What you should do:

Go on the offensive here. Be as transparent as you can about your income and expenses. Publish your budget on your website and periodically report on how you are doing. Have a friend who is not involved in a nonprofit look over your budget and call your attention to anything that she or he thinks would seem strange to someone not familiar with nonprofits. Provide a narrative explanation of your budget so that laypeople can understand it.

Also, when other nonprofits are “exposed” in the media, make sure that you agree that what they have done is egregious. Some of the “scandals” reported in the media are actually either not that serious or are not scandals at all. For example, several stories have reported on how much organizations spend on mailings, showing that they spend almost as much as they make and sometimes more. Those of us who are familiar with direct mail will know that this is a legitimate cost of doing business—direct mail is used to acquire donors who are then asked to give again or to give more. Write your own op-eds or letters to the editor to defend nonprofits you feel are being attacked unfairly.

Donors have the right to demand that their hard earned money is spent properly and we have an obligation to teach them what they need to know in order to determine that. The real scandal is how badly we have done the latter.

Fiscal Crisis in the States

An excellent, although dense, study called “Fiscal Crisis in the States: Its Impact on Nonprofit Organizations and the People They Serve,” by Woods Bowman, Ph.D has just been released by the Nonprofit Sector Research Fund of the Aspen Institute. It can be downloaded from the Philanthropy Information Retrieval Project.

Basically, it documents what most of us are experiencing on the state level. The opening paragraph of the Executive Summary says it best, “State budgets are plagued by structural imbalances, giving rise to chronic deficits. A combined state shortfall grew from $10.1 billion in 2001 to $32.9 billion in 2002, to $34.6 billion in 2003. The latter figure is 4.4% of estimated total revenues of the nonprofit sector. [Emphasis added] Half of the states expect general funding spending, adjusted for inflation and population growth, to be lower than 2002.”

The report goes on to say that federal spending, although increasing, is used mostly by Medicaid. Medicaid spending is growing so fast that it is displacing other essential programs from state budgets. Unfunded mandates, such as “No Child Left Behind,” “Homeland Security Act” and the “Help America Vote Act” have increased the burden on states and the federal government.

Fundraising is the Number One Challenge Facing Nonprofits

It is not surprising then, that a sample of 1000 nonprofits done at Johns Hopkins University reported that fundraising was the number one challenge facing them, followed by government cuts and financial issues and cost containment. These are, of course, all related.

The report goes on to say that the nonprofit sector is not synchronized with the economy. We experience recessions later and they last longer. We can expect to be in serious financial straits for another two years at least (that is assuming that the economy does recover.)

Basically, as Rick Cohen from the National Committee for Responsive Philanthropy stated in a meeting at the Independent Sector Conference in November, “Nonprofits are being asked to more and more with less and less, until finally we will be asked to do everything with nothing.”

What you should do:

Keep tabs on what is happening in your state. Monitor reports like the one cited here, and make sure this information is fed to your local papers. Often a daily or weekly paper in a small town will appreciate this information, tied to a human interest story of a local nonprofit.

This can have results. My hometown of Berkeley, CA, so often the butt of every joke, is having the last laugh. It has the one of the highest bond ratings in the state, and is widely regarded as one best managed cities in the country. In a report in American Prospect (July/Aug 2003), David Kirp notes that Berkeley is one of a very few cities to be operating in the black, our summer camps are going strong, our libraries are open evenings and weekends, and our public transportation system delivers 1 out of 5 residents to work every day—four times the national average. A four year initiative in the city has cut the number of low birth weight babies by 40%. We have high taxes and great citizen participation in government. These are related.

And Finally…
Where Does Rumsfeld Want Our Nation to Go?

I end this column on a note of noir comedy. Thomas Cahill, in his new book, Selling the Wine-Dark Sea: Why the Greeks Matter, reports that US Secretary of Defense Rumsfeld commissioned a study of “how ancient empires maintained their hegemony” when he took over the Pentagon. Cahill asks, “Might he more profitably study how they lost all they had gained?” Cahill argues that the Fall of the Roman Empire was not caused by them becoming to sensual and consumeristic, but rather because of “unfair taxation on the poor and middle class,” among other problems.

To find out more and express your opinion, go to the following sites (which will take you to more sites.)

www.ombwatch.org

www.responsiblewealth.org

www.nrdc.org