THE NONPROFIT SECTOR IN SAN DIEGO Ruth E' Patterson, PhD Program Director, Science

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THE NONPROFIT SECTOR IN SAN DIEGORuth E.
Patterson, PhDProgram Director, Science
Technology
Confidential
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Founded by San Diegans who wanted a permanent
source of funding for charitable activities.

• Incorporated May 1975
• Initial Assets
• SD City Council 75,000
• GildredFamily Foundation 135,000

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The San Diego Foundation Now
Mission To improve the quality of life within
all of our communities by promoting and
increasing responsible and effective philanthropy

• Largest Public Foundation in San Diego
• We manage approximately 424 M in charitable
  assets
• 1050 separate funds
• Granted 47M in 2003
• Granted 298M since 1975
• Operating Cost Less than 1

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2004 NONPROFIT STUDYPart of the Understanding
San Diego Region InitiativePreliminary Findings
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INPUT FROM VARIOUS SOURCES
Project Update
Individual interview series
CEO Forum/group discussions

• OSP Working Group Advisory Team
• Bruce, Kent, Ray, Lena
• Barry Newman, WG Chair, HHS
• Julie Dubick, Womens Foundation
• Leslie Hine-Rabichow, SANDAN
• Buzz Woolley, Girard Capital
• Julie Fry, TSDF Arts
• Ruth Patterson, TSDF Science/HHS
• Emily Young, TSDF Environment
• Karen Brailean, SDSVP

• 2 CEO forum discussions
• El Cajon CDC
• San Diego Aerospace Museum
• The Center
• Second Chance
• Big Brothers and Sisters
• Harmonium
• SD River Park Lakeside
• Center on Policy Initiatives
• Back Country Land Trust
• LEAD San Diego
• Alzheimers Family Centers
• Home of the Guiding Hands
• Burn Institute
• Young Audiences of San Diego
• Nonprofit Management Solutions
• Boys Girls Clubs of Carlsbad
• Elderhelp
• Community Housing Works

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PRIMARY AND EXISTING SOURCES OF INFORMATION
Project Update

• Raw data sources
• 990 data
• Internet research (service providers)
• Phone interviews/questions for service providers
• The National Center for Charitable Statistics
  2001
• USF Institute for Nonprofit Organization
  Management data
• Existing Survey Data
• Survey of SD County Nonprofit Orgs Regarding
  Technical Assistance
• Each Working Groups Environmental Scan
• Nonprofit research studies/reports
• 2002 San Diego Giving and Volunteering Survey,
  funded by the Packard Foundation
• Giving USA 2003, The Annual Report on
  Philanthropy
• High-Engagement Philanthropy A Bridge to a More
  Effective Social Sector, VPP
• The New Nonprofit Almanac Desk Reference, Urban
  Institute
• Nonprofit Overhead Cost Project, Urban Institute
  and Indiana University
• Capacity Building for Impact, Grantmakers for
  Effective Organizations

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SAN DIEGO HAS LARGE NONPROFIT SECTOR
Sector Overview
9,341
Saturation Statistics(1)
501(c)3 per 1,000 persons San Diego
2.51 California 2.70 United States 2.07
7,059

• Includes PTAs
• Home assoc
• Churches
• Soccer teams
• Little Leagues

• Public charities with budgets over 25,000
• Includes, Universities, Hospitals

• Public charities of all sizes
• Includes Grass root charitable organizations

1,982
All San Diego Nonprofits 2000
All San Diego 501c3s 2000
All Reporting San Diego 501c3s, 2000

• Number of all 501(c)3 organizations per 1,000
  persons. NCCS data for 2000
• Note 501(c)3 organizations with budgets of
  25,000 or greater must report with the IRS
• Source USD Nonprofit Leadership and Management
  Program NCCS 2000 Data SANDAN. These sources
  use the secondary data provided by IRS 990 data
  from 2001

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SD HAS A FRAGMENTED NONPROFIT SECTOR
Sector Overview

• No effective central, organizing body or council
  for the sector
• SD nonprofits are not sharing enough information
  with each other
• Not learning about each other or from each other
  enough
• Yet to realize collective buying/bargaining power
• Sub-sectors lack organizing bodies as well
• Unlike other major art metro areas, San Diego has
  no county-wide arts council
• Very fragmented market of servicing to nonprofits
• People dont know where to look for information
  (e.g., hiring, training, consulting, best
  practices)
• Lots of people/organizations re-doing whats
  already done
• Re-inventing the wheel, repeating same studies

