Posted on: Friday, May 3, 2002

Nonprofit industry at crossroads

By Dan Nakaso
Advertiser Staff Writer

Hawai'i's nonprofit industry ranks as the state's fourth-largest employment segment, generates $2 billion in revenue but needs to be better organized to wield more clout, according to the first comprehensive study of local nonprofit agencies.

Nonprofits employ 41,000 full- and part-time workers for a combined $1 billion payroll — representing 6 percent of Hawai'i's total wages, according to a Hawai'i Community Foundation study released yesterday.

"Hawai'i Nonprofits 2001: A Study of the State's Silent Economic Partner" is the first major attempt to measure the role and significance of Hawai'i's nonprofit agencies, and comes as they are adjusting to severe needs and a new philanthropic landscape following Sept. 11.

The study was released on the same day that the Legislature — a major source of nonprofit financing — wrapped up its session. But nonprofit groups were still struggling yesterday to tabulate how cuts to various state agencies would affect their programs.

"When the economy goes bad, the need for services increases," said Kelvin Taketa, president and chief executive officer of the Hawai'i Community Foundation, which commissioned the study. "Unfortunately when the economy goes bad the two principal sources for revenue — government grants and contracts and private contributions — are tenuous. It's a very stressful circumstance for health and human service agencies right now."

The foundation hopes nonprofits use the study to better organize their internal operations and perhaps consolidate to get bulk purchasing prices and better insurance rates. The study might also be used to lobby government officials to speed up the pace of reimbursements.

"This study is going to be surprising to the people in the nonprofit sector because I don't think they see themselves as having this kind of scale and clout," Taketa said. "Most nonprofits see themselves as independent and entrepreneurial. I don't think they step back and say, 'Look how large we really are.' They have a lot of clout, but they don't organize very well."

The study's authors ranked nonprofit employment behind Hawai'i's service industry (tourism), wholesale/retail trade and government.

The study began in April 2001 after nonprofit agencies filed their federal 990 tax returns for 2000. It's based on data before the fallout of Sept. 11 forced many nonprofit agencies to rethink their approaches to raising money while simultaneously dealing with higher demand for their services.

There has been little time — and almost no money — to address some of the organizational shortcomings cited in the study, said Susan Doyle, one of three co-chairs appointed by Gov. Ben Cayetano after Sept. 11 to head the Hawaii Together task force to better coordinate the efforts of nonprofit organizations. Only 23 percent of nonprofit groups, for example, have a formal written strategic plan. And between 25 and 44 percent have no plans for fundraising, measuring organizational performance, operating agreements with other nonprofits, staff training and marketing/outreach.

Being able to measure how donations turn into results is critical right now because "donors demand — and people in the industry want to have — much more of their dollars going to services," said Doyle, who is also vice president for community building at Aloha United Way, which offers to help nonprofits develop strategic plans and find ways of measuring results.

Hawai'i has an estimated 6,000 nonprofit agencies, but the study focused on organizations that generated more than $25,000 in revenue. Only 288 agencies participated in the study — 215 of them with revenue of more than $25,000. The results still revealed important details about how they operate:

• Private contributions from individuals, corporations and foundations in Hawai'i account for 19 percent of total revenue — higher than the 10 percent national average.
• Local, state and federal government grants represent the bulk of nonprofit financing — but the exact percentages could not be broken out.
• Forty-four percent of the organizations said they believe they cannot service more people. Forty-six percent said they could offer services to "only a few more people."
• On the Web: Complete results of the survey are available at www.hcf-hawaii.org