2008 was a year of ups and downs for almost every sector; however, a number of nonprofit, social enterprise, and philanthropic organizations demonstrated tremendous innovation in 2008, while others stimulated intriguing headlines. Below is a sampling of some of the most innovative ideas and interesting headlines of the last year.
1. Innovative IPO “Initial Partnership Offering” Fundraising Strategy Increases in Prevalence
In 2008, Do Something, a not for profit organization with a mission to inspire, support, and celebrate teenagers who want to get involved in causes such as the environment, HIV and sexuality, and poverty, launched a philanthropic type of initial public offering called an “initial partnership offering” (IPO), with the goal of raising $8 million to double the organization’s activities by 2011, when it hopes to be engaging with 66 percent – 21 million – of America’s teenagers. Prior to Do Something’s IPO, Year Up, an organization dedicated to helping young adults gain professional skills and entry-level employment, also developed their own IPO working with the Nonprofit Finance Fund, in an effort to raise $18 million to cover operating deficits as it doubled its number of sites. As a September 2008 article in the Economist noted, these innovative IPOs highlight the trend of nonprofit organizations looking to “philanthropic equity” to fund their activities. It is estimated that nonprofits have raised $200 million of this type of funding in the past few years, with an additional $100 million currently being sought.
Here’s how Do Something’s IPO worked (from a September 21, 2008, article written by Chief Executive Nancy Lublin):
- 80 shares were available at $100,000 each, which a “shareholder” directly paid or raised from others. The amount was payable six months from the date the shareholder agreement was signed.
- The shares were purely philanthropic in nature. By law, they did not represent a commercial interest in Do Something.
Ten shares were purchased before the IPO even launched.
2. The IRS Redesigns the Tax Form 990
After reviewing over 700 public comment letters and emails and reflecting on input regarding changes to the Form 990 from nonprofit leaders, experts and state regulators, the IRS has updated the form as of tax year 2008 to make it more useful. According to the IRS website, changes were made in the formatting and content of the form. Changes from the 2007 form include a front page summary providing a snapshot of key financial and operating information, a new governance section, and revised compensation and related organization reporting. Additional schedules have also been included to collect information not previously required. Overall, the redesign is aimed at enhancing transparency of an organization’s mission, financial information, and operations and promotes tax compliance by improving table formats, making it easier to understand what to report and how to report it. For more information, visit the IRS website.
3. Aspen Institute Provides Guidance to Public Policymakers on Strengthening the Nonprofit Sector
The Nonprofit Sector and Philanthropy Program of the Aspen Institute reported on suggestions from nonprofit leaders to improve government policies regarding nonprofits. The 10 proposals included in the report, titled “10 Nonprofit Policy Proposals to Strengthen U.S. Communities,” highlight areas in which a bipartisan commission could develop public policies that would improve the government-nonprofit relationship and the nonprofit sector’s ability to do its work:
- Generate growth capital for promising nonprofits by creating a Social Investment Fund Network.
- Promote the growth of enterprises that mix business practices with social missions by creating a special tax code designation for social-benefit enterprises.
- Increase donations by extending the deadline to April 15 for making tax-deductible charitable contributions.
- Increase the funds available to nonprofits by simplifying or reducing the excise tax for private foundations.
- Improve the viability of smaller nonprofits by creating a Small Business Administration for nonprofits.
- Advance knowledge and improve the performance of nonprofits and philanthropy by creating a Strategic Nonprofit Research Collaborative to support independent analysis of nonprofit data, issues and challenges.
- Improve disaster relief, especially for low-income and vulnerable people, by integrating local nonprofits and faith-based groups into official response systems.
- Ensure strong nonprofits by recruiting, training, and retaining the next generation of leaders for the nonprofit sector.
- Encourage public service by making a “Summer of Service” a rite of passage for every young person during the transition from middle school to high school.
- Encourage the use of music as a development tool by creating a Music National Service Initiative, strengthening and expanding music-based public service.
To learn more about these proposals, click here.
4. Social Enterprises and Entrepreneurs Alike Make Strides With Wiki Technology
Organizations are increasingly using new Internet tools to share information easily with a geographically dispersed staff and to allow large, discrete communities to connect with each other. Web 2.0 tools, in particular Wiki technology, are allowing organizations with field staffs not only to share information quickly but also to collaborate as members of a community. For example, Kiva, a micro-lending organization working to empower individuals to alleviate poverty, utilizes field-based Fellows to collect information from its loan recipients around the world, and then share those learnings with other geographically dispersed Fellows. To facilitate this, Kiva has created a Wiki that is used as an online workbook by its Fellows. Fellows add information they are retrieving from the field into the Wiki, which is then read and edited by other field staff. This allows Fellows around the world to learn about what other Fellows are doing, pose questions, and share information. Additionally, Wiki is being used to start new social enterprises, including PatientsLikeMe.com, in which patients suffering from various diseases can form a community and communicate with one another. Click here for more information on the use of Wiki Technology.
