Let’s get to some facts on nonprofits as you consider your year end donating.

The number of nonprofit organizations reported by the National Center for Charitable Statistics as of October 2009 was 1,569,572 that reported to the IRS.  Since 2006 that is an increase of 91,378 nonprofits. This does not include the 175,000 religious congregations who choose not to report as allowed by law.

Largely overlooked by many in the business arena, the non-profit world is a critical sector of our economy.  The employment of hundred’s of thousands individuals provides for the economic wealth of many communities and the creation of many for-profit companies.  As a reader and possible donor I remind you that most colleges, universities, and hospitals are nonprofits.  From a pure economic view, the education and health care field of nonprofits provide for the greatest measurable opportunity to see an outcome which resulted from the donation.

In 2007, public charities reported over $1.4 trillion in total revenues, nearly $1.3 trillion in total expenses and nearly $2.6 trillion in total assets in 2007. (Source: The Urban Institute, National Center for Charitable Statistics, Core Files 2007)

Volunteering and charitable giving even with a huge influx of funding from the government, non-profits are still prone to struggle in down economic times, since the other part of their funding, donations, often take a turn for the worse.  In addition, while there are many companies created in the for-profit arena to provide help to organizations in becoming more efficient in this business climate, few focus on the non-profit world.   

Even for those who realize and understand the obstacles of starting a small business, few understand the competitive nature of the non-profit industry.  There is a strong movement among social service advocates and the people who utilize social services to have more choice in selecting from whom services are provided and what different types of services are offered.  This has spurred growth in the industry, not just in the number of new nonprofits established each year, but also the amount of money allocated by the government.  This new influx of money has only added to the pre-existing tension between large and small non-profits. The new, smaller non-profits are able to change the way they operate quickly to meeting the changing client base while the larger non-profits are able to expand into new areas and service lines.

While efficiency of the donation may be expected to be able to be accomplished on a larger scale many nonprofits are staying to their mission and finding qualified people willing to work for nonprofits at a wage they can afford. 

Pic by Twenty Questions

I am surprised by the number of nonprofits across the country that pay individuals in the organization above $400,000.  If I lower the bar to the average salary of $100,000 the number jumps off the charts.  Since these organizations are suppose to be charitable in their nature, it seems that paying individuals a salary that is less than 10% of the workforce seems to justify tying the wage to the lowest paid salary of the organization.

Nonprofit hospitals, colleges and universities have the highest salaries paid out to individuals.  These are the same two areas where costs have exceeded inflation every year.

I propose that salaries be tied to the lowest paid employee of an organization.  Since I stated that a living wage is $35,000 I would suggest that nonprofits start at this level as the entry-level salary.  If all management salaries were tied to this salary and limited to being no more than 5 times the salary of the lowest paid employee the individual would be limited to $175,000.  If the cap was 10 times the salary of the lowest paid employee that individual would be limited to $350,000.

I like what Massachusetts has done for capping salaries under a law they passed which limits reimbursement of state funds to salaries of a certain pay grade in government.  Yes, they have capped what the state will allow to be reimbursed with state funds. ”Effective July 1, 1998, the salaries of officers and managers as defined by OSD shall be non-reimbursable under Operational Services Division regulation 808 CMR 1.05 (24) as amended to the extent that they exceed an annual rate of $143,986.22. Please note: Due to budget constraints Commonwealth manager’s salaries have been frozen at FY ’08 rates.  Contractors must maintain documentation and justification for the selection of a salary reimbursement rate up to $143,986.22.  Where officers and managers devote less than full time to state programs, the level of reimbursement should be prorated accordingly.  See 808 CMR 1.05 (24).”

I think a similar system should be adopted by the federal government as a standard it will measure, consider in rate calculations for reimbursement and reporting to the public.

I recommend that boards of nonprofits use three measures for setting the floor and the ceiling for executive compensation.  For nonprofits $500,000 and above the floor should start at 8% of the revenues for the salaries of administrative staff.  The first ceiling for salaries should be tied to the Massachusetts salary cap with no further due diligence by the board.  If the board wishes to go beyond this cap, it should be required to show what benefit is being obtained for the additional compensation being given.  Yes, this means that the additional salary is tied to outcomes.  Under no circumstance can justification be made that any nonprofit should pay an individual more the President of the United States salary.

pic by Daileypic

Nonprofits with high salaries are ruining it for everyone.  I have as a personal rule never to give to any nonprofit money if they pay any one individual on their management staff more than $400,000.  I also look to see how much in revenues the organization receives each year to see if that number should be smaller.  My decision is based on four facts.  In 2009 I estimated that the living wage for a family of four is $35,000 plus a year; the average salary for the work force according to the US Department of Labor is $38, 348; no nonprofit should expend more than their 25% of the budget on non service directed functions; and finally no one in the nonprofit community receive a salary more than the President of the United States.

