State of McLennan Nonprofits 2011 Economic Profile

State of McLennan Nonprofits 2011 Economic Profile Introduction The nonprofit sector in McLennan County is comprised of a vibrant group of individuals committed to the betterment of society through service and philanthropy. From homeless shelters to primary health services, from food banks to educational outreach, nonprofits in McLennan County provide essential services for many of our residents as well as entry points for our residents to become further involved in the community. In addition to providing dedicated manpower to help address and solve community problems through coalition building, leadership development, and provision of essential services, nonprofits have proven themselves to be a powerful force with regards to their economic impact. Economies all over the world are impacted by the employment nonprofits provide, the spending they engage in to conduct operations, and the tremendous amount of social capital they leverage to spur volunteerism for community benefit. The purpose of this report is to highlight the size, scope, and societal benefits provided by the nonprofit sector, specifically 501(c)3 charitable organizations, in McLennan County. Overview of the Nonprofit Sector in Texas As of June 2011, there are 66,229 registered public charities in Texas (the total number of nonprofit organizations is much greater), with 40,839 filing with the IRS. Their revenues and assets are listed as $59,341,350,153 and $127,222,545,857, respectively. In 2006 there were 59,057 nonprofits registered in Texas, 20,655 of which filed. This represents an increase of 7,172 registered nonprofits, or 12.1% during a 5 year period. i Texas nonprofit organizations employed 403,196 paid workers during 2008. This represented 3.8% of the total Texas workforce (governmental, for profit, and nonprofit sector employees) and 4.6% of the total private workforce (private, profit seeking businesses and nonprofits). These workers earned $16.8 billion in wages in 2008, or 3.6% of the state s total payroll. Like most of the nation, health and educational nonprofits, including large hospitals and universities, constitute most of the areas of nonprofit employment. Despite the economic recession that began in 2007, nonprofit employment increased by 3.1% between 2007 and 2008 in most professional fields. 1 However, in most fields where both the for-profit and nonprofit sector operate, nonprofits lost overall market share to private providers over the previous six years (with the Houston-Sugarland-Baytown and Fort Worth- Arlington MSAs being regional exceptions). This means that though nonprofit employment and service provision has increased, private for-profit providers of those same services (in specific fields) have grown at a much faster rate, allowing for-profits to capture a greater share of the revenues and jobs in those fields. In the state of Texas as a whole, nonprofit average weekly wages are 7% below for-profit workers and 6% below state government workers, but 11% higher than local government workers. Wage gaps in the state are improving, as nonprofit workers were earning 13% below for-profit workers in 2004. However, there is high variance in weekly earnings by field for nonprofit workers in general, and in fields where both the private and nonprofit sectors operate, nonprofit workers are sometimes more highly compensated. However, professionals working in the top tiers of the health and education sectors may skew both of the figures concerning the wide variance in compensation as well as compensation by field. ii 1 This could suggest that the nonprofit sector has a countercyclical effect on job growth, as nonprofits often are strained to provide more services in down economies and thus hire more workers in response. However, this could be due to higher amounts of educational enrollment that happens in down economies. 1

