Revenue for the nation’s largest nonprofits has continued to recover since the recession, backed by a slow but steady return for donations last year and buoyed by more gains in investment income and continued growth of program service revenue.
Total revenue for organizations in the 2014 NPT Top 100 totaled approximately $74.726 billion, about 7.75 percent more than the previous year. Public support was reported at $37.624 billion, up 8 percent, while investment income jumped 36 percent to $3.574 billion, the highest total in six years. Those revenue categories again made up for a relatively flat year in government support, about $10.297 billion in the aggregate. Program service revenue was up a healthy 8 percent, to $19.1 billion.
The 26th annual study of the largest nonprofits in the United States is a snapshot of organizations based primarily on their Internal Revenue Service (IRS) Form 990 filings for the Fiscal Year Ending 2013. In some cases, organizations submit audited financial statements or estimates or surveys of their affiliates.
While organizations reported an aggregate total investment income of between $2.5 billion and $2.8 billion in each of the past three years, last year’s $3.574 billion was the highest in six years. The number eclipsed the $4 billion for the 2008 NPT Top 100 standings. This year’s estimate is closest to the 2006 NPT Top 100 (which covered Fiscal Year Ending 2005), when organizations reported $3.27 billion in investment income.
“The economy was looking positive to begin the year and it ended that way; 2014 may be even better,” said Daniel Romano, executive director-tax, Northeast higher education and not-for-profit practices for Grant Thornton LLP, which helps compile and analyze the data.
“Program service is important because as organizations look for new ways to generate new funds, you’ll see more programs that pop up that they can charge for, as well as other types of income streams. I think it’ll be necessary for orgs to survive that don’t have the big donor base to be able to think out of the box,” Romano said.
“One of the trends we’ve been seeing in the industry is that organizations are really trying to diversify their activities to broaden their support,” Romano said. Some examples include more joint ventures. “A charity may work closely with another entity, sometimes a for-profit entity, to bring a product or service to another level and increase their outreach beyond what the charity is able to do on its own,” he said. Those ventures, if structured properly to protect charity’s interests and mission, could help achieve their exempt purposes but also provide a needed financial infusion, he added.
With increased revenues, it appears the 100 largest nonprofits also boosted their expenses, particularly when it came to fundraising. Total expenses were 4.5 percent greater, up to $69.8 billion. The bulk of expenses went toward program, about $60.5 billion, which were up 5.6 percent, and comprising almost 87 percent of expenses. The largest increase on the expense side was in fundraising, up almost 17 percent, to $3.8 billion. Administrative expenses were down almost 12 percent, to $5.5 billion.