I was Wrong

Today we have an article by Gayle Gifford, who is so right, while I was so wrong. I thought the vast majority of nonprofit budget money in the US came from individuals. No. It mostly comes from program income. Seriously. Check it out. Thanks Gayle!

By Gayle L. Gifford, ACFRE

You’ve probably heard the statistic that over 70% of nonprofit funding comes from individuals.

Well, that’s almost right.

That number comes from Giving USA, which studies charitable giving in the United States. For 2015, 71% of charitable giving is estimated to come from living individuals and 9% from their estates through bequests.

But charitable giving is only one type of revenue that nonprofits receive. The National Center for Charitable Statistics is my go-to place for data on nonprofit organizations.

And here’s what I learned:

Charitable gifts, grants and contributions, the blue pie slice, are just 22% of the total of all revenues for public charities.

This chart only includes public charities. Those organizations that are 501c3 but not private foundations. The chart is from 2013, the most recent year that NCCS has the data in this format. Total annual revenues in 2013 were $1.7 billion.

Am I losing you with the math yet? I hope not.

So, let’s do the math. Individual charitable giving is 71% of the 22% of total revenues for charities in the US. 71 x 21% = 16%. That means individual giving is 16% of total revenues for public charities.

Let me repeat that: individual charitable giving makes up approximately 16% of total funding for public charities in the United States.

What is the biggest source of revenues for charities in the US?

Program service fees – the green slice. Including government fees and contracts, and other fees like tuition, admissions, health insurance reimbursements, and more, program service fees account for 72% of all public charity revenues in the United States.

Have any of you have been following the social enterprise craze? You know, the one that says nonprofits should stop relying on begging (i.e. philanthropy) and instead develop earned revenue streams for support? Guess what? Been there. Done that.

But let’s break this down a bit more because the picture is not the same for all organizations.

Smaller organizations are more dependent on philanthropy than larger organizations.

  • IF we look at the bigger organizations on the left of the table above, those with revenues over $5 million, they received three-quarters of their revenues program services and contracts and just under a fifth from contributions gifts and grants.
  • But for organizations under $5 million, just over half of their revenues come from contributions, gifts and grants, with only just over a third from program services and contracts.

But you know what is really interesting (or scary)? The left hand size, the organizations with budgets over five million, is just 6.6% of all public charities in the US.

Yet they ate 78% of all the contributions, gifts and grants given to public charities in the United States.

That’s not surprising if you think of the incredible people power of big organizations.

How many staff do you think Harvard has in its development department?

I was at a conference where Dana Farber mentioned the 200 staff working on its billion dollar campaign.

So what’s a small organization to do?

While it might seem that smaller organizations should run right out and start developing earned revenue streams, for most of our small organizations that just isn’t practical.

But what is important is creating as much capacity as you can in the revenue streams that will work for you. That requires that you really study where the growth would come from in the area in which you operate.

Is there a way you could increase your program income or earned income streams?

Maybe your nonprofit is super local. Your town doesn’t really have much in the way of business giving or foundations. So individual giving is really your thing.

Then you want to make sure that you are really good at raising funds from individuals. And learn everything you can from folks like Mazarine.

And don’t under estimate your need for people to do this work.

Invest in more staff capacity, whether that’s a part time admin person or a few courses under your development director’s belt.

And if you need volunteers, like board members, make your fundraising person’s job easier by giving your board members the training, direction, coaching and inspiration they need to be successful in whatever you ask them to do.

Let’s be smart.

Bio: Gayle Gifford ACFE is co-President of Cause & Effect Inc. She is a nationally respected consultant, writer and trainer with over 30 years of experience building nonprofit capacity in governance, strategic and business planning, fund development, facilitation, program development, and communications. Gayle is one of the just over 100 fund development professionals worldwide who have achieved the ACFRE advanced fundraising credential awarded by the Association of Fundraising Professionals.

Gayle’s work to strengthen nonprofits is fueled by her passion for a greener, more just and peaceful world.

She is the author of How to Make Your Board Dramatically More Effective, Starting Today, and a contributor to the Essential Fundraising Handbook for Small Nonprofits, and other books on nonprofit management, fundraising and governance. Gayle is an adjunct instructor at Brown University and a member of the Governance Affinity Group of the Alliance for Nonprofit Management. She is co-researcher on the recently released national study, Voices of Nonprofit Board Chairs.

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