About the industry
To understand the non-profit industry better, Independent Sector gave an informative description of what makes a non-profit. They explain, “There are many kinds of nonprofits — the Internal Revenue Code defines more than 25 categories of organizations that are exempt from federal income taxes. But for most people, a nonprofit refers to what the tax code classifies as a “charitable” or 501(c)(3) organization.
What separates a charitable organization from other types of tax-exempt organizations is its purpose: it must benefit the broad public interest, not just the interests of its members. It must serve one or more of the following purposes, which come from the IRS: charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or the prevention of cruelty to children or animals. Congress and state legislatures have long recognized this special service by making these organizations tax-exempt, which enables them to dedicate their funds to fulfilling their missions.”
Trends in the industry
In our research on trends in the non-profit sector, we found the National Council of Nonprofits’ summary of the top 3 trends to watch to be most comprehensive.
1. Increased pressure to make the most impact with little resources
The National Council of Nonprofits writes, “Grant makers for Effective Organizations (GEO) highlighted the most significant trend – limited resources – when it documented in its recent national study of philanthropic practice that: “Nonprofits still don’t have the resources they need to respond to new opportunities, leadership transitions or changes in their environment.”
The ripple effect of six years of very limited resources is taking its toll. Most charitable nonprofits have not had “slack” time, or the financial luxury, to invest in technology or leadership. And it’s rare to find a nonprofit leader who has enough hours in the day, enough well-informed and engaged board members, or employees who are experienced and successful fundraisers. As GEO’s observation reveals, there is a great need right now for most nonprofits to take stock of the infrastructure and core capacities that make their nonprofit resilient and adaptable in times of financial strain.
Nonprofit leaders’ biggest challenge for 2015 will be accessing needed resources, including raising the money needed to sustainably advance nonprofit missions.”
2. Increased Needs in Communities
The National Council of Nonprofits also summarizes the difficulty in meeting the increased needs from communities. The post explains, “As documented by Nonprofit Finance Fund (NFF), basic needs in communities are rising. This means that demands on charitable nonprofits are steadily and significantly increasing – without the corresponding resources to relieve the pain in communities. The past 6 years of continuous strain on individual household incomes that started before the Great Recession, is now manifesting itself in many state government coffers and budgets falling short of cash.
How are nonprofits responding to the rising demands, coupled with the resource squeeze? The strain on the social safety net means nonprofits need to cast a wide net for funding, and do what our sector does best: try out new approaches (“innovate”) and increase efficiencies to soldier on – as long as possible. But in doing so, resiliency may be an elusive goal for many nonprofits.
The growing needs for services in communities, combined with cuts in government support for social programs, are outpacing our sector’s current capability to address community needs.”
3. Increased reliance on nonprofits due to decreased government budgets
For the third trend to watch for in the nonprofit sector in the coming years, the National Council of Nonprofits writes, “as new lawmakers take their seats in state and local governments, the tendency of politicians to look to the limited resources of charitable nonprofits to fill government budget holes will continue. Some government officials have openly told constituents to “seek help from local charities and churches,” while those same governments are targeting nonprofits as sources of revenue. So, this shift of government financial responsibility to charitable nonprofits is happening at the same time that governments openly expect charitable nonprofits to step forward to fill the service gaps and address growing needs in communities.”
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