IN THIS ISSUE:
2010 Fundraising: CATASTROPHE OR OPPORTUNITY?
2010: What should fundraisers expect?
by Laurence A. Pagnoni
 I have heard it said that while non-profits are certainly evolving, many businesses are working to be more socially responsible, blurring the lines between for-profit and non-profit ventures. Perhaps, but the parallel that should more properly concern us is that all organizations need to have a viable revenue model whether in an up or a down economy. The next few years will see a healthy contraction in both the for- and non-profit sphere as redundancies, ineffectual efforts, and organizations limping along without a clear and dedicated focus are eliminated or reformed. For the shape of things to come, consider two recent survey results, the first from the Nonprofit Finance Fund, and the second from the Human Services Council:
Foreboding Surveys
Of 986 non-profit leaders surveyed by Nonprofit Finance Fund, just 16% expect to be able to cover their operating expenses in 2009 and 2010. Fifty-two percent expect the recession to have a long-term or permanent negative financial effect on their organization. When asked to identify actions taken within the past 12 months or planned for the next 12 months to address this financial situation, 39% selected “reduce or eliminate programs,” 41% chose “reduce staff or salaries” and 23% said “delay payments to vendors.” Many respondents expressed interest in exploring new ways to manage through the crisis—and beyond—to continue serving their communities, with 58% saying they would like to conduct scenario planning, 52% wanting help communicating their financial picture to board members and/or funders, and 34% interested in program profitability analysis.
A more recent report released by the Human Service Council (HSC) and Baruch College’s School of Public Affairs portrays the situation in even starker terms. This report is based on responses from 244 organizations representing a diverse cross-section of human service organizations. The median responding organization serves between 2,001 and 5,000 clients, has a budget of $2 million to $5 million, and provides direct services in New York City. According to HSC and Baruch, more than 60 percent of the organizations surveyed have seen decreases in public funding, with more than 50 percent experiencing major cuts to existing contracts with government at all levels—city, state and federal. Further, 80 percent of respondents also said they are experiencing major reductions in private funding with more than half seeing reductions of more than 20 percent. Worse, 73 percent of these organizations have no financial reserves—no endowment or lines of credit—with which to weather the uncertain economic climate.
Foundation Forecast
Since the market downturn, U.S. foundations lost about one-quarter of their assets, on average. In response, roughly two-thirds of all foundations nationwide have cut their charitable giving so far in 2009. According to the Foundation Center, overall foundation grantmaking will decline by as much as 13 percent this year. In 2010, Foundations are expected to reduce grantmaking even further, and drastic cuts to city and state-funded human services programs are widely expected.
Opportunities Abound
Some nonprofits will not survive, but the shakeout does not have to include you and your agency. We will see in 2010 more of what we have seen in 2009, but with a few unexpected opportunities. What unexpected opportunities?
- Perhaps it time for you to consider joining The Combined Federal Campaign? The total amount pledged by Federal public servants to thousands of local, national and international non-profits was $276 million, a 1% increase over the 2007 total of $273 million. The CFC is one of the few fundraising resources for non-profits that did not report a decline in value during last fall’s economic pressures. It is also the world’s largest workplace giving campaign with $1 billion of unrestricted giving over the past five years. Did you know that in terms of actual giving, if the CFC were a foundation, it would be the 10th largest foundation in the US? See http://www.opm.gov/CFC/
- While foundation giving will not likely expand, there may be special initiatives that select foundations create specifically to be of help through the tough times. This means that you should stay in touch with your foundation officer.
- There may be greater sensitivity from foundations to capacity building as recently evidenced when the Boston Foundation changed its grantmaking strategy, shifting its emphasis to unrestricted operating support! This is a major institutional funder founded in 1915, with, currently, a $700 million endowment. That surely is a sign of an accurate reading of our nonprofit times. I hope that others may soon follow suit.
- Despite a slight dip in special event revenues, agencies that stay focused on cultivating their past attendees, asking them to bring a new friend or family member to be introduced to the organization, may be pleasantly surprised to find that their event revenue holds its own or even expands.
