The state of San Francisco nonprofits

June 1, 8:56 PMSF Nonprofit Business ExaminerMaureen Futtner

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What do the grantmakers have to say?

On May 28, San Francisco's Foundation Center held another discussion in its "Meet the Grantmakers" series, and this time the house was packed. The topic of last Wednesday's panel was a recent study by USF's Institute for Nonprofit Organization Management (INOM) on the "State of the Nonprofit Sector." The study, released in April and authored by INOM's Carol Silverman in conjunction with Compass Point Services, is an exhaustive survey of 1,000 nonprofit organizations in the city.

Immediately following the study's release, some of the editorials and opinions in local media focused on the high number of nonprofits in the city. With over 7,000 registered tax exempt organizations, the headlines seemed to sensationalize the study's findings as a glut of nonprofit organizations, translating into a drain on our economy. The reality is that 43% of these nonprofits have budgets $25,000 or under; 17% are philanthropic foundations and give money to vital programs; and the nonprofit sector accounts for eight percent of all wages paid in San Francisco.

Also, remember those controversial "San Francisco values" that got drubbed in the national media when Nancy Pelosi became House Speaker? What a better demonstration of "San Francisco values" than a robust sector whose primary tasks are to educate, serve and improve the lives of all citizens. That last point, too, is a salient take-away from the study. It isn't as though San Francisco's nonprofit organizations are serving solely San Franciscans. National and international charities set up shop in our city because of our world-class reputation for philanthropy and innovation.

THE M-WORD - MERGERS, ACQUISITIONS AND DOWNSIZING

So, what did our grantmakers make of the study? A resounding word of caution around a concern that the findings justified a call to reduce the number of nonprofit organizations. Eric McDonnell, executive vice president of United Way Bay Area, stressed that the "question is about quality of services delivered, not whether there are too many." Denny Martin, program officer for community health at the San Francisco Foundation, agreed  and recognized that philanthropy is not in the game of forcing downsizing. However, given the devastating economy, difficult choices are being made everywhere, and foundations are "very concerned about the plight of the nonprofit sector. A tidal wave is coming," continued Martin, "and organizations need to be proactive to address these coming changes."

The San Francisco Foundation recently launched the Nonprofit Transitions Fund to support "intentional change." The fund's call for letters of inquiry just closed, but Martin said the Foundation will open it again next year. The Transition Fund is for nonprofits that are interested in pursuing organizational restructuring in response to the economic downturn. The San Francisco Foundation earmarked $250,000 to support serious planning efforts, consultants and due diligence related to downsizing, mergers, acquisitions and other core regroupings.

FLAT IS THE NEW UP

With assets declining precipitously, foundations are necessarily realigning their giving strategies. Amanda Feinstein, senior program officer for economic security at the Walter and Elise Haas Fund, said that, in this fiscal year, the Haas Fund is staying flat with their grants, and that is good news. "Flat is the new up," Feinstein quipped and was pleased to recognize that the Haas Fund, for now, has not cut programs. Denny Martin chimed in to acknowledge that the San Francisco Foundation would be increasing its grant sizes, but funding less organizations.

Still, change is on the horizon. In addition to the outcomes and measurements a nonprofit organization must track and demonstrate rigorously, according to Feinstein, a new question will be, "Do you have the leadership and infrastructure to make it through this economic environment?" Martin noted that we are "in a brave new world and the nonprofit sector will look different" when we're at the other end of this recession.

DIVERSE CITY?

While San Francisco's nonprofit sector is diverse, it is not as diverse as the city itself. Particularly in looking at management staff, the study discovered that 43% of nonprofits have no person of color in a leadership role and 55% have no LGBT members. One of the more stunning findings was that diverse nonprofits (those that both focused on serving diverse communities and that had diverse leadership) have lower revenues. Eric McDonnell expressed a need for the sector "to unpeel that," as it is a glaring inequity that might have greater implications.

NEXT STEPS

Jeanne Bell, executive director of CompassPoint Nonprofit Services and moderator of the discussion, emphasized that it is important for fundraisers to remember that foundation grants are just a tiny piece of income for nonprofits. For more information on the nonprofit sector, visit USF's Institute of Nonprofit Management. There, in addition to downloading the full report on the state of San Francisco nonprofits, you'll also learn that the INOM closed its doors in March 2009. That might be the most telling indicator of all.

MORE ON THE M-WORD

See the list of "Resources for re-grouping" on this page for more information and to download resources on nonprofit mergers, acquisitions and downsizing.

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