Application: Funding Sources
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nonprofit_and_voluntary_sector_quarterly-2005-jalandoni-260-75.pdf
10.1177/0899764004272195Jalandoni et al.Government Funding and the Nonprofit Sector
Government Funding and the Nonprofit Sector: Exploring a New Census Bureau Data Source— The Federal Audit Clearinghouse
Nadine T. Jalandoni Independent Sector
Claudia Petrescu Eastern Michigan University
Gordon W. Green University of Maryland
Using the information provided by the Federal Audit Clearinghouse, maintained by the U.S. Census Bureau, this research attempts to improve our understanding of the nature, scale, extent, and sources of federal funding to social service and educational nonprofit organizations. Using 2001 as the base year, this research is divided into two parts. The first part looks into federal funding provided to social service organizations by laying out the amounts of grants awarded by 57 different federal agencies and looking into its geo- graphic and per capita distribution. The second part traces federal funding provided to universities and provides information on the institutions and states receiving the most grants and the federal agencies that provided them. The data’s utility, limitations, and potential uses to academicians and practitioners are also discussed.
Keywords: federal funding; nonprofit organizations; social service; university; grants
This study is based on information obtained from the Federal Audit Clearing- house (FAC) maintained by the U.S. Census Bureau. Federal law (Title 31 U.S. Code, chap. 75) requires that all nonfederal entities expending $300,000 or more annually in federal awards must have an audit conducted (referred to as a “single audit”) in accordance with Circular A-133 issued June 27, 1994 by the Office of Management and Budget (OMB; 2003). The types of nonfederal enti- ties covered by this circular include state and local governments and nonprofit organizations. Altogether, these entities file approximately 36,000 audits a year, of which more than half are for nonprofit organizations. This study focuses on the awards received in 2001 by two major sectors of nonprofit
Nonprofit and Voluntary Sector Quarterly, vol. 34, no. 2, June 2005 260-275 DOI: 10.1177/0899764004272195 © 2005 Association for Research on Nonprofit Organizations and Voluntary Action
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organizations: social services and higher education. Similar types of analysis can be conducted on other sectors as well, but these two sectors were chosen because of their size and interest. At the time this article was written, audit information for nonprofit organizations prior to 2001 was not available in an easily accessible form, and not all of the data had been compiled for a complete accounting in 2002. Thus, using 2001 as the base year, this study illustrates the types of analyses that can be conducted as more data become available.
The data in this study were obtained from summary electronic forms (SF- SAC) titled “Data Collection Form for Reporting on Audits of States, Local Governments and Non-Profit Organizations.” These forms are a summary of the information submitted in the full audits, and are maintained by the U.S. Census Bureau in an electronic database that is part of the FAC. As noted by the U.S. Census Bureau on its Web site (http://harvester.census.gov/fac), the summary form includes five basic kinds of information. The section on Gen- eral Information includes the affected fiscal and audit period, type of audit, employer identification number (EIN), and the federal oversight agency. Basic information about the nonfederal entity being audited, such as the address, phone number, contact name, and the auditee’s certification of the complete- ness and accuracy of information provided on the SF-SAC is found under Auditee Information. Auditor Information has the information on the auditor and the auditor ’s statement. Financial Statement and Audit Information shows the type of financial statement and audit results. Finally, the Federal Program Information includes information about the Circular A-133 audit results, federal awards administered by the nonfederal entity, and an identifi- cation of federal agencies required to receive the audit reporting packages.
The SF-SAC electronic database at the U.S. Census Bureau is completely public and may be accessed free of charge by users with personal computers and Internet browsers (http://harvester.census.gov/fac). The Web site at the U.S. Census Bureau contains extensive background information on Circular A-133 as well as the single audit program. Powerful search engines are avail- able that enable the user to search for specific entities or categories of entities, as well as by the Catalog of Federal Domestic Assistance. The information contained in the SF-SAC form can be retrieved for use online or downloaded into a spreadsheet, as was done in this study. The database classifies the vari- ous nonprofit entities that receive federal grants and filed an audit into seven groups as shown in Table 1.
