PHILANTHROPY AND THE NONPROFIT SECTOR

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PHILANTHROPY AND THE NONPROFIT SECTOR

• James M. Ferris
• March 10, 2004

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

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• Definitions, Boundaries, Scope

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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.

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Terminological Thicket

• Nonprofit
• Not-for-profit
• Voluntary
• Independent
• Charitable

• Nongovernmental
• Philanthropic
• Third Sector
• Civil Society
• Social Benefit

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The Nonprofit Sector in Context

• Relative Size in terms of
• Organizations
• National Income
• Employees
• Earnings

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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,
2002.
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Distribution of National Income by Major Sector,
1998
Total national income 6.9 trillion
Total national income 7.1 trillion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Distribution of Employees by Major Sector, 1998
Total national employees 144 million
Total national employees 154 million
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Distribution of Paid Earnings by Major Sector,
1998
Total earnings 4.8 trillion
Total earnings 5.0 trillion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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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

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Distribution of National Income in Nonprofit
Sector, 1998
Total nonprofit national income 325 billion
Total nonprofit national income 477 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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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, Americas Nonprofit Sector

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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.

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Sources of Nonprofit Revenue, 1997
Total Revenue 665 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Sources of Nonprofit Revenue, 1997(excluding
health services)
Total Revenue 339 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Changing Patterns
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Changing Patterns(excluding health services)
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Changing Patterns Health Services
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Changing PatternsArts and Culture
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Changing PatternsEducation and Research
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Industry Allocation of Revenues, 1997
Total Revenue 665 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Industry Allocation of Revenues, 1977
Total Revenue 111 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Industry Allocation of Revenues, 1977 and 1997
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002.
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Roles of the Nonprofit Sector

• Service Delivery
• Advocacy
• Community Building
• Value Guardian

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The Philanthropic Dimension of the Nonprofit
Sector
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Private Giving, 2002
Total Giving 241 billion
Source Giving USA, AARFC Trust for Philanthropy,
2003.
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Changing Sources of Private Giving
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002 Giving USA, AARFC Trust for Philanthropy,
2003.
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Changing Sources of Private Giving
Total giving 21 billion
Total giving 48.6 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002 Giving USA, AARFC Trust for Philanthropy,
2003.
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Changing Sources of Private Giving
Total giving 98.8 billion
Total giving 203.4 billion
Source The New Nonprofit Almanac Desk
Reference, Independent Sector, Urban Institute,
2002 Giving USA, AARFC Trust for Philanthropy,
2003.
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Giving By Recipient Type, 2002
Total Giving 241 billion
Source Giving USA, AARFC Trust for Philanthropy,
2003.
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Private Giving as of Income
Source Giving USA, AARFC Trust for Philanthropy,
2003.
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PHILANTHROPIC INSTITUTIONS

• Foundations
• Federated Fundraising Appeals
• Donor Advised Funds
• Public Grantmaking Charities

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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.

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Foundations, 2001

• 61,180 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.

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Foundation Growth, 1991-2001
Number Assets (b) Giving (b)
1991 33,356 162.907 9.211
1995 40,140 226.736 12.261
1999 50,201 448.610 23.321
2001 61,180 476.789 30.502
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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.

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Regional Concentration 2001
State of Giving of Assets
New York 18.8 17.2
California 11.7 13.9
Pennsylvania 5.3 5.2
Washington 5.1 8.3
Texas 4.9 5.1
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Foundation Types

• Private Independent Foundations
• Family Foundations
• Corporate Foundations
• Operating Foundations
• Community Foundations

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Industry Structure 2001
Foundation Type Number Assets Giving
Independent 89.2 84.6 77.7
Corporate 3.5 3.3 10.6
Community 1 6.4 7.9
Operating 6.3 5.7 3.6
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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