Overview of McLennan County According to the 2010 census, McLennan County has 234,906 residents, an increase of 10% from the 2000 figures (213,517 individuals). While median household income is $40,038, 20.7% of all people in McLennan County and 28.8% of all people in Waco live in poverty, 2 according to the latest American Community Survey. iiimedian wages are $13.98 per hour ($559.20 per week) and as of July 2011 unemployment is at 8.4% in both Texas and McLennan County specifically. iv The Nonprofit Sector in McLennan County As of June 2011, McLennan County has 784 registered 501(c)3 nonprofits, 255 (32.5%) of which file with the IRS. Per capita, this means there is approximately 1 charitable nonprofit for every 300 people in McLennan County. Nonprofit organizations in McLennan County are fortunate to have 2,944 individuals serving on various boards of directors, with the average board size at about 12 people. The most common board size is 7 members. 25,632 people, or about 11% of the county s residents, serve as volunteers in non-governance capacities. Considering that the estimated dollar value of 1 hour of volunteerism is $21.35 for the state of Texas, vthe economic impact of these individuals is huge. However, these figures do not capture the number of nonprofits who operate in McLennan County but are not registered here (larger organizations that might have a wider regional or state focus) nor the countless forms of social organizations committed to solving community problems that have not registered as formal organizations. So it is reasonable to assume that an even greater number of people in McLennan County are generously donating time in the service to nonprofit organizations. In McLennan County, Nonprofits employ a little over 19,000 people, or 8% of all residents. They employ 11.3% of the private (non-governmental) workforce in McLennan County and 2.4% of the nonprofit workforce in the state of Texas. vi 2 However, poverty figures are still based on the original indicators for poverty (what it would take to provide 3 square meals a day under the USDA s thrifty food plan x 3, adjusted for family size, number of children, and a host of other factors) adopted by the Johnson Administration in the 1960s. Many have questioned the relevance of the measure as the overall cost of food has decreased as a percentage of income but housing and medical costs have dramatically increased. 2 Nonprofit workers represent a higher percentage of the workforce in McLennan County than many of the other counties in Texas. Considering only 990s from 2009 and 2010, the most available data, 92.5% of our nonprofits accounted for $546,821,065 in wages and other forms of compensation pumped into the local economy. Again, these numbers do not capture larger organizations with a branch operating in McLennan County nor do they capture the true economic impact that volunteerism has in our community. Figures for employment are also highly skewed due to large levels of employment and higher salaries for organizations involved in higher education and hospitals. These organizations, while nonprofits, also tend to make a large share of their income from program service fees (tuition, medical billing, etc.) and rely less than other organizations on contributions from donors. Charitable Giving in McLennan County McLennan County residents also have a great capacity for giving. In 2005, of the 91,504 households in McLennan County, 16,002 of those households (17.49%) itemized a deduction towards a charitable purpose. Out of a total Adjusted Gross Income of $3,825,755,000, a total of $90,409,000 (2.36% of AGI) was given to charitable causes. viiin 2006, out of a reported AGI of $4,018,079,000 in McLennan County, residents gave $88,830,000 in charitable contributions. viii Finances of McLennan County Nonprofits 3 Revenue Mix and Expenses Nonprofits earned $1,177,786,724 in revenues in FY 2009. $61,817,013, or 5.2% of total revenues, is made up of some kind of governmental support. Contributions (which includes government grants but also includes membership fees, individual donors, and some special events) make up 10.7% of revenues while program service fees (which can include government contracts) make up 89.2% of revenues. However, these figures are highly skewed due 3 This nonprofit finances section only considers data from the 2009 fiscal year (meaning some nonprofits with 990s from 2010 are excluded). This is largely because the 2009 fiscal year represents the biggest chunk of available data. Thus, we are only understating total figures.

