Financial trends affecting your nonprofit in 2015

At Execute Now!, we’re often in the unique position of having a broad perspective on what trends affect financial management in the nonprofit sector due to the wide range of clients we serve. During this time of year, the legislative sessions are gearing up for what’s on the horizon in 2015. Most recently, we heard our country’s State of the Union address.

In the spirit of evaluating the state of affairs, I couldn’t help but share some of my own nonprofit sector insights for 2015 in light of some of the trends I’ve observed in the news. Join me in taking a look forward:

Giving circles and impact funding

If you’re like me, you’ve noticed the growing popularity of giving circles. Millennials have helped make this movement a popular way to give collectively with others. Giving circles are a form of participatory philanthropy where groups of individuals donate their own money or time to a pooled fund and decide where to donate the funds. During this process, they may also engage in activities to increase awareness of and engagement in the issues surrounding the cause or community project. Giving circles can be as informal as a group of friends or as structured as a foundation. Some examples of giving circles can be:

Investors
Nonprofits
Students
Policy makers
Business leaders
Political leaders

An article in The Chronicle of Philanthropy about a Jewish Group launching its own giving circle, called the Natan Fund, reported that studies show people who participate in giving circles tend to give more, have stronger religious and community ties, and are more strategic in their charitable contributions. They are also younger. Most of the members in the Natan Fund are under 45.

Natan Fund’s executive director, Felicia Herman, observes, “Young givers like to do things in a community of their peers.” The Natan Fund has approximately 200 members and has given roughly $9.6 million in grants since its formation in 2002. It launched a website as part of its efforts to offer a resource library that helps potential philanthropists join in the growing movement of collaborative charity. Natan.org is one of many giving circle sites cropping up to make it easier for collective philanthropy. Websites like www.Tilt.com are one of the “easiest ways to pool money with your group and make amazing things happen,” according to the website tagline. Tilt and other giving circle sites abound on the Internet. Enter “giving circles” in the search bar to find 14 million plus results.

Philanthropy and politics

No forecast is complete without acknowledging the uncertainty created by politics and legislative sessions surrounding nonprofit tax laws. According to The Chronicle of Philanthropy reporter Alex Daniels, the Republican takeover of Congress will mean lawmakers will dig deep into the tax code.

Some of the provisions under scrutiny, says Daniels, will be:

Extending the charitable deduction window into April 15 after the calendar year-end

Benefits for land conservation, donations to food banks and contributions to charity made from certain retirement accounts

The IRS considering what constitutes political activity by social-welfare organizations and whether their donors can remain anonymous

Foundation excise taxes (The House passed a measure to simplify and lower this tax to one percent.)

A proposal to require donor-advised funds to pay out at least five percent of their assets each year

The provision of federal support for social-impact bonds that fund “pay for success” efforts at the state and local levels

Pending rules that limit how to conduct federated campaigns (The United Way, in particular, hopes a Republican Congress will remove recently added federal regulations.).

Most of the sector’s preliminary feedback on these issues surrounded the April 15 deadline for charitable gifts. Some large nonprofits don’t like the idea because it diminishes the emotional appeal during the holidays. Lawmakers argue that businesses don’t really know what they have to give until they’ve completed their taxes in the first quarter. Depending on the legislation that passes this year, nonprofits could be making a year-end and April push for gifts.

Light at the end of the tunnel

Allow me to give you a dose of certainty after looking at the uncertain legislative provisions above by sharing some good news I’m confident will positively impact charities this year. The federal Office of Management and Budget (OMB) announced effective December 26, 2014, that “governments at all levels entering into written agreements with nonprofits to deliver services to the public have an affirmative duty to pay their fair share of the costs that those nonprofits incur.” This will require government agencies to reimburse nonprofits for some or all of their indirect costs. Amazing. This report came as a delightful surprise, especially since I’ve written at length about the lack of consistency with government funding and underwhelming support from its agencies.

In Nonprofit Advocacy Matters, Tim Delaney, President/CEO of the National Council of Nonprofits was quoted as saying, “The changes promised by the new rules are a major victory for people who depend on nonprofits every day. If properly implemented, the new rules will finally end the harmful practice of governments imposing artificially low limits on the reimbursement of indirect costs that nonprofits must incur. Those arbitrary caps have essentially forced charitable nonprofits to subsidize government.”

I couldn’t have said it better myself. I hope these observations have given you a sense of what 2015 may hold for your nonprofit. Giving circles are an inspiring movement and demonstrate innovation behind our giving spirit. Politics will always provide a climate of uncertainty and challenge us to overcome bureaucratic hurdles. The OMB’s new requirement teaches us an important lesson: There is always room for optimism—even with the government. Bloomberg Businessweek reported on the economic power of optimism in a January 8 article: Optimistic people work harder, get paid more, get elected to office more often and win at sports more regularly. They even live longer. The effect of optimism spills over into business decisions. Let your optimism impact your leadership decisions this year. You may live longer and have time to start a giving circle of your own.

See also:

Cash Flow Strategies: Innovation in Nonprofit Financial Management

Nonprofit Sustainability: Making Strategic Decisions for Financial Viability

The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model

Image credits: post-gazzette.com, givingcirclesnashville.org, latinorebels.com, businessobservefl.com, exacttarget.com, mpd.me

 

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