Charities' Value to Economy: $9 Billion
Local Analysis First to Quantify Investment's Power

By Philip Rucker
Washington Post Staff Writer
Monday, November 26, 2007

Nonprofit organizations contribute at least $9.6 billion to the Washington region's economy and often deliver services in more fiscally prudent ways than the government, according to a new study by a nonprofits consortium that for the first time calculates the return on investment for charitable donations.

The study, to be released today, found that many of the area's 7,614 nonprofits deliver such key services as health care in more cost-efficient ways than the government. Nonprofits also address social problems -- including homelessness, hunger, violence and illiteracy -- in the early stages, which prevents additional public spending, according to the report.

The study by the Nonprofit Roundtable of Greater Washington and sponsored by the World Bank, titled "Beyond Charity: Recognizing Return on Investment," is believed to be the first attempt in the nation to measure the economic and social impact of nonprofits. It comes as the holiday giving season gets underway.

Fueled by a growing professional class, the region's wealth has been swelling, and philanthropic donations have surged here and across the country.

The study's authors said the report is designed to show businesses and individuals that charitable giving is not just a feel-good investment, but one that makes economic sense, too.

"At this time of year, during our busy holiday season, our hearts go out to our most vulnerable neighbors," said Chuck Bean, executive director of the Nonprofit Roundtable. But, he added, "these investments also make economic sense. We give with our hearts, and we invest with our heads, and the good news is that the 'Beyond Charity' report shows that we can do both at the same time."

The report includes about 100 examples of local nonprofits making an economic impact in a wide array of fields, from social services and health to education, the arts and the environment.

According to the report:

¿ Adoptions Together works with the government to place children with families at an annual cost of $7,200 a child. It would cost the state of Maryland about $25,000 a year for each child to remain in the welfare system.

¿ The Manna Food Center in Montgomery County turns every $1 cash donation into $5 worth of food through volunteer labor and food donations.

¿ Volunteers with Stop Child Abuse Now in Northern Virginia served as court-appointed special advocates for nearly 200 children last year, saving the state government more than $400,000 in attorneys' fees.

¿ The District-based Metro TeenAIDS has an annual budget of just over $1 million. The group estimates that its entire budget is justified by preventing just two youths from contracting HIV each year, considering that the average lifetime cost of health care for one person infected with the virus is about $600,000.

The report also found that about 32,000 volunteers serve on the boards of local nonprofits, and the combined value of their time is at least $7.3 million. Further, if a volunteer spends two hours each week helping a nonprofit organization, the value of that time over one year is about $2,000.

Viki Betancourt, community outreach manager of the World Bank, said it is important to document in financial terms the impact of charitable contributions. Applying an economic value to nonprofits may increase donations from corporations and wealthy business leaders, who would consider such giving a smart investment, she said.

"I'm a huge believer that you have to know who you're investing in," Betancourt said. "No one goes out and buys a car and doesn't take care of it for five years. So why would you put your money in a nonprofit and not follow it, not know where it's going? You always want to invest your money wisely."

Alan J. Abramson, director of the Nonprofit Sector and Philanthropy Program at the Aspen Institute, said many organizations struggle with quantifying their value to society and the economy.

"I think what the Roundtable has done is try to face that challenge square-on," Abramson said. "I think some of the interesting material that they've put together has to do with the idea that money spent on nonprofits or by nonprofits may actually save some money down the road."

Bruce Adams, who directs Montgomery County's Office of Community Partnerships, called nonprofits the "invisible sector" and said the report helps argue in "dollars and cents" that nonprofits are valuable to society.

"We've got to have these partners," Adams said. "In many ways, they can be more effective [than the government]. Some of these smaller, emerging ethnic nonprofits are going to learn about emerging problems way faster than someone, no matter how able, who's sitting in a government office building in Rockville. They're right there on the street level with the people in need."

One nonprofit addressing problems at the community level is CentroN¿a, a District-based early childhood education center that serves the area's booming Latino populations. The center's president, Beatriz Otero, said her organization takes pressure off public school systems by preparing children for school and addressing their developmental and language needs early on.

"We know that special education is one of those areas that is the biggest drain in our public-education dollars," Otero said.

Charitable giving has soared in the Washington region in recent years as higher-paying jobs and rising home values have made many residents more affluent.

In 2005, private and community foundations in the area gave more than $655.5 million, a 7.3 percent increase from 2004, according to a study by the Washington Regional Association of Grantmakers. Private foundations in the region reported $9.42 billion in assets at the end of 2005, the study found.

Experts said the level of philanthropic giving might rise still, even with the slowing economy and the end of the real estate boom. Area residents are expected to bequeath $2.4 trillion during the next 50 years in what is believed to be the largest transfer of wealth in the region's history, according to a study released last year. Roughly 19 percent of these assets, or about $460 billion, is expected to go to charities.

The work of Bill and Melinda Gates, Warren Buffett and former president Bill Clinton, among others, has put the spotlight on philanthropy as never before, experts said.

D.C. Council Chairman Vincent C. Gray (D) said the report will help restore faith in area nonprofits after the 2003 scandal at the United Way of the National Capital Area. The organization, which raises millions of dollars for hundreds of local charities, was rocked by reports of questionable spending by top leaders, bloated overhead costs and other financial improprieties.

"A number of people walked away, and charitable giving really suffered for a period of time," said Gray, who has directed several local nonprofits. "So this is yet another opportunity to restore confidence and get people to reinvest or invest in the nonprofit community."

William Couper, mid-Atlantic president of Bank of America and a former United Way board chairman, said a measurement of nonprofits' economic impact helps validate the donations of corporate executives.

"It's something that we very much salute," Couper said. "We're bankers, after all."

But he said business leaders already appreciate the value of nonprofits.

"They take our charitable dollars, and they leverage those with other funders, government resources and, in many cases, volunteer labor," Couper said.

"So the sum total of all of that is way more than what we have committed to the marketplace, and it's addressing things that we think are very important."