Although the number of individual entities identified totaled 19,325, their multiple entries yielded over 126,000 records. The sheer size of the database presented some data downloading and manipulation challenges. To keep the analysis at a manageable level, only nonprofit social services and nonprofit institutions for higher education were downloaded for this initial analysis. This resulted in over 58,000 records for social services and 24,950 records for higher education, which together composed about two thirds (65%) of the entire record file.
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The database offers opportunities for further study and research in such areas as
� programmatic analysis and assessment; � comparative analysis within and between nonprofit subsectors and the
impact of federal grants; � specific organizations and their federal funding streams; � identifying well-funded R&D programs in nonprofits and the agencies
that sponsor them.
NONPROFIT SOCIAL SERVICE ORGANIZATIONS
The largest numbers of nonprofit organizations included in the FAC data- base are social service organizations. This coincides with findings from other studies, which also show that social or human services organizations make up the largest group of public charities (Weitzman, Jalandoni, Lampkin, Pollak, 2002, Table 5.6) in the United States. The major variables provided for analysis include organization name, EIN, state, oversight agency, funding agency, pro- gram name, grant amount, direct funding, and major program.
Two major strategies for analyzing the data were adopted. The first was to lay out the amount of grants distributed by the 57 different federal agencies included in the database and determine which agencies awarded the largest amounts to social service. An assessment of the amount of direct versus indi- rect grants was also conducted. The second strategy looked at the allocation of grant dollars by state and the per capita distribution.
DISTRIBUTION OF FEDERAL GRANTS BY FEDERAL AGENCY
The list of federal agencies by order of the amount of grants expended is provided in Table 2. Although many of the agencies that top the list are famil-
262 Jalandoni et al.
Table 1. Nonprofit Entities in the Federal Audit Clearinghouse Database
Code Entity Type No. of Auditees No. of Records
902 Nonprofit hospital 160 2,569 903 Nonprofit housing organization 5,806 13,087 904 Nonprofit institutions for higher education 1,298 24,950 906 Nonprofit transit organization 36 114 907 Nonprofit utility 157 366 908 Nonprofit social services 8,604 58,028 909 Nonprofit other organization 3,264 27,612
Total 19,325 126,726
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iar and predictable, such as the Department of Health and Human Services (DHHS), Department of Housing and Urban Development, and the Agency for International Development (AID), there were also a number of less recog- nizable entries. These include the Denali Commission (established in 1998 as a federal-state partnership for the development of Alaska) and the Architec- tural and Transportation Barriers Compliance Board. Even more interesting was discovering agencies such as the National Aeronautics and Space Admin- istration (NASA), the Library of Congress, and the Department of Defense (DOD) as sources of grants for social service organizations.
The total amount of federal grants expended in 2001 to social service orga- nizations that received grants of $300,000 or more amounted to $24,609,388,254. The total number of grants totaled 58,115—keeping in mind that this does not equal total number of grantees, as social service organiza- tions could receive multiple grants. As the summary table illustrates, 63% of all grant money ($15 billion) and more than 49% (28,651) of all grants awarded to social service organizations originated from the DHHS, making it the pri- mary source of all grants in the area. The Department of Housing and Urban Development, Department of Agriculture, Department of Labor, AID, and the Department of Education complete the top six funding agencies, providing another 29% of all grant money to these organizations. More than 92% of all government grant dollars to social service organizations captured in the FAC database were disbursed through these six government agencies.
The database also provides information on the amount of direct versus indirect grants awarded by each federal agency and received by the nonprofit entity. Direct grants are defined as being “received directly from a Federal awarding agency,” whereas indirect grants are “received by a subrecipient from a pass-through entity.” A pass-through entity, which is usually a state, local government, or private organization, is defined as “a non-Federal en- tity that provides a Federal award to a sub-recipient to carry out a Federal program.”