5. Nonprofit Finance Fund Receives $50 Million in Tax Credits
The Nonprofit Finance Fund (NFF), a leading community development financial institution providing loans and direct advisory services for nonprofits, was awarded $50 million in New Markets Tax Credits (NMTC) from the U.S. Treasury in winter 2008. The New Markets Tax Credit Program, as defined on the Community Development Financial Institutions Fund website, permits taxpayers interested in investing in their communities the opportunity to receive a credit against federal income taxes for making qualified equity investments in designated Community Development Entities (CDEs). In order to be designated as a CDE, an organization must be a legally established entity with a mission of serving, or providing investment capital for, low-income communities or low-income persons, and maintain accountability to the low income residents it serves. A tax credit is a dollar for dollar reduction, which is subtracted from a taxpayer’s tax liability. This is different from a deduction, which is an expense or an amount of money which lowers your taxable income. The CDE must then use all qualified equity investments to make investments in low-income communities.
The NFF will use the tax credit allocation to attract private capital, which it will then use to make loans at reasonable rates to nonprofits with projects aimed at improving low-income communities. The loans will be available for community facility projects over $5 million, which may include new construction or renovations on community health centers, charter schools, or arts and cultural spaces, to name a few. To find out more about NFF’s New Markets Tax Credits Program, visit its website.
6. Charitable Gift Cards Go Mainstream as Innovative Fundraising Strategy
Social enterprises and philanthropies alike are using prepaid gift cards to raise money for charity. One of these social enterprises is Giving Tree LLC, a privately held for-profit social enterprise in the prepaid card market with a mission to bring philanthropy to the masses. Giving Tree LLC uses a prepaid VISA® gift card, called the GiveCard®, to make it easy for people to give. The GiveCard® allocates 10 percent of the value of each card to any of over 1 million charities of the holder’s choosing, providing the opportunity for an everyday person to become a philanthropist. The remaining 90 percent is used like cash. During the 2008 holiday season, Giving Tree created co-branded versions of the GiveCard® with AmeriCorps Alums, CancerCare, Central Dallas Ministries, and EarthCorps, which the charities sold to their supporters in an effort to raise additional money. Affiliates directly received the donations from the sales of their branded cards. Other organizations like Network for Good, an organization with a mission to simplify individual’s ability to donate and volunteer online, and The Greater Kansas City Community Foundation also offer charitable gift cards, called the Good Card and the Giving Card, respectively. Unlike Giving Tree LLC’s GiveCard®, however, 100 percent of the value of these cards go to the charity of the recipient’s choice, versus 10 percent.
7. PowerPhilanthropy Connects 400 Central Ohio Nonprofit Organizations to Donors Online
The Columbus Foundation pioneered a new online giving resource in February 2008 called PowerPhilanthropy, connecting central Ohio nonprofit organizations with potential donors. Nonprofits interested in being included provide information on their organization and activities through the online Nonprofit Toolkit located on the Foundation’s website. Potential donors search the PowerPhilanthropy database and read profiles of nonprofits in their community, which include information on their programs, finances, management, and services. Access to this information improves donors’ understanding of the organization and helps them decide where to give. In March 2008 the foundation held a PowerPhilanthropy “matching” fundraiser, in which it matched the contributions. The fundraiser lasted until the Foundation’s $250,000 in funds was used up, which took 44 minutes. Read press releases on the fundraiser – Press release #1 and #2.
8. Case Foundation Giving Challenge Uses Technology to Raise $1.7 Million in 50 Days
The Case Foundation, Causes on Facebook, and PARADE magazine’s two fundraising initiatives, “America’s Giving Challenge” and “Causes Giving Challenge,” used online social networking tools to raise $1.7 million in under just two months. The Causes Giving Challenge allowed Facebook members to activate social networks, while the America’s Giving Challenge used online charity “badges” placed on personal websites, within e-mails, and on social networking sites to promote causes and raise money. The challenges awarded cash prizes for the causes supported by the “champions” who were most successful in using these tools to gain support for their cause.
9. Dan Pallotta’s New Book Challenges the Giving Community to Reflect on Limitations Placed on Nonprofits
Dan Pallotta, President of Springboard, an organization that designs brand identities and marketing campaigns for nonprofit and social change organizations, has written a book called Uncharitable: How Restraints on Nonprofits Undermine Their Potential, which challenges long-held notions about nonprofits. Should donors stop focusing on how much it costs nonprofit groups to raise money? Should a nonprofit offer its “investors” the opportunity for a financial return? Should it spend money on advertising? The author says yes to all three. The book asks the giving community to grant nonprofits the freedom to “get the job done,” giving nonprofits the same autonomy that businesses have to advertise, take risks, provide competitive salaries, and earn a profit. Whether or not you agree with the book’s premise, Uncharitable is challenging the giving sectors’ beliefs on the best way for nonprofits to achieve their outcomes.
10. Platte River Industries Group Launches a ServiceMaster Clean Franchise, Its Second Social Franchise Business
The nonprofit Platte River Industries, of Denver, which is dedicated to creating market-based employment opportunities for people with disabilities, opened a ServiceMaster Clean franchise in 2008. ServiceMaster Clean provides residential and commercial cleaning services. The opening of the social franchise highlights the trend of franchisors becoming increasingly interested in partnering with a nonprofit organization. According to an interview with the president and vice president of the ServiceMaster Clean franchise brand, published in Streams of Hope – Social Franchising: A New Path to Wealth for Nonprofits, franchisers are looking to partner with nonprofits that can enhance the brand, have the capacity to meet performance responsibilities, and will provide the customer care necessary to sustain the brand.
In addition to the ServiceMaster Clean franchise, Platte River Industries operates Auntie Anne’s pretzel shop franchises at four locations in Colorado, earning between $200,000 and $1million in annual revenue per site.