Message To Not-For-Profits: Get Smart

Despite the economic downturn, not all is bleak for not-for-profit organizations, which take on some of New Haven’s most important work.

Yes, federal and state money — part of the lifeblood of these organizations — has been drying up. And poor people and others hit by the economic downturn are turning up in greater numbers for help, more than many agencies can handle.

On the other hand, the agencies have gotten smarter. They used cash reserves to ride out the downturn of the late aughts. They’re managing their money well, keeping plenty of cash on hand. A large majority are avoiding cutting services.

Those findings appear in a report released Tuesday afternoon by the Community Foundation For Greater New Haven. The report was a subject of a 5 p.m. community summit (aka ​“convening”) at the Lawn Club on Whitney Avenue Tuesday afternoon to discuss the present and future of area not-for-profits. (Scroll down in this story for a live-blog report. You can also follow Lee Cruz’s live tweets here.)

Tax-exempt charitable and educational organizations are big business in the region. Not counting Yale University and Yale-New Haven Hospital,: Greater New Haven has 3,291 tax-exempt organizations under 501(c)3 of the federal code, generating some $3.6 billion in annual revue, according to the report. The breakdown: We have 200 private foundations, 356 churches, 882 public charities with no assets and income; and 1,016 public charities with either assets or income. The issues they address range from the arts to the environment, education to health and human services and children.

Entitled ​“State of the Nonprofit sector in Greater New Haven 2013,” the new report includes a survey of area organizations. The survey found that only 15 percent of not-for-profits dipped into cash reserves in 2012 (as opposed to 28 percent in 2009). Some 15 percent reduced or eliminated services, compared to 30 percent in 2009. Close to half (46 percent) ended the year with a surplus, compared to 28 percent three years earlier. That’s all despite the fact that a full 95 percent reported their clients facing harder financial conditions, and 60 percent (compared to 40 percent in 2009) couldn’t meet all the demand. Of agencies relying on state money, 86 percent reported having funding cut.

Click here to read a report summary.

Click here to read the whole report.

One upshot of the report: Not-for-profits have to continue getting smart about managing their money, experimenting with new business models. They’re starting to, according to the survey: 88 percent of respondents ​“have or are working on strategic plans,” for instance; 56 percent ​“plan to collaborate to improve services”; and 35 percent ​“plan to change the way they raise and spend money.”

The community summit meeting Tuesday afternoon went beyond the report and focused on problems not-for-profits are facing with government funders, as well as efforts to get donors to look beyond simplistic charts showing percentages of an organization’s budget that go toward ​“overhead.”

Live Blog

The Tuesday afternoon gathering was one in a series of ongoing community ​“convenings” held by the Community Foundation to address big issues in town. Click here, here and here for reports on previous convenings.

The star guest at today’s event: Jacob Harold, head of GuideStar USA, a top information clearinghouse and partner for the country’s not-for-profit sector. (It’s one place people go to look out the tax form 990s that not-for-profits file with lots of juicy financial info.)

5:38 p.m. The Lawn Club ballroom is filled with hundreds of people for this event. WIll Ginsberg, CEO of the Community Foundation is giving an introductory ​“state of the sector” statement. ​“We’re fortunate to live in a place where the sense of community … is so palpable. It’s something we feel every day,” he says. How do we ​“act on our sense of commitment and connection to one another?” That’s the basic question tonight, he says.

5:43 p.m. The not-for-profit sector is ​“the vehicle through which we choose to contribute to one another” rather than merely accumulate personal wealth. The Community Foundation doesn’t just give out money to that sector’s groups; through events like these, and its new report, it seeks to study the sector and support its growth with analysis and good ideas.

5:47 p.m. Some report takeaways, according to Ginsberg: We’re ​“blessed” with a thriving not-for-profit sector. Not-for-profits are gradually become ​“more regional,” meaning more of them are opening in or branching out to suburbs. BIg challenge: How protect the sector’s ​“funding base.”

5:49 p.m. The not-for-profits are basically managed well. (See data in the main body of this story above.) They weathered the recession ​“storm” by improving how they operate.

5:52 p.m. ​“Disquieting” finding: Only a quarter of the not-for-profits surveyed plan to add staff. And demand for help from the public is increasing while government money shrinks. ​“All is not well” in the sector: demand is growing faster than ​“the capacity to handle those demands.”