Based on the audited statements of the reporting nonprofit social service organizations, a larger proportion of the grants was received indirectly than directly from federal agencies. Of the estimated $24.6 billion of grants in the database, 57%, or $14 billion, were in the form of indirect grants, whereas 43%, or $10.6 billion, were direct grants. Through this data source, we can verify that a substantial portion of federal spending to the nonprofit sector is passed through state or local government entities. This does not include Medicare/ Medicaid payments, which are believed to be a large amount of federal pass- through dollars channeled mostly through individuals.
Among the top 10 federal agencies that provide federal funding, AID gives the highest proportion of direct funding to nonprofits, giving out 90% of its grants in this manner. It is important to note that most of these grants were for international programs. In the same way, 89% of grants from the Department of State, which also were largely for refugee or global activities, were direct funds. DHHS, the biggest federal awarding agency that focuses mostly on
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domestic programs, only gave 38% of its grants directly to nonprofits. Only 23% of grants were awarded directly by the Department of Agriculture, the third-largest source of funds. The Department of Energy, with more than $113 million in grants, only awarded 9% of them directly to nonprofits. The data suggest that nonprofits in the social service field that are interested in compet- ing for government grants need to be more strategic in finding which agencies offer them. Because a substantial amount of federal grants is awarded indi- rectly, the intermediary state and local agencies through which these funds pass through need to be identified as well.
Of interesting note, DOD awarded 90% of all its grants to nonprofits directly.
DISTRIBUTION OF FEDERAL GRANTS BY STATE
The second strategy pursued in the analysis of the data was to examine the geographical distribution of federal grants to nonprofit social service entities in all 50 states, the District of Columbia, and U.S. territories. Table 3 summa- rizes the results.
California topped all states, receiving almost $3.5 billion in federal grants for its social service organizations. New York, Pennsylvania, Texas, and Florida completed the top five, which together received about 40% of all grant dollars recorded in the database. Delaware, Nevada, South Dakota, Wyo- ming, and North Dakota received the least amount of federal grants.
To put this distribution into a comparative perspective, the total number of human and youth services organizations in each of these states and their total population were also gathered. Using the National Center for Charitable Sta- tistics (NCCS) Data Web (http://nccsdataweb.urban.org/NCCS/Public/), the number of organizations coded as human services and youth services in 2001 in each state and the District of Columbia was determined, as these would equate most closely to the social service entities included in the FAC database. Data for state populations for 2001 were gathered from the Cen- sus Bureau. In addition, the per capita distribution of grant dollars is also presented.
As the table shows, the state rankings across three categories—(a) amount received, (b) number of human and youth services and, (c) total state popula- tion—were very close, leading us to believe that the distribution of money closely reflected the presence of numerous social service agencies and the size of the population. There was less consistency, however, in the per capita distri- bution among states. California ranked first in all categories, but only 15th in per capita distribution. Massachusetts appears to have fared better than some of the bigger states, receiving the 7th-largest amount of grant dollars and rank- ing 3rd in the distribution of dollars per capita, while ranking 10th in number of social service agencies and 13th in population. Minnesota was in a similar position. Conversely, North Carolina, which ranked 9th in number of social
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service agencies and 11th in population ranked only 21st in the amount of grants received and 47th in per capita distribution. The state of Alaska ranked 2nd in per capita distribution, receiving a comparatively higher amount of grants vis-à-vis its smaller population. The District of Columbia is the most conspicuous anomaly, receiving the 15th highest amount of grants and ranking 1st in per capita distribution, while ranking only 34th in number of social ser- vice entities and 50th in population. A couple of reasons may account for this, including the fact that the headquarters of several large social service agencies that have a national and/or international focus are located in the District of Columbia. Social service agencies located in the same city hosting the federal agencies may have an advantage in getting information on federal grants, particularly those that support programs that are national and transnational in scope.
Overall, the top 10 states (California, New York, Pennsylvania, Texas, Florida, Illinois, Massachusetts, Ohio, Michigan, and Minnesota) that received federal grants totaling $14.3 billion have 58% of all grant money awarded and also are home to 53% of the U.S. population. Among the top 10 states receiving federal grants, an average of 60% to 70% came in the form of indirect grants. Pennsylvania and Michigan had higher ratios of 78% and 75% indirect grants, respectively. New York and Minnesota were on the lower end, with awards split 50% between direct and indirect grants.