General loss of traction due to inefficiencies of
marketplace
Source Interviews, research
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HUMAN SERVICES ORGANIZATIONS COMPRISE THE
LARGEST SEGMENT
Sector Overview
Number of Reporting 501(c)3s in 2000
HHS
AC
Health
Education
Public Benefit
These numbers dont capture the thousands of
small, non-reporting (lt25K budget) organizations
Source USD Nonprofit Leadership and Management
Program, compiled from IRS 990 data from 2001
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SAN DIEGO NONPROFITS DIVERSE WITH REGARDS TO
TENURE AND SIZE
Sector Overview
Years operating in San Diego(1)
2001 Total Annual Budget (1)
13 lt25k
11 gt5m
31 lt 10 yrs
37 25 yrs
15 25-100k
20 1-5m
15 10-14yrs
26 100-500k
14 500k-lt1m
18 15-24yrs
(1) Random sample of 560 nonprofit organizations
contacted (list provided by TSDF) 293 completed
survey Source The San Diego Foundations
Survey of San Diego County Nonprofit
Organizations Regarding Technical Assistance.
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SAN DIEGO NONPROFITS ARE LEANLY STAFFED(1)
Sector Overview
60 of organizations have 10 or fewer staff
(1) Random sample of 560 nonprofit organizations
contacted (list provided by TSDF) 293 completed
survey Source The San Diego Foundations
Survey of San Diego County Nonprofit
Organizations Regarding Technical Assistance.
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SAN DIEGO NONPROFITS SPENDING HEAVILY FOCUSED ON
PROGRAMS
Sector Overview
5.7b
5.2b
Other revs 10
Management 12
Fundraising 1
Special events 1
Govt grants 13
Contributions/donations 18
Program 87
Program 57
Note Data compiled from IRS 990 data from
2001 Source USD Nonprofit Leadership and
Management Program
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NP NEEDS IDENTIFIED IN CEO FORUM DISCUSSIONS
Sector Overview
Low
High
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SD NONPROFITS SPENDING IS HEAVILY WEIGHTED
TOWARDS PROGRAMSEfficiency Ratios
Sector Overview
Administrative Cost Ratio
Program Efficiency Ratio
Fundraising Efficiency Ratio
Administrative expense (excluding fundraising) as
a percent of total expense San Diego
13.5 United States 20.9
Program expense as a percent of total
expense San Diego 86.5 United
States 79.1
Fundraising expense as a percent of contributions
and special events San Diego (ex govt)
6.6 United States 18
However, may not be investing adequately in
capabilities
Note Data compiled from IRS 990 data from
2001 Source Analysis of raw data SDU Nonprofit
Leadership and Management Program The National
Center for Charitable Statistics 2001 Standards
for Charity Accountability, BBB Charity Rating
Guide and Watchdog Report, AIP Understanding
Management and General Expenses in Nonprofits,
Pollak, Rooney Hagar
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AS A NATION, CHARITABLE GIVING CONTINUES TO RISE
Sector Overview
Corporations
Foundations
Bequests
Individuals
Giving for 2003 rose by the highest rate in three
years to 240b or 2.2 of GDP. 2.3 of GDP was
all time high, reached in 2000
Note Total charitable giving in the U.S. shown
with inflation adjusted dollars. Source Giving
USA 2003, AAFRC Trust for Philanthropy
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HOWEVER, SD COUNTY NONPROFITS MAY NOT BE
FAIRING QUITE AS WELL
Sector Overview

• San Diego nonprofits dont have as wide a reach
  with local donors
• 73 of HH make charitable contributions versus
  89 nationwide
• Although the donors they do reach must be
  contributing more significantly
• Average contribution in San Diego is high at
  2,028 versus 1,620 nationwide
• In addition, spending on nonprofit
  services/goods must be low
• Revenues (total) per capita in San Diego is
  2,039 versus 3,954 in California
• With assets per reporting 501(c)3 in San Diego
  low
• Average of 3.97 million/NP in San Diego versus
  7.06 million/NP in California

Source Analysis USD Nonprofit Leadership and
Management Program 2002 San Diego Giving and
Volunteering Survey, funded by the Packard
Foundation
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IN ADDITION, GOVERNMENT FUNDING CONTINUES TO FALL
Sector Overview

