Diversity in Funding Sources More Talked About Than Practiced

A study of more than fifty organizations in Baltimore with income from $1 million to $50 million shows that close to 90% rely on just one line on the Form 990 for more than half their income.  Even more notable: the lion's share of private contributions go to organizations that make private contributions their primary source of income.

A recent discussion on the Arnova-L email list brought up the old topic of whether nonprofit organizations should pursue a strategy of diversifying their sources of income.  Woods Bowman, of DePaul University, noted that a few years ago the Bridgespan group (EIN 31-1625487 Form 990), the nonprofit affiliate of the management consulting firm Bain & Co., offered a study of youth services and environmental advocacy groups that attempted to shed some light on this cliché of nonprofit consulting. 

Which reminded me of a rainy Saturday project of mine from a few years ago (2001).  From the IRS Master File I had identified some 276 charities (other than churches, schools, and hospitals) in the Baltimore area (those with zip codes starting with 212) with incomes between $1 million and $50 million.  I randomly selected about a quarter of them, 56 to be exact, and pulled their Form 990s from Guidestar, entering each line of their income to a spreadsheet.  Then I figured out for each organization which line accounted for the greatest amount of income and to what extent the organization relied on that lead source of income.  (Here is a summary of the results, and here is the data I based the summaries on in comma-delimited text that can be uploaded to any spreadsheet or database program.)

To my surprise, I found that 39% of the organizations relied on their lead source of income for more than 90% of their revenue, and that 50% of them relied on the lead source for between half and nine-tenths.  In other words, nearly 90% of the organizations relied substantially on one type of income. 

Program service revenue was the most common lead income source (41%), then came private contributions (30%), then government contributions (20%).  So these three types of income accounted for 90% of the organizations, as well. 

Another notable finding was that 87% of all private contributions reported by all the groups in the study went to organizations that relied on private contributions for more than 50% of their income, even though these were only 24% of the groups overall.  It would appear that the only way to raise large amounts of funding from the public is to dedicate the organization to this purpose. 

The results of this study of fairly substantial organizations calls into doubt the suggestion of diversification of sources of income for charities.  It could be that the answer for an organization is to focus its expertise on one source of funding, be it program service income, private contributions, or government contributions. 

Of course, start up charities have to find an alternative to their start-up funding source (typically a foundation) and small charities have to find an alternative to an annual fundraising event if they want to grow.  But these truisms shouldn't be generalized into a principle of income diversification.  Rather, start-ups and small charities need to point themselves in the direction of just one of the big three funding sources—program service income, public contributions, or government contributions—as the route to sustainability. 

Comments

[Ken Ristine]

There is a major weakness in using the 990 for this type of analysis. Line 1 a and b are both vague and often completed in different ways by different organizations. Foundation grants and corporate giving often end up in either a or b; rendering those amounts as indistinguishable from the amounts raised through individual donors.

An organization raising most of its money each year from individual donors is in a much stronger position than an organization raising a similar amount (and percentage) of money from a handful of foundations and corporations. The individual donor base will most likely persist, if the organization continues to do the work that needs to be done, while foundation and corporate support may suddenly disappear, not matter what effort the organization puts into gaining those gifts, because foundation and corporate giving tends to operate that way.

[engraved pens]

I suspect that the diversity problem works both ways.People in org theory, and maybe this is true in any academic field, tend to flock around the same issues and study the same kinds of things.

[corporate gifts]

t is a great way for the university to raise extra money which is then spent on what it really cares about. Yeah, Cambridge is great, although I think the experience depends much on your college.

[Darion]

Well, that makes sense.
http://filecraft.com

[coach outlet]

So funny, I think.*

[coach outlet]

So funny, I think.*

[real jordan sneakers]

hey sir,want to tell you how great this was,thanks again

[nike air max]

I like your concept.*_*

[scraps]

great information

[ooma review]

It was very interesting to know about the analysis made on the source of incomes. I'm sure this analysis will prove helpful for many people.

[bridesmaiddresses]

This is some reliable material. It took me some time to unearth this web page but it was worth the time. I noticed this page was hidden in yahoo and not the first spot. This website has a lot of good quality stuff and it doesn’t deserve to be burried in the search engines like that. By the way I am going to add this web publication to my favorites.
http://www.bestquinceanera.com

[ghd lisseur]

I must express my admiration for the kind-heartedness providing assistance to persons that truly need assistance with in this region. Your extremely own commitment to getting the concept up and down appeared to become wonderfully effective and have generally encouraged these like me to attain their dreams.

[Gianmarco Lorenzi]

I must admit that this is one great insight. It surely gives a company the opportunity to get in on the ground floor and really take part in creating something special and tailored to their needs.

[Hogan Sito Ufficiale]

Wonderful illustrated information. I thank you about that. No doubt it will be very useful for my future projects. Would like to see some other posts on the same subject!

[Wholesale Snapback Hats]

Many thanks for the article. I will have a link back to this information from our fresh blog. Thanks again.
http://www.cheaphatcaps.com
http://www.cheaphatcaps.com
http://www.cheaphatcaps.com

[バーバリーマフラー]

東京都で処理を受け入れた岩手県宮古市の東日本大震災の災害廃棄物（がれき）第１便約３０トンが３日、貨物列車でＪＲ東京貨物ターミナル駅（品川区）に到着し、７トン積みコンテナ計６個が都内３カ所の中間処理施設に運び込まれた。震災のがれきが東北以外で受け入れられたのは初めて。
２日夜に盛岡市を出たコンテナは３日午前、相次いで東京貨物ターミナル駅に到着。フォークリフトでトラックに積み替えられ、各地の処理施設に向かった。このうちコンテナ１個が搬入された大田区の処理施設では、重機や手作業で金属などの不燃物が分けられ、可燃物は燃やしやすいように破砕された。がれきには、木材や木くずに加え、布団やネクタイ、ぬいぐるみなど、津波で流されたとみられるさまざまな生活の品が泥にまみれて交ざっていた。

[chanel bags]

for charities. It could be that the answer for an organization is

[ティンバーランド]

ティンバーランド労組への配慮も顕著だ。会社員らの厚生年金と公務員らの共済年金の一元化問題では、公務員労組から支援を受ける議員が「人事院が来年２月に公表する会社員と公務員の退職金比較調査の結果が出るまでは、共済年金の特権的な上乗せ部分である職域加算の取り扱いを決めるべきではない」と主張。時間稼ぎをして法案の中身を骨抜きにしようという意図は明白だが、骨子案はあっさりとその主張を受け入れた。

　ティンバーランド首相は年末までに、社会保障分野と消費税増税部分をあわせた一体改革素案をまとめる方針だ。古本伸一郎党税調事務局長は１２日の党一体改革?税制両調査会合同会議で、「３１日の除夜の鐘のところまで、みなさんと相談していきたい」と強調したが、抜本的な改革は先送り必至の情勢だ。

[ティンバーランド]

ティンバーランドカナダのケント環境相は12日、先進国に温室効果ガスの排出削減義務を課した京都議定書から正式に離脱することを明らかにした。主要メディアが報じた。
　ティンバーランド同環境相は「わが国は京都議定書から正式に離脱する法的権利を行使する」と述べた。　

[402300572]

http://www.coachoutletstoreonlinenew.com