Philanthropy Under the Microscope – Real Risks to the Fundraising Environment

26 05 2011

Philanthropy as we know it has been uniquely American and has deep societal roots that allow people to support others in ways that market forces and other mechanisms sometimes miss. Alexis de Tocqueville recognized almost two centuries ago that Americans seemed uniquely supportive of each other, despite our frontier spirit. And, the rest of the world is catching up. However, events in May have increased the focus on fundraising in ways that will affect most development shops.  Last year, Tom Friedman foretold changes in our non-profit funding environment in an interesting op-ed piece . Furthermore, the Wall Street Journal just reported on the potential for tax law changes from the Obama Administration, which could impact all nonprofits.

My colleague Chris Cannon and I have been discussing the impact of the economic and political climate. So how is this manifesting itself?  This became a small challenge about what would make the biggest impact.

Mark’s picks:

1)      Healthcare Reform – I am seeing that the uncertain impact of federal healthcare law and widely varying applications of HIPAA have created an uneven fundraising environment.  The Association of Healthcare Philanthropy identified some additional responsibilities on healthcare organizations right after the bill was signed. Uncertainty of what this all means will offer challenges.

2)      Education (and Public) Funding – We’ve seen for a few years now what a single senator’s focus can do to the nonprofit agenda at the federal level.  And, at the state and local levels, it will be even shakier.  For state-supported universities, budgets remain depleted. The LA Times just reported that Governor Brown is likely to cut deeper into one of the world’s most respected public higher education systems. I was interviewing a board member the other day who commented that his alma mater was “no longer state supported, really. Instead it is more or less state chartered. That’s it.”

Chris’ picks:

1)      Increased Scrutiny – A recent IRS-giving article in the New York Times, makes it look like advocacy groups’ fundraising is really being scrutinized. I understand some of the focus; the influence and the potential to hide behind the nonprofit veil. But the donor privacy issues and the overall slippery slope here are a little troubling.

2)      Taxing Non-profits – Some of the biggest cities in the U.S, such as Boston and Los Angeles, are proposing potential avenues to tax nonprofit real estate holdings and possibly revenue, not just unrelated business revenue.  This affects budgets and may change donor behavior.

With all of these changes, it’s hard to know what the impact may be, but these are some serious risks. We find that maintaining a focus on the top of our pyramids and working top-down, inside-out allow nonprofits to ignore some of these changes, but some are too big to avoid. We should also be preparing to manage these risks. So, what impact are these risks having  on your mission?

– Mark




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