report, developed by international fundraising and philanthropy consulting firm Changing Our World, Inc., analyzes the dramatic changes in public funding affecting the nonprofit sector in the recent years of the recession.

In the Mid-South, Tennessee had a total budget gap of $1 billion and Mississippi had a $716 million budget gap in FY 2011. Arkansas is one of only a handful of states in the country not experiencing budget shortfalls.

To make up for the economic loss from state budgets, private giving to nonprofits would have had to increase by 30 percent in 2011 and by 60 percent in 2012. Clearly private grants and donations haven’t compensated for state budget crises. Between 2008 and 2010, annual private giving fell by $13 billion. Foundations, whose assets and revenues are largely tied to investment portfolios, lost $150 billion in assets and reduced giving by 13 percent during the recession.

The report provides an excellent timeline of the recession’s impact on nonprofits and an in-depth analysis of the various government effects on nonprofit revenue flows and strategies. It discusses the drying up of the Federal financial stimulus, how budget cutbacks affect various nonprofit sectors, and what it would take to relieve the shortages through private giving.

We’d like to think this research could raise awareness among government leaders about the nonprofit effects of state budget problems, given that nonprofits comprise eight to ten percent of the workforce in most states. The effects of the downturn on the sector are unprecedented, and the authors make a convincing case that major shifts in nonprofit funding are unavoidable.

Unfortunately they only offer the same old advice to nonprofit managers to diversify funding sources, measure impact, and hire volunteers. It’d be nice to see an overlay of state and Federal tax structure revision strategies on the state-nonprofit finance matrix, especially since so much nonprofit advocacy is now focused on maintaining tax breaks for the wealthy to preserve charitable deductions.

The Alliance has just released Downstream and In Demand III, our updated report on how the recession has affected Mid-South nonprofits. We’d love to hear your comments on The Public Finance Crisis: Can Philanthropy Shoulder the Burden? and your own experiences with government funding.