• San Diego nonprofits received nearly 14 of
  revenues in 2001 from government grants
• However, government funding is down and is
  expected to continue to fall
• Government funding for nonprofits (not including
  health) was 25 percent less in 1999 than in the
  early 1980s.(1)
• Between 2001 and 2003, there was an estimated
  drop of 13 billion in public funding for
  nonprofits(1)

(1) The Nonprofit Policy Councils Facts
Fallacies 2001, by Green and Crabb Source The
Nonprofit Policy Councils Facts Fallacies
2001, by Green and Crabb
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OTHER CHALLENGES IMPACTING MOST ORGANIZATIONS
Sector Overview

• Shift in sources of revenue
• Drop in government funding
• Increased focus on fee for service
• Changing demographics of county
• Increasing senior population
• Increasing Latino population
• Increased cost of doing business
• Workers comp insurance rates rising
• Increased complexity of contracts/government
  funding
• Increasingly regulated environment requiring a
  whole different set of skills

The state of doing business is becoming
increasingly complex and competitive require a
re-tooling within many nonprofits
Source Interviews, internal TSDF expertise
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INTERVIEWS CONFIRM NEEDS WITHIN THE SECTOR (I)
Sector Overview

• The sector is fragmented and unorganized
• The sector is full of redundanciesfledgling
  organizations on shoestring budgets
• Many organizations are financially unstable
• Living hand-to-mouth
• Many have lost their angels and have no plans
  for how to recover
• Sustainability is their biggest issue
• Often because they lack necessary knowledge or
  experience
• The biggest challenge is that the world changes
  so fast and we cant keep up
• We are not an expert on fundraising, it is on
  providing care to families

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INTERVIEWS CONFIRM NEEDS WITHIN THE SECTOR (II)
Sector Overview

• Organizations experiencing tremendous change and
  need help navigating that change
• We have gone through tremendous change and
  redirected our serviceswe have had to develop
  systems by the seats of our pants
• There needs to be more attention paid to
  executive leadershiptheres phenomenal
  leadership but others that need real help
• Board development and governance is considered a
  huge issue
• Board development is the weakest capability in
  the organizations I have seen
• as is strategic planning and business savvy
• There are some universal needs across the
  sector, board development and strategic planning
• These organizations need good business planning

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NOT MUCH ASSISTANCE FOCUSED ON RE-TOOLING THE
SKILL SETS WITHIN NONPROFITS
Capacity Building Providers
Sources of Revenue for Reporting Charitable
Nonprofits in the San Diego, 2001
However, focus continues to be on the nonprofit
side of doing business

• No real provider of business management type
  assistance
• General agreement that nonprofits lack business
  savvy but appear to have a growing need to
  develop expertise
• NMS, the largest provider to the sector, appears
  to be heavily focused on fundraising, board and
  volunteer development rather than business acumen

Contributions from individuals, corporations and
foundations 18
Other (fees for services and goods, govt grants
and contracts, and investments, etc.) 82
The most dramatic change in funding for
nonprofits over the past two decades has been the
increase in fees for service(1)
Note Data compiled from IRS 990 data for
2001 (1) The Nonprofit Policy Councils Facts
and Fallacies 2001, by Green and Crabb Source
SDU Nonprofit Leadership and Management Program
Primary Source Interviews, Research
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SUMMARY OF FINDINGSSan Diego Nonprofit Sector
Sector Overview

• Relatively large and fragmented sector
• Lacking strong organizing bodies and sharing of
  information
• Highly diverse by many factors
• Programs, size, structure, age, staff, management
  capabilities
• Nonprofits increasingly EARN much of their income
• Nearly 60 of revenues driven by program fees and
  goods
• However, often still heavily dependent on angel
  investors or government support
• On aggregate, not investing adequately for growth
  and capacity building
• In many cases, living hand-to-mouth
• Although facing some universal challenges,
  difficult to address all organizations in
  aggregate. Each sub-sector (e.g., arts, health,
  etc) faces unique challenges.

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SUMMARY OF NEEDS OF NONPROFIT SECTOR

• As the complexity and competitiveness of running
  a nonprofit has increased, the skills, tools and
  investment needed to operate effectively have
  changed
• The level of assistance and support available to
  develop these capabilities within San Diego
  nonprofits appears inadequate
• Possibilities for enhancing the effectiveness of
  the sector have been identified, but leadership
  is needed to see them happen
• Greater networks of nonprofit organizations
• Improved organization and information sharing
• Greater collaboration and cooperation
• Greater networks of organizational support
• Access to and information on providers
• Enhancement to the types of providers