The recent standoff in Congress that brought the nation’s credit worthiness to the brink has deep and dangerous implications for the nonprofit sector. The three-week federal shutdown is more problematic than cash flow and bills not getting paid.
Government at all levels is the largest funder and customer of nonprofit services. Any sustainable business must seek various revenue streams. The challenge for the vast majority of nonprofits is that there are only two sources — donors and program services.
The behemoth nonprofits have more options, of course. Organizations with $10 million or less in revenue live and die with contributions, program service fees and government contracts. With the pool of donors shrinking and the growing number of nonprofits swimming around them like piranha, fee-for-service is going to play a much larger role in operations.
The question for board members is what shape an organization should take and where is the line between being a tax-exempt organization with community roots and any other service provider?
That line seems to every day shift closer to for-profit. With B-Corporations registering as organizations with a heart, L3Cs and straight old community-active for-profit firms, where will nonprofits fit in if program service fees are the primary source of revenue?
The YMCA, YWCA and other such organizations have battled this issue for decades. The nonprofit mission is clear at a national, 30,000-foot level. It’s in communities where the lines start to blur.
Service delivery or program services are catch phrases that nonprofit leaders need to begin moving to the margins of how they describe an organization’s mission. They should be replaced with community impact. Anyone can have a muscle head gym or an after school math program. You see them advertised on television. The key to the argument for sustaining the tax exemption is community and keeping an organization’s tentacles into it – enter Stephen Heintz and Irv Katz.
Stephen Heintz heads up the Rockefeller Brothers Fund and Irv Katz runs the National Human Services Assembly. Both have launched efforts to involve the public and their constituents in a dialog about not just the sector, but also the nation’s future. Both are calling on consumers of sector services – whether or not the targets realize they are consumers – to discuss commonality and framing of the sector.
Heintz and at least six other foundations are hoping to engage “hundreds of thousands if not millions of Americans, online and face-to-face,” to answer an alarmingly simple question that has complex answers: “How can we muster the national will to make the tough choices and big changes that are needed if America is to renew its promise and regain its vibrancy and confidence?”
Katz is exploring the potential impact of changing the way that nonprofits explain their missions. It’s a matter of choosing the right words, a process known as framing, and it can affect donors’ thinking. He was quoted in the Page One story in this issue as saying: “Some politicians lump all human services together in a negative light as ‘entitlement’ programs, or by referring to the ‘safety net’ as a ‘hammock.’ Individuals’ outlooks are influenced by those kinds of characterizations, and individuals vote, so it’s time to reframe the discussion.”
Reframing might be the polite term for the process. Preservation is more like it.
As government seeks more revenue, shining like a pot of gold under a rainbow is the potential tax or payment in lieu of tax from the charitable sector. This just might be the most dangerous time the sector has experienced.
There is collective strength in the tax-exempt sector and it is more than time for community organizations to tighten the connection with constituents and ignite conversations.
Nonprofit leaders should join with Heintz and Katz to learn more about engaging in the discussions regarding the sector’s immediate survival and hopeful future. NPT