By John Porter
Does the name Dan Palotta ring a bell? Probably not, but to those of us in the nonprofit world, he’s the standard bearer for promoting the value of nonprofits in our society. As an author, entrepreneur and humanitarian activist, Palotta spends much of his time engaged in presenting reasons we, as a nation, need to be more supportive of nonprofits and the work they do.
Dan is particularly concerned with the two different rulebooks we allow to operate in our country — one for the nonprofit sector and one for the rest of the world. He views compensation for employees, advertising and marketing for the cause or product, the taking of risks in pursuit of new ideas, time and the opportunity to attract risk capital as the major differences in the for- and not-for-profit sectors.
He has a hard time understanding why a for-profit CEO would be praised and heavily compensated for producing and selling thousands of video games to kids while the head of a nonprofit would not be equally praised and compensated for working to solve major social or health issues for our citizens.
Dan takes particular issue with our tendency to not want donations made to nonprofits to go for overhead, but instead to go directly to the cause. He believes the standard question, “How much of my donation goes to overhead and how much to the cause?” is grossly misplaced, as it forces charities to forgo investment needed for growth and limits their opportunity to spend time and capital to make the nonprofit successful, thereby better assisting those they serve.
In hopes of further illuminating this issue locally, the Alexandria Council of Human Service Organizations, whose mission is to improve human services through cross sector collaboration, commissioned a research study, which was released in 2014.
Entitled “Return on Investment: Alexandria Nonprofit Impact Report,” this report highlighted the economic value and importance of Alexandria’s nonprofit community to the local economy. Taking nothing away from the social impact value provided by local nonprofits, this report more directly responded to the key role nonprofits play in the economy of our city.
Some of the findings note that, annually, ACHSO nonprofits:
• Provide more than 100,000 services;
• Attract more than $206 million in revenues;
• Have $198 million in assets;
• Expend $182 million, including $60 million in salaries and wages;
• Employ more than 2,000 individuals; and
• Raise or earn $4 for every $1 they receive in taxpayer funding.
The report further characterizes local nonprofits as instrumental in fostering strong and visible collaborations among organizations while meeting a broad range of needs for the entire community.
The report concludes that “[Alexandria’s local nonprofits], rather than being regarded simply as charities, must be seen for what they are: businesses that efficiently and reliably produce valuable services, worthy of continued and increased investment of public and private resources.”
With poverty holding at approximately 12 percent of the population nationally for the past 40 years and charitable giving remaining fairly constant at 2 percent of GDP since we began keeping such data in the 1970s, it’s obviously time for a change. But what should be done?
I suggest the place to start is with a well deserved pat on the back to Alexandria’s nonprofits — not just for their service, but for their economic value to the community. Follow this with the understanding that nonprofits are indeed businesses and need to be afforded some of the same understandings that are found in the business world. And lastly, get involved in what you’re passionate about and do what you can to help others.
In the words of Dan Palotta, we don’t want the epitaph for our generation to be “we kept nonprofit overhead low,” but rather we made a difference in the lives of others, in the world.
The writer is the president and CEO of ACT for Alexandria.