Economists Take Note
I spend quite a lot of time reading financial reports from nonprofit organizations and talking to leaders of nonprofits about their financial situation. Delving into the financial reports of an individual nonprofit is like getting to know one verse of a song from a musical. Each verse is important and lovely to hear, but it’s even better if you can see the whole show - when you hear it in the context of the characters and story.
In the same way, the financial picture of an individual nonprofit can be understood differently if you understand the bigger economic picture of the nonprofit sector. How does this nonprofit compare to its peers or to the regional trends? What’s changing in revenue and expense composition? Because I believe that it is crucial that we understand this big picture, I was delighted that the Federal Reserve Bank of Minneapolis featured the nonprofit economy, what they dubbed “The economy’s middle child,” in the July 2006 issue of the fedgazette.
The publication includes several articles on revenue trends, services, financial data, and growth. Some of the their observations are especially helpful:
- Any portrait of nonprofit finances are skewed by large, health care organizations.
- Since 60% of nonprofits are so small they don’t have to file an IRS Form 990 and are therefore excluded from the data we’re only seeing a portion of the data.
- If the value of volunteer labor were included in the numbers, Minnesota nonprofits would represent an even larger portion of the economy.
Even with the data and reporting challenges, it is worth the time to understand the entire stage that we perform on as a part of the nonprofit sector.
The Minnesota Council of Nonprofits has also just released their annual report on the economic picture of nonprofits in the state. Read the 2006 Minnesota Nonprofit Economy Report.