PHILANTHROPY AND THE NONPROFIT SECTOR James M. Ferris March 10, 2004

Definitions, Boundaries, and Scope The Philanthropic Dimension of the Nonprofit Sector Trends in Philanthropy

Definitions, Boundaries, & Scope

What Is the Nonprofit Sector? Formal organizations that are neither public or for-profit. Private, self-governing, voluntary, non-profit distributing. Exempt from corporate income taxes. Diverse, heterogeneous group.

Terminological Thicket Nonprofit Not-for-profit Voluntary Independent Charitable Nongovernmental Philanthropic Third Sector Civil Society Social Benefit

The Nonprofit Sector in Context Relative Size in terms of: –Organizations –National Income –Employees –Earnings

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Distribution of Organizations by Major Sector, 1998 Total number of organizations = 27.7 million

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Distribution of National Income by Major Sector, 1998 Total national income = $6.9 trillionTotal national income = $7.1 trillion

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Distribution of Employees by Major Sector, 1998 Total national employees = 144 millionTotal national employees = 154 million

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Distribution of Paid Earnings by Major Sector, 1998 Total earnings = $4.8 trillionTotal earnings = $5.0 trillion

The Public Benefit Nonprofit Sector The nonprofit sector is comprised of 27 types of organizations in the Internal Revenue Code. Of particular interest are the public benefit organizations: –501(c)(3): Religious, charitable, educational, etc. –501(c)(4): Social Welfare. Comprise the great majority of the sector Common perception of the sector

Distribution of National Income in Nonprofit Sector, 1998 Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Total nonprofit national income = $325 billionTotal nonprofit national income = $477 billion

Philanthropy & the Nonprofit Sector “The task of comprehending the nonprofit sector is further complicated by a widespread failure to recognize the important distinction between philanthropy, on the one hand, and the private nonprofit sector, on the other. In many accounts these two terms are treated interchangeably when in fact one is really just part of the other.” Lester Salamon, America’s Nonprofit Sector

Philanthropy & the Nonprofit Sector The nonprofit sector is the set of organizations that are private but serve public purposes – advancement of health, education, scientific progress, social welfare or the free expression of ideas. Philanthropy is the giving of time or money for public purposes. It is an important resource for nonprofit organizations. –“Venture capital” for social change.

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Sources of Nonprofit Revenue, 1997 Total Revenue = $665 billion

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Sources of Nonprofit Revenue, 1997 (excluding health services) Total Revenue = $339 billion

Changing Patterns Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002.

Changing Patterns (excluding health services) Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002.

Changing Patterns: Health Services Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002.

Changing Patterns: Arts and Culture

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Changing Patterns: Education and Research

Industry Allocation of Revenues, 1997 Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Total Revenue = $665 billion

Industry Allocation of Revenues, 1977 Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, Total Revenue = $111 billion

Industry Allocation of Revenues, 1977 and 1997 Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002.

Roles of the Nonprofit Sector Service Delivery Advocacy Community Building Value Guardian

The Philanthropic Dimension of the Nonprofit Sector

Private Giving, 2002 Source: Giving USA, AARFC Trust for Philanthropy, Total Giving = $241 billion

Changing Sources of Private Giving Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002; Giving USA, AARFC Trust for Philanthropy, 2003.

Changing Sources of Private Giving Total giving = $21 billionTotal giving = $48.6 billion

Source: The New Nonprofit Almanac & Desk Reference, Independent Sector, Urban Institute, 2002; Giving USA, AARFC Trust for Philanthropy, Changing Sources of Private Giving Total giving = $98.8 billionTotal giving = $203.4 billion

Giving By Recipient Type, 2002 Source: Giving USA, AARFC Trust for Philanthropy, Total Giving = $241 billion

Private Giving as % of Income Source: Giving USA, AARFC Trust for Philanthropy, 2003.

PHILANTHROPIC INSTITUTIONS Foundations Federated Fundraising Appeals Donor Advised Funds Public Grantmaking Charities

FOUNDATIONS Philanthropic foundations are an important element of the American nonprofit landscape. Mechanism through which philanthropic dollars flow to nonprofit organizations, typically from endowments. They are of particular interest given their link to concentrated wealth and the impact of their grantmaking.

Foundations, ,180 grantmaking foundations, with $477 billion in assets, and $30.5 billion in giving. A nearly three-fold increase in assets and over a three-fold increase in giving since 1991.

Foundation Growth, NumberAssets (b)Giving (b) ,356$ $ ,140$ $ ,201$ $ ,180$ $30.502

Size Concentration: 2001 The largest 43 foundations – $1 B or more in assets, hold 34.8% of assets and 23.8% of giving. The largest 214 foundations – $ 250 million or more in assets, hold assets 51.4% of assets and 47.4% of giving. Foundations with under $10 million in assets (56K+) hold 13.8% of assets and 25.2% of giving.

Regional Concentration: 2001 State% of Giving% of Assets New York California Pennsylvania Washington Texas

Foundation Types Private Independent Foundations –Family Foundations Corporate Foundations Operating Foundations Community Foundations

Industry Structure: 2001 Foundation Type NumberAssetsGiving Independent89.2%84.6%77.7% Corporate3.5%3.3%10.6% Community1%6.4%7.9% Operating6.3%5.7%3.6%

Funding Priorities, 2001 (percent of total) Education 26.8 Health 20.5 Human Services 13.8 Arts and Culture 12.2 Public/Social 10.9 Environment 6.2 International 2.4 Science/Tech 2.9 Social Science 2.1 Religion 2.1 Other.1