New Jersey Non-Profits: Checking in and Looking Ahead to 2015 - PowerPoint PPT Presentation

New Jersey Non-Profits: Checking in and Looking Ahead to 2015 presented to the February 10, 2015

Your presenter Linda Czipo Executive Director Center for Non-Profits

•Promoting New Jersey’s non -profit About community Advocacy/Public Education • Public policy the • Research (non-profit statistics, trends) Center • Management/compliance assistance for • Workshops/seminars/Webinars Capacity Building • Publications Non-Profits • E-newsletters, resource lists, info/referral Member Services • Cost saving benefits For 30+ years, the champion & first-stop resource for and about New Jersey’s non -profit community

NJ Non-Profit Overview What we’ll National and New Jersey Policy Trends cover today: Government/Non-Profit Contracting Looking Ahead: Initiatives and Issues

New Jersey Non-Profit Overview

 30,000 501(c)(3) orgs in NJ  314,000 employees New Jersey’s  9.8% of the state’s private work Non-Profit force  More than construction, Community transportation, public utilities, finance and insurance industries  $37 billion in expenditures annually  1.5 million volunteers providing $4.6 billion in service

Non-Profit Sector Size/Scope  # of NJ 501(c)(3)s grew by 64% from 1999-2009  Even after IRS auto-revocation, net increase of 30% in number of public charities from 2003-2013.

Government Media Heightened scrutiny Public Funders/Donors

Compensation levels Admin expense ratios Heightened scrutiny Evaluation/impact Accountability/transparency “Pay your fair share”

National and NJ 2014 NJ Non-Profit surveys: Survey: Capacity 2/3 to 3/4 of more than 80% issues survey respondents of NJ respondents consistently report said demand had rising demand risen in 2013. for services. This upward trend more than 80% has been reported projected that by non-profits for demand would numerous continue to rise in consecutive years. 2014. Sources: Nonprofit Finance Fund, State of the Sector surveys, 2013 and prior years; Center for Non-Profits, New Jersey Non-Profits: Trends and Outlook survey reports, multiple years

Over half of national survey Capacity respondents said they issues could not meet the increased demand. Source: Nonprofit Finance Fund, State of the Sector survey, 2013

Gradual transfer of burden of service delivery from government to non- profits “Stealth • Rising demand shift” • Budget cuts • Efforts to curtail tax exemptions, giving incentives • Contracting system challenges

Government funding/regulation Other trends / • Budget crises/funding cuts issues • Non-profits as a revenue source • Rationale for tax privileges • Threats to autonomy, advocacy rights

Squeezing non-profit resources Other • Property Tax Challenges/PILOTs trends / • NJ Court Cases to Watch issues • Princeton University • Morristown Medical Center • Cumbersome, restrictive, ineffective government contracting structure • Efforts to limit charitable giving incentives

Policy Updates

What to watch for Budget in Gridlock or Cooperation? the new  Federal Fiscal Year runs 10/1 through Congress 9/30  FY 2015 budget (10/1/14 - 9/30/15) enacted December 2014  IRS budget cut  Funding for various non-profit programs  Affordable care act

Tax Reform in the new Congress? Giving Incentives Provisions to look for: and Tax  AGI Floor or cap on deductibility  Annual giving limits Reforms  Donation deadline of 4/15  Estate tax  UBIT Changes  DAF payout requirement  Foundation excise tax reform?

December 2014 A Fleeting Restoration Giving Incentives Expired Incentives: and Tax  IRA Charitable Rollover Reforms  Food Inventories  Land Conservation ___________  Signed into law 12/19/2014  Expired 12/31/14

America Gives More Act H.R. 644 - House to Vote 2/12/15 Giving Incentives Restore and Make Permanent: and Tax  IRA Charitable Rollover Reforms  Food Inventories  Land Conservation  Simplify Foundation Excise Tax ___________  Mobilizing support Per Council on Foundations, private foundations may contact members of Congress to support this (“self - defense” issue)

Treasury/IRS Proposed Regulations 2013 Proposed Regulations  501(c)(4) Social Welfare Nonprofits only Campaign-  Attempted to define “campaign -related Related political activities” that would not count as a social welfare purpose Political Concerns of 501(c)(3) organizations Activity  Nonpartisan election-related activities  Black-out periods Status  Over 140,000 comments received, mostly in opposition  Timeline for rewrite uncertain

A (too?) streamlined path to Tax Exemption  Released July 2014 Form  IRS’ response to backlog of applications 1023 EZ at IRS and targeting controversy  Available to many groups with less than $50,000 gross receipts / $250,000 assets Concerns  3-page checklist  No IRS agent review  Gateway to unsuitable approvals?  Funder backlash?