5:59 p.m. Guidestar’s Jacob Harold takes the lectern. He has been promoting a message recently: Don’t judge not-for-profits by how much they spend on overhead. His group is a major source of info to donors, a major collector of tax forms filed by not-for-profits and other metrics. ​“Percentage of budget spent on overhead” (not those exact words) has for years been a key phrase donors look at it. The percentage is supposed to be low. Guidestar has been promoting the idea that that percentage can be misleading, that what counts as overhead can actually have a lot to do with getting work done and helping people. (The reverse is true too.) The group has a campaign entitled ​“The Overhead Myth.”

6 p.m.: Harold begins by asking us to rethink of an object we dismiss as ugly: scaffolding. ​“Scaffolding is sign of human progress. A sign of human progress, too.” And he shows slides of artist scaffolding (like one previously used at the Washington monument during renovations) that can actually be ​“beautiful.” ​“Aesthetic concerns aside, scaffolding allows us to do things.”

The connection to not-for-profits is this question: ​“We can building a stronger information scaffolding for social change?”

Well, information is cheaper than ever. So is collaborating with others (Arab Spring, for instance), entering the info dissemination business, and keep people accountable through the use of information.

6:04 p.m. Needed: an ​“information infrastructure” for the not-for-profit sector. For starters, to help us know which not-for-profits are ​“extraordinary” and which .. aren’t. And also: Some donors accomplish more than others do.

6:06 p.m. Key types of not-for-profit sector info: About organizations. About issues they address. About ​“interventions” (what you can do to make the world a better place, like having nurses visit kids more). About where ​“money goes” to ​“power these organizations.” How do we make good use of this information?

6:08 p.m. ​“Rules” for not-for-profit data. ​“No numbers without stories.” ​“No stories without numbers.” He notices how that tax form 990 has been the main way we’ve been getting our info about not-for-profits; he puts a messy one on the screen, which draws knowing laughs among the hundreds present. These forms, he says, don’t ​“tell the whole story” about how organizations work.

6:11 p.m. He shows examples of pie charts that are common when people analyze these forms. Charts that break down the percentage of budgets that go to ​“overhead.” yes, sometimes those charts are important, he says: Charts showing 90 percent of money going to overhead can lead to examples of outside fraud. That’s important But the analysis is overused and too simplistic, he said. In fact, often organizations need more computers or other equipment, say, in order to do their job better and help more people.

6:22 p.m. We need a new way to get lots of information, with more depth, to the three major players in the not-for-profit world: the donors, the groups they donate to, and the people those groups help. Reams of ​“better, faster, data” is available, from organizational profiles to independent analyses, etc., on the web (from journalists and the financial services industry, for instance), and needs to get to all three groups of players in a ​“continuous” loop.

6:24 p.m.: Floor opens to questions. A Teach Our Children member asks about not-for-profits reaching out to schools; students should know that ​“working for a not-for-profit is a career choice” and ​“what that path looks like.” Harold: 10 percent of U.S. workforce is employed at not-for-profits (including hospitals and universities). On the other hand, the sector is ​“incredibly diverse”; hard to disseminate a good set of standard skills. The industry ranges from homeless shelters to opera houses. The industry debates the training issue: Should you first get management training, for instance, before going to work for not-for-profits? In any case, he agrees that ​“the nonprofit sector has to step up its game” in training the next generation’s leaders.

6:32 p.m. A man from the YMCA reports that his agency receives millions of government dollars for child care, school readiness, after-school programs. It’s becoming harder to deliver the services based on the terms of the grants. ​“The margins are so think we find ourselves seriously looking at” whether they can afford to continue to accept this money from the government. Any advice? Answer: Harold says ​“my only piece of advice is to be as forthright as possible, come with as much data as possible, go as far up as the chain as possible … and be patient.” Government decision-makers are under pressures, too. He says this is a broader problem with not-for-profit recipients of government funding.

6:35 p.m. James Perillo, the former head of the New Haven Coliseum and now a board member of the Community Foundation asks: Will there be a good way to get data directly from the people served by the not-for-profits the foundations fund? Answer: Guidestar works with a group that has already gotten 150,000 reviews from the public about organizations So far, there’s ​“not a lot of nuances”; reviewers tend to give only one- or five-star reviews, because they either ​“love” or ​“hate” the groups if they’re motivated to contribute to crowd-sourced reviews. The upshot: Yes, this is a promising new field that will require lots of refining. And people are working on it.

6:39 p.m.: LEAP leader Esther Massie asks: How do we explain to donors how important staff training or other ​“overhead” expenses are to delivering service? Harold: ​“I hope that our Letter [“to the Donors of America”] provides some cover.” And spell out the case well connecting how, say, better training leads to better outcomes.