to large hospitals and higher education institutions. For a more detailed breakdown of revenue sources, see the table at the end of this document. Expenses totaled $1,253,306,508 for a net deficit of $75,527,170 for nonprofits in 2009. 42.9% of all organizations that filed in 2009 ended with a deficit. Assets and Liabilities Despite many nonprofits functioning with a deficit, overall assets increased in FY 2009 from $13,499,623,750 to $14,955,202,660 for an overall gain of 10.8% over FY 2008. However, liabilities also increased by 15.8% from $12,587,060,889 to $14,582,009,748. Much of the deficit then has been absorbed into these organizations fund balance either through drawing down assets or absorbing more liabilities. Net assets decreased by 58.5% from $912,562,861 to $378,954,897. Though the McLennan County nonprofit sector as a whole has considerable assets, it also has nearly as much liability. When excluding hospitals and higher education institutions from the mix, we see that the remaining organizations actually hold very few of the total assets in McLennan County (6.4% of total assets at the end of the fiscal year) and actually lost assets in 2009. While this group decreased its liabilities by $7,156,354, or 1.5%, it absorbed much of its deficit in its fund balance with a decrease of $61,847,342 or 11.1% over the course of the year. The marked difference between considering all organizations and then excluding hospitals and higher education institutions is striking. When excluding these organizations, the remaining organizations accounted for 60.9% of the fund balance at the beginning of FY 2009 and only maintained 3.7% of the total liability. Thus, when looking at net assets of the nonprofit sector, if you exclude hospitals and higher education institutions (and thus their liability), nonprofits in McLennan County hold $493,534,619 in net assets, or more than when you consider all organizations. Figure 1: McLennan County Nonprofits By Type Religionrelated Public and Social Benefit 15% Mutual/ Membersh ip Benefit 0% International and Foreign Affairs 1% Unknown/ Unclassified 1% Human Services Arts, Culture and Humanities 9% Higher Education 2% Education, besides Higher Education 19% Environment/ Animals 2% Health Related (Non-) 6% 1% Conclusions about the State of the Sector in McLennan County The Nonprofit Sector in McLennan County leverages substantial amounts of resources both in terms of dollars and human capital in order to provide essential services that improve the quality of life in McLennan County. As this report shows, it takes the dedicated support of private philanthropic individuals, entities, and community volunteers to sustain the impact the sector has in the community. The information provided in this report only provides a snapshot of what is occurring in the sector and does not reflect all of the complexities that underpin the sector or the local economy. This snapshot does however illustrate the economic and social impact of nonprofit organizations in McLennan County and the diverse contributions of the sector to McLennan County s quality of life. Waco Foundation will continue to explore and share nonprofit trends in subsequent reports throughout the coming years and continue to use this and other means to help evaluate the impact of the sector in our community as well as the role that we at Waco Foundation can play in multiplying that impact. Diversity of Nonprofits in McLennan County One hundred and seventy-four (22.2%) of registered organizations are classified as religious organizations by the National Center for Charitable Statistics (NCCS), the source of this data. For a further breakdown of organizations by type, see the graph above. 3

Notes on the Methodology: Waco Foundation purchased 2 datasets from the National Center for Charitable Statistics to conduct this analysis: the June 2011 IRS Business Master File and the Core 2009 PC File. The Business Master File provided us with 784 registered charitable 501(c)3 nonprofit organizations while the Core File provided us with key financial indicators for 276 filing organizations, both private charities and foundations. A few of those organizations were found to not be currently registered with the IRS and were excluded from this analysis. 3 organizations did not have 990s before the 2007 fiscal year, and they were excluded from all aspects of financial and personnel analysis. Where more current financial information could be found than the NCCS data from a more current 990 (through use of Guidestar), it has been included in the analysis. The numbers of different types of returns as well as the percentage they make up in the data are included in the table on page 5. contracts and reimbursement payments (e.g., Medicaid) on the other. This can lead to gross under-statements of the extent of government support in the revenue base of the nonprofit sector, which can lead, in turn, to serious policy errors. Similarly, the 990 form groups government grants together with private philanthropic contributions, thus potentially overstating the extent of philanthropic support. These limitations are well understood and are taken into account when interpreting the data. viv Research compiled by public policy analyst Zacary Bryan * The NCCS also classifies charities by type, and some of these classifications were revised. The Brazos Higher Education Authority, Inc. and its affiliates were classified as Education organizations rather than Higher Education organizations despite their extensive involvement in student loans for higher education. The same is true for organizations that provide support services to Baylor and its alumni. Thus, they were reclassified for the purposes of this analysis. Organizations related to 2 major nonprofit hospitals in the county were also reclassified as Hospital organizations if they were not classified as such already. Whether the statistics and figures are referring to registered organizations vs. filing organizations should be clear from the language of this report. There are also limitations to the data used due to the nature of the 990. First of all, like all documents, it is subject to reporting errors. It also does not capture organizations which operate in McLennan County but are not registered here. The Form 990 covers only nonprofit organizations and does not classify nonprofit organizations by the North American Industrial Classification System(NAICS). As such, it is not possible to use these data to compare nonprofits to for-profits or government without considerable difficulty. Form 990 treats certain key variables in a manner that was developed for other purposes but is not well suited for studying the behavior of nonprofit institutions. Thus, for example, it does not distinguish between market sales, on the one hand, and government 4