An investigation into the cause for the variations in per capita distribution lends itself to further research study.
NONPROFIT UNIVERSITIES AND INSTITUTIONS OF HIGHER LEARNING
To further illustrate the wealth of information contained in the database, and to exemplify how this information could be used, four types of analysis were performed on the data on nonprofit universities. These were
(a) Individual analysis (b) Population analysis (c) State analysis (d) Funding agency analysis
INDIVIDUAL ANALYSIS OF A UNIVERSITY
The database provides information about each university that has received one or more grants from the federal government equal to or more than $300,000. For example, in fiscal year (FY) 2001, Northwestern University, Illi- nois, (EIN 362167817), received a total of $185,385,493 in grants from 12 fed- eral funding agencies. The database provides information on the amount received from each funding agency, the name of the program, and the name of
Government Funding and the Nonprofit Sector 269
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the oversight agency. For example, DOD, under the program DEV. NEW EPIDEMIOLOGIC TOOLS gave Northwestern University a grant of $15,247. The oversight agency was DHHS. The grant was given to a major university program and used for R&D.
POPULATION ANALYSIS OF ALL UNIVERSITIES
An analysis of the number of grants received by each university deter- mined that out of 25,124 universities that received grants from the federal gov- ernment, only 32 universities received more than 100 grants. Among these 32 universities
� Two universities (Northwestern and Rochester) received more than 1,500 grants.
� Two universities (George Washington University and Washington Uni- versity in St. Louis) received between 500 and 1,000 grants.
� Eight universities (including Columbia and Duke) received between 300 and 500 grants.
� Six universities (including Howard and Massachusetts Institute of Tech- nology) received between 200 and 300 grants.
� Fourteen universities (including New York University, Georgetown, and Johns Hopkins) received between 100 and 200 grants.
Table 4 below illustrates the differences and similarities between these cate- gories; an individual analysis has been made for one university from each category.
ANALYSIS BY STATE
Using frequency analysis, states can be ranked based on each of the vari- ables available in the database. For example, when ranking states by number of grants received, it is observed that seven states, including the District of Columbia (New York, Illinois, Pennsylvania, California, District of Columbia, Massachusetts, and Georgia) received 58.6% of all grants. Among these, New York received the largest number of grants (4,289), followed by Illinois with 2,872 grants. These two states together received 28% of all grants.
Regarding total amount of money1 received in grants by the two first- ranked states, New York received more than $4 billion ($4,223,865,787) and Illinois was granted more than $1 billion ($1,156,020,038) in grant money. These two states represent 18% of the total amount of grant money distributed by the federal government in 2001.
The database also provided a variety of information on individual states. For example, the information obtained for the state of Arizona (see Table 5) includes
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271
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� Number of grants received: 17 � Total amount received in grants: $15,619,357 � Number of R&D grants: 1 � Number of grants designated for major program: 62
ANALYSIS BY FEDERAL FUNDING AGENCY
There were 59 agencies that provided a total of 25,124 grants; the total value of these grants amounted to $29,663,880,749. Among these, four agencies proved to be the largest providers of grants (see Table 6).
Four agencies (Denali Commission, Equal Employment Opportunity Com- mission, Interstate Commerce Commission, and Legal Services Corporation) provided only one grant each.
Analyzing the type of grants provided (R&D or not), it was determined that out of all grants,
� 47% were designated for R&D; � 67% were designated for a major program.
272 Jalandoni et al.
Table 5. Funding Agencies That Provided Grants to Arizona
As a % of Federal Agency No. of Grants Total Grants
Corporation for National & Community Service 1 1 Department of Agriculture 2 3 Department of Education 61 77 Department of Health and Human Services 8 10 Department of Housing and Urban Development 1 1 Federal Emergency Management Agency 1 1 National Aeronautics & Space Administration 2 3 National Science Foundation 3 4
Table 6. Funding Agencies and Grants Provided
No. of % Grants Grants R&D Provided of % R&D
Funding Agency Provided Grants Total Grants Grants
Department of Health and Human Services 8,088 5,405 32.19 67 Department of Education 7,944 360 31.62 5 National Science Foundation 2,453 1,919 9.76 78 Department of Defense 1,549 1,304 6.17 84
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A ranking of funding agency by R&D grants determined that
� Four agencies (Tennessee Valley Authority, Interstate Commerce Commission, Office of National Drug Control Policy, and Smithsonian Institution) rank number one in R&D grants. But they awarded only be- tween one and four grants.
