Nonprofits say foundations unaware of their needs

Many nonprofit leaders say key challenges their organizations face are off the radar of foundations, which they say do not use their resources to help address those challenges, a new report says.

Nearly half of 121 nonprofit leaders surveyed by the Center for Effective Philanthropy believe foundations are not aware of their organizational needs, and over two-thirds believe foundations do not use their resources help strengthen their organizations, says the report, Nonprofit Challenges: What Foundations Can Do.

That perceived failure by foundations likely is rooted in a “crucial knowledge gap” between them and nonprofits they support with grants, the Center says.

Key needs

Nonprofits want more support in meeting demand for their programs and services, using technology to improve their effectiveness, and developing leadership skills, the report says.

Seventy-three percent of nonprofit leaders surveyed, for example, say they lack the resources to develop their leadership skills.

“That’s a huge opportunity for any foundation that wants to take the long-term view and fuel leadership development,” Ellie Buteau, vice president of research at the Center for Effective Philanthropy, says in a statement.

Barrier to openness 

The fact that only 52 percent of nonprofit leaders believe their foundation funders are aware of the challenges their organizations face may be partly the result of the “strength of relationships” that grant recipients have with their funders, and in particular their “degree of comfort with being open and honest,” the report says.

“The more likely nonprofits are to feel that they can be open with their funders about their organizations’ challenges, the more likely they are to report that their funders are aware of the challenges,” it says.

Foundations could do more

It also says the data “clearly show that nonprofits are not looking to foundations to solve all their problems,” but that they are looking for more help “and do not believe foundations are doing all they could.”

Only 36 percent of nonprofit leaders surveyed believe foundations share their knowledge about the ways other nonprofits are addressing similar challenges.

Still, on a range of common challenges, such as how to productively engage their boards of directors, and develop and train their staff, “most nonprofits are not looking for foundations’ help, the report says.

Demand for services

With a 2012 survey by the Nonprofit Finance Fund finding 52 percent of nonprofits could not meet demand for services, up from 44 percent in 2009, the report by the Center for Effective Philanthropy says over two-thirds of nonprofit leaders surveyed want more help from their foundation funders to address that challenge.

‘Leadership deficit’

And with the nonprofit sector finding it tough to attract talent, facing a potential “leadership deficit as Baby Boomers retire, and needing to develop the next generation of leaders, the report says, 73 percent of nonprofit leaders surveyed believe they “lack sufficient resources and opportunities to develop their leadership skills.”

And among nonprofits that try to influence public policy, it says, most want more help from foundations in that work.

Earned revenue

The report also says that among 85 percent of nonprofit leaders who want to maintain earned revenue, which in the sector has not grown as a share of total nonprofit revenue, an overwhelming proportion of leaders find that effort challenging.

And while 18 percent of nonprofit leaders do not believe foundations are in a position to help, most in fact are looking for more help from foundations on that issue.

Most nonprofits also find it challenging to increase their earned revenue, although 25 percent of them do not believe foundations are in a position to help them.

Big opportunity

The findings overall “indicate how much opportunity still exists for foundations to help nonprofits with some of their most difficult and persistent challenges,” the report says.

Past research by the Center for Effective Philanthropy has shown that while foundation staff “tend to be interested in providing assistance beyond the grant,” they “often do little to understand what their grantees need.”

The new survey says it “shows the consequences” of that failure on the part of foundation staff — “nonprofit leaders who do not believe foundations understand their challenges, and who are looking for foundations to do much more to help them in specific areas.”

Relationships key

Underlying much of the research by the Center for Effective Philanthropy about the work that foundations and nonprofits do together, the report says, is “the need for foundations and grantees to form strong relationships.”

Nonprofit leaders likely would not “be comfortable being open about the various challenges their organizations face if their relationships with their foundation funders do not feel strong enough to withstand that honesty,” it says.

“Clearly, foundations cannot do everything, and it is likely the case that nonprofits will always be looking for more help from funders than can be provided, given limits on staff time and resources,” the report says.

Pressing challenges

But the data also show that nonprofits “are not looking for their foundation funders to help them with everything they find challenging,” it says. “They are looking for more help to deal with some of their most pressing challenges.”

If foundations “depend on their nonprofit for the work they do to achieve their shared goals, then they will benefit from working to better understand nonprofits’ challenges and from dong more to help nonprofits address them,” the report says.