- Consider launching a campaign to increase participation in the 2010 Census in communities that are at a significant risk of being undercounted. Many community leaders are looking to work with local partners to help educate hard-to-count populations about the census. Historically, low-income communities and immigrant families have been underrepresented in past census counts. There are several fundraising benefits. You will enroll new clients and increase outcomes, and you, through your census involvement, you will also be able to cultivate prominent community leaders as donors. The census, of course, influences government funding. Nationally, the census helps determine the allocation of roughly $400 billion a year in federal funds to state and local governments—or $4 trillion over a ten-year period. Census experts estimate that for every person not counted in 2010, local government will lose $12,000 during the next ten years in federal funding alone. In other words, an additional 10,000 people counted would mean $120 million more in federal funding for their area. Also, many state governments use census numbers to allocate funding to local communities. You are hereby forewarned!
- And saving the best for last, I continue to believe in the power of asking individuals for direct support. I know that many of your $25K donors have turned into $5K givers, but believe me they will give again at a higher level. People give more money away as they age. It’s a fact. But they tend to give it to their college or place of worship more often than they give to your agency! Why is that? Simply because those institutions ask more frequently, and they ask with gusto. In 2010, leave your anemic appeals behind and make the case to your donors why their support (and that of their friends and family) is more vital than ever.
Fundraisers are still raising money, and the fundraising process has enormous lag-time that needs to be factored into account to achieve future successes. Whatever 2010 looks like, it will look better to nonprofits that cultivate donors, respect the time it takes to build key relationships, and ask for money based on innovative program models.
And To Make Matters Worse...
It should be noted, however, that the slumping economy and its ramifications are occurring at a unique juncture in nonprofit history. By 2010, two-thirds of the nation’s current nonprofit directors plan to retire or leave their positions. Nearly 50% of the executive directors of New York City’s top social service agencies are scheduled to retire over the next few years. The baby-boomers are departing their leadership roles not only during a moment of economic uncertainty, but at a time when tighter leadership is being demanded by the federal government.
The following articles by Michael Davidson and Thomas Mehnert provide a rundown on the new IRS and Medicaid rules, and the concrete steps board members can take to ensure organizational continuity before, during, and after the transition.
As always I welcome your input to this forecast. Please contact me through the web site.
In 2010, Board’s Role in Financial Compliance Is More Important Than Ever
by Michael Davidson
 The new IRS form 990 has been issued, and, as a result, the board’s role in financial compliance will be more important in 2010 than ever before. The new IRS 990 requires the board to take a very active role in financial oversight and monitoring. The form asks whether certain key compliance policies are in place— i.e., Conflicts of Interest, Whistle Blower Protection, and Document Retention and Destruction. In addition, the board must demonstrate that it is actively involved in assuring the implementation of those policies. Information about the extent to which the board is active in these areas will be made available through the internet to all current and potential supporters.
Some specific board expectations:
Review of the 990
The 990 must now be signed and attested to by an Officer of the Board. The board must describe the process it used to review the 990 before it was filed.
Conflicts of Interest
The organization is asked to describe the process used to monitor and enforce compliance with its policy, including whether the board and key employees are required to annually disclose any “interests that could give rise to a conflict.”
The board is also required to disclose business relationships with any “current or former officer, director, key employee, substantial contributor, or person related to such an individual.”
Executive Director Compensation
The board must describe the process it used to determine compensation of the Executive Director, including whether there was a “review by independent persons, use of comparability data and documentation of the deliberation and decision.”
Board procedures
The board must disclose whether there are contemporaneous minutes of the board and key committees, and the way the organization’s documents are made available to the public.
Michael Davidson has been a LAPA associate since 2002, providing support to Boards of Directors as client organizations move through periods of growth and change.
Alert: New Medicaid Regs Impact Not-for-Profits in 2010
by Thomas Mehnert, LAPA Healthcare Division Director
 Over the summer, the New York State Office of the Medicaid Inspector General (OMIG) published new regulations which will impact virtually all not-for-profit organizations involved with Medicaid in New York State. These regulations, called Part 521, require any organization billing at least $500,000 to the Medicaid program to have a Compliance Program in place. Starting this fall, the OMIG will be surveying to see that organizations have complied with the new regulations.
