Appendix C: Research Approach

07/15/2009 | 8 mins |

Summary

Research approach used for the paper "Nonprofits in Rural America: Overcoming the Resource Gap."

Research approach used for the paper "Nonprofits in Rural America: Overcoming the Resource Gap."

Note on research methods

For this study, we focused specifically on youth-serving nonprofits in California and New Mexico—two states with enough rural and urban nonprofit organizations to represent the nation. Using the National Taxonomy of Exempt Entities (NTEE) classifications to define “youth-serving,” we were able to draw from the National Center of Charitable Statistics (NCCS) database of Form 990 returns to create a sample of more than 850 organizations. We divided these organizations by “urban” and “rural” locales, ending up with 547 urban and 305 rural organizations.

We then used the Form 990 data to map how many of the organizations fell into five revenue bands: 1) less than $0.5 million; 2) $0.5 to $1 million; 3) $1 to $3 million; 4) $3 to $5 million; and 5) $greater than $5 million. This enabled us to identify the number of large nonprofits in urban versus rural areas. To understand the relationship between funding sources and organization size, we categorized funding into four main categories: 1) individuals, corporations, and foundations; 2) government; 3) private fee-for-service; and 4) investments. When we aggregated the revenue from these four sources, we could compare funding patterns for urban and rural nonprofits and highlight key differences.

Furthermore, relying on NTEE codes, we broke the larger sample different youth-serving organization types, which allowed us to compare the funding patterns of nonprofits affiliated with national networks with those that operate as unaffiliated organizations.

From our initial pool, we identified more than 100 rural and urban youth-serving organizations, which we contacted with a request for nonprofit-specific annual and financial reports so we could understand their different funding sources in greater detail. Given a response rate of less than 10 percent, we are able to make only directional inferences about differences in individual, corporate, and foundation giving.

Finally, we leveraged the Form 990 analysis to identify a group of rural youth-serving nonprofits that had over $1 million in annual revenues. We specifically chose those organizations because we were interested in learning how they overcame the funding challenges and grew large. We were able to interview seven of the organizations. From these interviews, as well as interviews with a few private foundations, community foundations, and intermediaries (see Appendix A for the interview list) and a review of existing research (see Appendix B for the bibliography), we identified a set of strategies that rural nonprofits have successfully employed to overcome funding challenges. We also identified a set of targeted recommendations for private foundations that are interested in supporting rural nonprofits.

Note on urban/rural definitions

For this study, we defined the following California and New Mexico Metropolitan Statistical Areas (MSAs) and Consolidated MSAs (CSAs) as “urban.” All zip codes falling outside of these urbanized areas were considered “rural.” 

While the MSA/CSAs in California are significantly larger in population size than those in New Mexico, given that New Mexico has a significantly smaller population and less population density than California, we defined New Mexico’s two major cities as “urban,” because they are centers of activity in the state.

California

CSAs and MSAs with populations greater than two million, and which are major centers of activity are considered urban:

Los Angeles – Long Beach – Santa Ana MSA (& Orange County) – 13 million
San Francisco – Oakland – Fremont MSA – 4.1million
San Diego – Carlsbad – San Marcos MSA – 2.9 million
Sacramento – Arden – Arcade – Roseville MSA – 2.1 million

New Mexico

The two primary CSA/MSAs that are centers of activity are urban:

Albuquerque, NM MSA – 817,000
Santa Fe, NM MSA – 142,000

Note on definition of “youth-serving organization”

For this study, we have defined the following National Taxonomy of Exempt Entities Core Codes (NTEE-CC) as “youth-serving organizations” because of their explicit focus on youth (anyone under the age of 18). We have intentionally excluded “Education” (public sector) and “Recreation & Sports” (overlaps/includes adult-serving organizations). Please refer to later pages in this document for additional detail.

Categorized as “Youth-Serving Organizations”
O20  Youth Centers
O21,22,23 Boys & Girls Clubs
O30  Adult & Child Matching Programs (Mentoring)
O40  Scouting Organizations (Scouting)
O50  Youth Development Programs (Youth development)
I21   Youth Violence Prevention (Violence prevention)
P40  Family Services (Family services)

Categorized as “Other”
O01-O19 Other Youth Development
O99  Youth Development N.E.C. (not elsewhere classified)
K30  Food programs

Definitions for codes:

O20 – Youth Centers: Organizations that provide supervised recreational and social activities for children and youth of all ages and backgrounds, but particularly for disadvantaged youth, through youth-oriented clubs or centers with the objective of building character and developing leadership and social skills among participants. Excludes Boys & Girls Clubs.