990 Fiscal Year Number of 990s Percentage of 990s Before 2007 3 1.2% 2007 6 2.4% 2008 10 3.9% 2009 175 68.6% 2010 61 23.9% Number of 990s 255 100% End Notes i National Center for Charitable Statistics, available at http://nccsdataweb.urban.org/tablewiz/tw_bmf.php. This includes the most up to date data from the IRS Master Business File, after the recent revocations an nouncement by the IRS. ii Texas Nonprofit Employment Update by Lester M. Salamon and StephanieLessans Geller (Baltimore: Johns Hopkins Center for Civil Society Studies,July 2010) Available at http://www.ccss.jhu.edu/pdfs/ned_ Bulletins/States/NED_Bulletin35_Texas_2010.pdf. Their data comes from the Quarterly Census of Employ ment and Wages (QCEW) conducted by the Bureau of Labor Statistics. Only nonprofit organizations with four or more employees are required to fill out the survey, so this data may exclude smaller nonprofits. iii From 2005-2009 American Community Survey. iv Bureau of Labor Statistics, Quarterly Census of Employment and Wages. Available at http://www.bls.gov/ cew/. Accessed September 1, 2011. v Independent Sector, Value of Volunteer Time. Available at http://www.independentsector.org/volunteer_ time. Accessed August 5, 2011. vi Ibid, Texas Nonprofit Update. Only Smith, Bell, and Bowie Counties have higher levels of nonprofit em - ployment than McLennan County. vii Taken from an overview of McLennan County given by the National Center for Charitable Statis tics whose source is an IRS dataset from 2005, available at http://nccsdataweb.urban.org/pubapps/ geoshowvals.php?id=305621&code=48309 viii From Adjusted gross income and charitable giving by county as reported on IRS tax return Form 1040, Schedule A, by households that itemize deductions, from IRS Tax Return Summary Files (1997 to 2006) http://nccsdataweb.urban.org/tablewiz/cg.php. viv For more information on McLennan County Nonprofits, please refer to the graphs and charts at the end of this document. 5

Source: NCCS Database (IRS Business Master File June 2010) Years 2005-2010 McLennan County Nonprofits by Type NTEE Major Group 12 Number of registered nonprofits Percentage of the whole Arts, Culture and Humanities 70 8.9% Higher Education 12 1.5% Education, besides Higher Education 147 18.8% Environment/Animals 18 2.3% 7 0.9% Health Related (Non-) 47 6.0% Human Services 167 21.3% International and Foreign Affairs 11 1.4% Public and Social Benefit 120 15.3% Religion-related 175 22.3% Mutual/Membership Benefit 3 0.4% Unknown/Unclassified 7 0.9% 784 100.0%

McLennan County Nonprofits Financial Data Table 1: Gross Receipts and Human Capital Gross Receipts # of voting members on BOD Number of Employees Volunteers Estimated or Actual Salaries s 2,007,713,226 2,944 19,056 25,632 546,821,065 Average 7,967,115.976 12.16528926 89.46478873 220.9655172 2,189,836.56 Median 220,108.5 9 1 20 14,259 Mode #N/A 7 0 0 0 s Excluding 396,388,108 2,693 5,159 23,296 108,380,994 Average Excluding 1,679,611 12 26 233 463,167 Median Excluding 198,999 9 1 25 14,850 Mode Excluding #N/A 7 0 0 0 Table 2: Revenue and Expenses Government Grants and Contracts Contributions Program Service Revenue Investment Income Net Income From Special Events Revenue Expenses Revenue Less Expenses s 61817013 125946291 1050977741 17513543 4117501 1198555076 1253306508-75527170 Average 490611.2143 719693.0914 6005587.091 100077.3886 23528.57714 6730209.851 7161751.474-431583.8286 Median 0 59145 7745 582 0 236406 207037 3451 Mode 0 0 0 0 0 #N/A #N/A #N/A s Excluding 61,397,096 120,264,835 79,425,248 19,100,675 3,914,991 222,705,749 217,665,237-14,457,323 Average Excluding 491,177 678,684 447,997 107,684 23,069 1,134,474 1,228,002-80,823 Median Excluding 0 55,950 1,571 306 0 176,230 168,573 3,696 Mode Excluding 0 0 0 0 0 0 #N/A #N/A