While previous federal and state regulations related to regulatory compliance focused almost exclusively on billing and remittance issues, the areas to be covered by the plan, in addition to the traditional fiscal concerns, now include "medical necessity and quality of care,” "credentialing,” compliance with "mandatory reporting" requirements, and perhaps most significantly of all, a focus on the area of “governance.”
While many organizations have developed Compliance Plans in the past, frequently these plans have ended up “on the shelf” and not fully implemented. The new regulations place an emphasis on effectiveness. Each December certification must be filed with the OMIG indicating that the organization has a functioning plan. The regulations also state that, "In the event that the commissioner of health or the Medicaid inspector general finds that the required provider does not have a satisfactory program, the provider may be subject to any sanctions or penalties permitted by federal of state laws and regulations including revocation of the provider's agreement to participate in the medical assistance program.”
The link to the new regulations is: http://www.omig.state.ny.us/data/images/stories/provider_compliance/adopted_regulations_521.pdf
Please contact LAPA should you require assistance in drafting a response to these regulations or in implementing an effective Compliance Program.
Also explore this link should you need assistance with competing for government RFPs:
http://www.lp-associates.com/grants_govt.php
Did you know?
Thanks to Mayor Bloomberg, New York City has responded impressively to our sector’s struggles by implementing several new initiatives. The funding for bridge loans through the Returnable Grant Fund will more than double, and, for the first time, nonprofits will gain access to the Capital Access Revolving Loan Guaranty Program. The city will also help reduce nonprofit organizations’ fixed costs via group purchase, evaluate and help reduce nonprofit energy use, and help nonprofits work better with city agencies.
Did you know that the Mayor’s Office of Contract Services has designated senior staffer Jennifer Walty as the Nonprofit Contract Facilitator to help nonprofits that need assistance with rules, regulations, or policies affecting their ability to obtain city funding. She can be reached at NFPhelp@cityhall.nyc.gov or by calling 311.
Expanding the accessibility of city contract information and increasing agency accountability is a mayoral priority. The city will post all contract status information on www.nyc.gov, and update it weekly so that nonprofits can easily check the status of any contract application and its progress in the pipeline. In addition, the Mayor’s Office of Operations will report on each agency’s overall efficiency in processing contracts, also on www.nyc.gov.
LAPA's team of 16 government grant writers complete many government RFPs for our clients and we find that the new practices instituted by the Mayor are working.
LAPA WELCOMES NEW CLIENTS
We are pleased to welcome to our portfolio three clients that so dramatically demonstrate our capacity to assist forward-looking nonprofits in the neighborhood and around the nation:
St. Margaret’s Episcopal Church, at 940 East 156th Street, in the Longwood section of the southwest Bronx, was attended in his youth by former Secretary of State, General Colin Powell. LAPA is providing capital campaign planning services geared to the congregation’s need to modernize its nearly 90-year-old neo-Gothic sanctuary.
NACE (National Association of Corrosion Engineers) Foundation (www.nace-foundation.org) is a non-profit organization affiliated with NACE International, a technical society consisting of over 16,000 corrosion engineers worldwide. NACE International is the premier authority in the world on the protection of infrastructure through corrosion engineering. Based in Houston, Texas, NACE Foundation is the only organization dedicated to preparing the next generation of corrosion engineers and professionals to save America’s infrastructure. LAPA is helping the foundation roll out a national workforce development program for military personnel and their families.
Childbirth Connection (www.childbirthconnection.org) is a national not-for-profit organization founded in 1918 as Maternity Center Association. Its mission is to improve the quality of maternity care through research, education, advocacy, and policy. Childbirth Connection promotes safe, effective, and satisfying, evidence-based maternity care, and is a voice for the needs and interests of childbearing families. LAPA is providing planning services to determine which development tactics may produce the most revenue.
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LAPA senior staff and associate consultants may be reached as follows:
Laurence A. Pagnoni, MA, MPA, President, Email, 212-932.9008
Bill Winston, CFRE, Senior Fundraising Counsel, Email, 973.901.7472
Sheldon Bart, MA, Senior Associate, Email, 201.451.3860
Tom Mehnert, Healthcare Division Director, tgm711@yahoo.com, Ph: 914-245-4618
LAPA works with over 30 nonprofit professionals who provide a wide array of services, such as planned giving, strategic planning, prospect research, and government grant proposal writing, program feasibility and project development.
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