O21,22,23 – Boys & Girls Clubs: Organizations specifically designated as Boys & Girls Clubs that provide a wide range of supervised activities and delinquency prevention services for children and youth of all ages and backgrounds, but particularly for disadvantaged youth, with the objective of building character and developing leadership and social skills among participants.

O30 – Adult & Child Matching Programs : Programs, also known as adult/child mentoring programs, that provide male or female adult companionship, guidance and/or role models for young men or women. Includes Big Brothers and Big Sisters.

O40 – Scouting: Programs that provide opportunities for children and youth to develop individual and group initiative and responsibility, self-reliance, courage, personal fitness, discipline, and other desirable qualities of character through participation in a wide range of organized recreational, educational, and civic activities under the leadership of qualified adult volunteers. Code for troop-type organizations not specifically designated as Boy Scouts of America, Girl Scouts of the U.S.A, or Camp Fire.

O50 – Youth Development Programs: Programs that provide opportunities for children and youth to participate in recreational, cultural, social, and civic activities through membership in clubs and other youth groups with a special focus on helping youngsters develop their potential and grow into healthy, educated, responsible, and productive adults.

I21 – Youth Violence Prevention: Organizations that offer a variety of activities for youth who have demonstrated or are at risk for behavior which is likely to be unlawful or to involve them in the juvenile justice system. Also included are community councils, coalitions, and other groups whose primary purpose is to prevent delinquency. Keywords: Gang Related; Juvenile Delinquency Prevention; SADD; Students Against Destructive Decisions; Students Against Drunk Driving; Youth Crime Prevention.

P40 – Family Services: Organizations that provide a wide variety of social services that are designed to support healthy family development, improve the family’s ability to resolve problems, and prevent the need for unnecessary placement of children in settings outside the home. Code for organizations that provide comprehensive family support services.

O01 - Alliances & Advocacy: Organizations whose activities focus on influencing public policy within the Youth Development major group area. Includes a variety of activities from public education and influencing public opinion to lobbying national and state legislatures.

O02 - Management & Technical Assistance: Consultation, training, and other forms of management assistance services to nonprofit groups within the Youth Development major group area.

O03 - Professional Societies & Associations: Learned societies, professional councils, and other organizations that bring together individuals or organizations with a common professional or vocational interest within the Youth Development major group area.

O05 - Research Institutes & Public Policy Analysis: Organizations whose primary purpose is to conduct research and/or public policy analysis within the Youth Development major group area.

O11 - Single Organization Support: Organizations existing as a fund-raising entity for a single institution within the Youth Development major group area.

O12 - Fund Raising & Fund Distribution: Organizations that raise and distribute funds for multiple organizations within the Youth Development major group area.

O19 - Support N.E.C.: Organizations that provide all forms of support except for financial assistance or fund raising for other organizations within the Youth Development major group area.

O99 - Youth Development N.E.C.: Organizations that clearly provide youth development services where the major purpose is unclear enough that a more specific code cannot be accurately assigned.

K30 - Food Programs: Organizations that provide access to free or low-cost food products to children, seniors, or indigents by distributing groceries, providing meals, providing facilities for storing food or making available land on which people can grow their own produce. Use this code for organizations that provide a wide range of food services or those that offer food-related services not specified below.

Note on IRS Form 990 analysis

Since National Center for Charitable Statistics (NCCS) data is self-reported by nonprofits, there are often inaccuracies and inconsistencies within and across 990 forms. NCCS’ ability to reduce the number of errors, beyond identifying a relatively small number of egregious errors, is limited. Given the size of the data sets, it is impossible as a practical matter to locate the majority of the errors without contacting thousands of individual organizations directly.

That said, according to an NCCS study on the reliability of Core Files and other 990 data:

· Error rates are acceptable for most research purposes; and
· Total revenue and its component sources (e.g., investment income, public support), as well as total expense and balance sheet items from the rich text formats (the Core files) can be used for the vast majority of observations.

To calculate the funding model for each nonprofit, we used the following formula:

 
990 Category     Bridgespan Classification
Donor Advised (p1contFund) +
Direct public sup (p1dirsup) +
Direct Public Support (p1indSup)

}

 “Individual/Corporate/Foundation”
Govt grants (p1govGt) +
Govt Med (p7medRin) +
Govt fees & contracts (p7govRin)

}

  "Government"
Program service (p1psRev) –
Govt fees & contracts (p7govRin)
} “Private fee for service”
Investment income (invinc) from CORE } “Investments”
    +                                              
"Average total revenue"

Please note: “Average total revenue” includes only revenue raised in a single fiscal year. This number does NOT include assets that rollover from previous years of income.

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