Government-Nonprofit Contracting Reform Persistent problems:  Contracts that don’t cover the Contracts cost of services  Complex and time consuming & Grants application/ reporting requirements  Changes to contracts mid-stream (54%)  Late payments  Non-profits owed $200,000+ on average by state governments

Government-Nonprofit Contracting Reform New Jersey  Contracts that don’t cover the cost of services (76%) Nation’s Worst Contracts  Complex and time consuming & Grants application processes (81%) 5 th Worst  Late payments (53%) 9 th Worst  Complex and time consuming reporting requirements (75%) 12 th Worst

Common Contracting Problems and Changes in New Jersey Non-Profits' Experiences since 1/1/13 compared with 2012 Be Better Ab About the Worse rse N/A sa same me State dollars not covering full cost to provide 2% 38% 53% 7% services under contract Timely contract processing or renewal 5% 49% 42% 4% Late payments 6% 55% 27% 12% Changes made by state contract terms after 3% 41% 36% 20% execution Complexity and time required for preparing 5% 37% 54% 4% contract applications Complexity and time required for contract 2% 47% 47% 3% reporting Duplication/overlap of monitoring or 2% 38% 47% 3% reporting requirements (for organizations with multiple state contracts) N = 135 Source: Rapid Response Survey conducted June 2014 (currently unpublished)

• Rising demand for services • Unmet community needs Why does this • Gap between contract funds and actual cost matter? • Government funding cuts

Public charities nationally reported over $1.59 trillion in total revenues in 2011. Other 6% Why does this Contributions, gifts, matter? government grants, 22% Program revenue, including government contracts 72% Source: Urban Institute, NCCS Core Files, circa 2011

Public charities in NEW JERSEY reported over $40 billion in total revenues in 2011. Contributions, gifts, Why government Other grants 6% 17% does this matter? Program revenue, including government contracts 77% Source: Urban Institute, NCCS Core Files, circa 2011

How do non-profits try to fill the gaps? Some are forced to cut programs or staff. Why Many seek funds from other sources, e.g., donors, grantmakers does this driving up competition for finite • matter? pools of funds increasing the pressure on • grantmakers to “keep essential organizations whole” Governments are also turning to private philanthropy.

Private philanthropy Why does this CAN’T make up matter? the difference.

Uniform Administrative Requirements, BIG Cost Principles, and Audit Requirements for Federal Awards WIN!  NEW OMB final guidelines governing federal grants/contracts, including state/local pass-throughs  Major overhaul of federal award procedures  Final guidance took effect 12/26/2014

Some highlights:  State & local governments using federal funds will be required to reimburse Game nonprofit contractors and grantees for reasonable indirect costs . Changing  In some cases, administrative expenses associated with a particular project (e.g., secretarial support) can be reported as direct , rather than indirect, costs.  Raises the Single Audit threshold from $500,000 to $750,000 , eliminating duplicative and unnecessary audit criteria, and clarifying cost allocation rules.

What now?  Ensure that states/local governments that pass through federal awards implement the Contracts new guidelines & Grants  Ensure that non-profits understand and exercise their rights under the new guidelines  Encourage state/local governments to emulate similar policies for their own (non-federal) awards

Government-Nonprofit Contract Reform (Ongoing) Contracts & Grants

Looking Ahead: Initiatives and Issues

Promising initiatives

Improve Understanding About Non-Profits Center Advocacy Priorities

Strengthen Government/ Non-Profit Partnerships • Improve understanding Center about non-profits Advocacy • Red Tape Priorities • Contract Reform • E-procurement • Fortify ties with legislators and regulators