A nonprofit exists to do charitable work.  Any employee who must make a salary that represents only 1 percent of the work force is not doing charity work.  They are investing in their future on the back of the nonprofit they work for.  This takes away precious dollars from the nonprofits mission.

Further, I would advocate that the IRS reconsidered a nonprofits charitable status when salaries have exceeded the norm of nonprofits.

There are three Boston nonprofits that I challenge their boards to reconsider how they compensation their Executives.

• The Boston Symphony Orchestra Managing Director received a salary of $476,100 and benefits worth $78,110.

• The Museum of Fine Arts Director received $591,892 in salary and $128,029 in benefits.

• Suffolk University pays it President over a $1,000,0000 plus benefits.

Nonprofits with extremely high salaries should dig deep and assess what the organization could have used the money on that expands their impact on the community it serves.  Now that is a better return.

 pic by Robin Hutton

All in the eyes of the beholder on how to solve a problem.  Just might get the decision maker to find a permanent solution. 

Many behavior problems are not caused by the education system but certainly influence the ability of teachers to deliver an education to all students effectively. 

The partnership of public schools with nonprofits experienced with behavior issues or other problems a student has have been shown to really make a difference.  However, it is not done enough or automatically.  It is time to step up to the plate and offer your services to schools.  When schools fail to recognize the problems of students the PTA is a good place to start to let parents know what supports you can offer as a nonprofit. 

However, I am waiting to see someone trying to use the Principal’s office as a classroom to get attention for a student in need. 

pic by Caveman

Charter schools as government entities should not be seen as a threat but a leverage to obtain more resources for education from the charitable community.

Charter schools make educational outcomes for each student more transparent and increases the leverage for a higher quality standard all entities must reach. 

The days of shorter school days, shorter school years and the lack of parental choice is coming to an end.  The question is a matter of when will we see local government opening to the reality of the facts.  Will the chains of resistance come down on their own or will it take drastic action by the voters to finally be heard.

Nonprofits have an opportunity to make inroads into education where school districts are failing to educate students.  Nonprofits need not be overwhelmed by the number of failing students.  Start small and build to your capacity. 

 pic by Robin hutton

Congress is wrestling with Health Care Choices.

Government is a nonprofit that can do zero base budgeting. 

There is nothing wrong with expanding medicare and Medicaid and calling it the public option.  Whether it is an individual receiving a subsidy towards their premium or a small business paying the premium for an individual it is the simplest way to get health care reform going. 

Call it a tax, call it it fringe benefits, or call it a requirement of life.  It is still a necessary cost for everyone.  Cost containment will be a lot easier with one system of data to track services and costs. 

Community Health Centers should be considered the other component to build upon to bring access to all affordable health care. 

 pic by Robin Hutton

Charter schools are providing choices for families among District schools.

Charter schools are increasing the opportunities for more to succeed.

Charter schools are more accountable to meeting standards than District schools.

Charter schools are bringing the community resources to bear to educate students.

There are many opportunities for nonprofits can join the charter school effort to educate students.  There are many students that may be failing.  The causes are many but with the right supports these students can reach their full potential and ultimately attend college.

pic by John Schwegal 

The evolution of the human greeting some cultures may have it right for protecting themselves from infection.  Whether on purpose or by default those cultures that used the bow to greet protected themselves from catching illnesses.

The Obama administration fist bump may have been a good attempt to change our habit.

 One habit that has changed is sneezing.  Instead of using your hand it is being promoted that it is better to use your sleeve, a major shift to prevent the passing of germs. 

A public health message on ways to greet and minimize the passing of germs can only help to decrease illness, lower the death toll, increase health, increase productivity and lower costs across many levels of the economy.

For all of us who feel awkward to not hand shake or hug the public health message on how to greet would go a long way to change behavior.  Nonprofits can promote a healthier life style among its employees and those they serve.

Pic by Thomas Dwyer

With the struggle many students are seeing in trying to find a job after graduation, non profits can help them out by coming to the students.  If you have some free time and some of your employees who would like to help, you can go around to local colleges and universities an recruit at their career fairs.  There really isn’t much too it.  If you are looking for employees this is a great place to start.  No only will it help you out but it can help out soon to be college grads who may not know about the non profit sector or that your company is hiring.  By recruiting at the college or university you are helping your own company and college students all at the same time.

Nonprofits making inroads with the new generation of employees are finding more successes and a means to have the talent to grow.

Pic by Docpop

Are you an executive at a nonprofit avoiding communication due to debt? 

A simple pattern emerges for those nonprofits who are struggling and which ones ultimately succeed in surviving .

Those that overcome the struggles have been more forthcoming and communicating with all parties and trying to work things out. 

The nonprofit that goes into silent mode and ignores creditors and concern entities closes.  It’s called complete failure.  A failure to communicate. 

 So instead of waiting for a miracle, put a plan together that is workable and present it.  Otherwise the nonprofit will be gone and forgotten soon.  Good intentions and good faith efforts work in most cases.