The report findings indicate that instances of foundations doing that “remain relatively few and far between.”

Todd Cohen

Peace says retail-center deal won’t alter endowment target

By Todd Cohen

RALEIGH, N.C. — William Peace University in Raleigh says its planned purchase of a nearby retail center and surrounding properties — a deal for which it reportedly will spend $20.75 million from its $33 million endowment — will not change the projected rate of return on the investment of its endowment assets.

“The University’s projected return on its endowment is 5.5% over a rolling three-year period, which reflects the long-term investment objective of the fund,” Julie E. Ricciardi, vice president in the Office of Engagement at Peace, says in a September 13 letter to fundholders. “The 5.5% objective is the same as before and after the Seaboard Station purchase.”

The letter does not give details of revenue Peace expects to generate from the retail center and other sources to achieve its projected rate of return on its endowment once the bulk of current endowment assets are used to buy the new properties.

Ricciardi did not return phone calls on Monday and Tuesday.

A bankruptcy court judge in August okayed the purchase, which has sparked fears among some tenants and residents of nearby neighborhoods that Peace might close the retail center and use the land for university purposes, according to a newspaper report.

Some university donors and alumnae worry that such a big investment from the school’s endowment in a single project is risky, but Peace has said it plans to keep the retail space, the newspaper report said.

The letter to fundholders characterizes the endowment as a “pooled income fund” that includes funds created by fundholders and is “invested in a number of things.”

Some part of the endowment “may be used to permit the acquisition” of Seaboard Station and nearby properties “if the purchase is completed,” the letter says.

As of the date of the letter, it says, the purchase had not been completed.

“After careful consideration, the Board of Trustees determined that investment of the endowment funds in the Seaboard Station property is in the best interests of the University and is a prudent investment,” the letter says.

“The annual income from your fund, determined based upon the collective returns of the endowment fund, must be used to provide scholarships, etc. and the nature of the underlying endowment will not change that purpose,” it says.

The endowment principal “will always be calculated upon its share of the endowment fund’s value,” the letter says.

“The fund is valued each year based upon its earnings and the fair market value of the investments held,” it says.

“The then current fair market value of real property investments, such as Seaboard Station, will be determined each year and the value will be reported on the annual information return that the endowment fund files with the IRS,” the letter says. “The return is made publicly available. That has not changed.”

The value of endowment assets invested in Seaboard Station “will reflect the market value of the property,” the letter says. “It is premature to state what that market value is as the property is currently being valued.”

Fundraising flat at hospitals, health systems

Nonprofit hospitals and health care systems in the U.S. raised over $8.9 billion in fiscal 2012, unchanged from a year earlier and 7 percent more than in fiscal 2010, a new report says.

The biggest sources of philanthropy in fiscal 2012 for those institutions were major gifts, grants from corporations and foundations, and annual giving, with each of those strategies generating about 20 percent of donated dollars, says the 2012 AHP Report on Giving from the Association for Healthcare Philanthropy.

Special events accounted for 14.9 percent of donations, and planned giving accounted for 9.5 percent.

Four of five organizations with fundraising expenses of at least $2 million, and organizations that employed seven or more full-time direct fundraising staff, were in the top 25 percent of health care organizations based on total fundraising “production,” says the report, which was based on a survey of nearly 1,700 institutions.

Among the most successful development programs, it says, major gifts accounted for nearly a third of all donations, annual giving accounted for less than a fifth of all donations, and contributions from corporations and foundations accounted for 24.1 percent.

For every dollar spent on fundraising programs, the median return on investment was $3.22 in fiscal 2012, down 2 cents from fiscal 2011.

The cost to raise a dollar was flat at a median of 31 cents.

Among all institutions surveyed, roughly 25 percent of funds contributed were used to pay for construction and renovation projects, compared to 21 percent for patient care programs, 12.9 percent for capital equipment purchases, and 10.8 percent for  general operations.

At teaching and academic hospitals and children’s hospitals, 16 cents for every dollar raised went toward medical research, compared to less than 6 cents per dollar among all institutions surveyed.

Among all institutions, 4.2 percent of donations, on average, were spent on charitable care, compared to 10.3 percent at children’s hospitals, 5.5 percent at tertiary hospitals, and 4.4 percent at community hospitals.

Todd Cohen