� Two agencies (Department of Energy and DOD) awarded between 80% and 90% of their grants for R&D.
� Six agencies awarded between 70% and 80% R&D grants (e.g., the Na- tional Science Foundation [NSF]).
� Sixteen agencies awarded between 50% and 70% R&D grants (e.g., DHHS).
� The rest of 29 agencies designated less than 50% of their grants for R&D (e.g., Department of Education).
When it comes to R&D, the significance of this database becomes more evi- dent when one reads the results of research conducted by Powers (2004) on how resources affect universities. Powers determined that federal funding is a positive significant predictor of university start-up activity. He found that although federal dollars have declined as a share of R&D funding, many fed- eral agencies are less likely to impose cost-sharing requirements on grantees. It was also established that institutional R&D is not just the fastest growing source of academic R&D, but it is also the “best barometer of entrepreneurial orientation of any of the R&D funding areas.”
The 57 funding agencies collaborate with 13 agencies in grants’ oversight. The oversight agency with the highest number of grants to oversee is the Department of Education with 16,500 grants, followed by DHHS with 7,850 and DOD with 459. The agencies with the lowest number of grants (7) to over- see were the Department of Agriculture and NSF. It is interesting to note that although NSF ranks high in number of grants awarded (2,453), it ranks low in number of grants it oversees (7).
DATA UTILITY AND LIMITATIONS
The FAC database undoubtedly contains a wealth of information, both on the detailed and aggregate levels, that would be of interest to both researchers and practitioners. The types of analyses employed for this study are but a few of the many that can be applied to the database to further improve our under- standing of the nature, scale, extent, and sources of government funding of nonprofit organizations. Other interesting approaches could look into the type and diversity of the nonprofit entities themselves that receive the grants, the kinds of programs that are funded, and any funding patterns that may emerge by state, agency, or entity. As the previous analyses have shown, the database can be dissected, sorted, and analyzed in several ways. With the
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availability of EINs for the nonprofit entities, comparisons and verification can even be made with information submitted by nonprofits in their Form 990s.
The data on universities and other institutions of higher learning may be used by both practitioners and academia for the following specific purposes:
� For universities to assess availability of various federal grants and pro- grams supported by the government;
� For universities to assess success and impact of programs and activities; � For university administrators to utilize as an aid in grant proposals and
budget planning as it assists in evaluating which programs are viable and self sustainable;
� For researchers to explore which agencies fund R&D projects and which research areas are of highest priority;
� For prospective students to explore which universities receive fund- ing support and which areas of study are likely to receive continued funding;
� For those interested in analyzing aspects of equity in federal funding provided through universities;
� For donors and grantors who plan to fund universities and want to eval- uate their current funding streams;
� For state governments that need to evaluate and decide on funding lev- els for institutions;
� All those interested in the issues surrounding federal research funding mechanics.
For practical or research purposes, the information provided by this data- base can also be correlated with other information relevant to higher educa- tion such as state funding and public policies. This information can be obtained from sources such as the Census Bureau, the National Education Re- source Center, the National Center for Higher Education Management Sys- tems, and the National Center for Public Policy and Higher Education, as well as information and statistics provided by the Department of Education.
When complete data for years beyond 2001 become available, annual trends and comparisons may also be identified and possibly related to shifts in public policy and economic conditions. The ability to do annual comparisons, however, has been somewhat compromised by the revision issued by the OMB in increasing the threshold for audit from $300,000 to $500,000 begin- ning in 2004, thus possibly eliminating a number of entities currently included in the database. Data collected for 2001 (currently the most complete in this format), 2002, and 2003 will be similar, but their composition will change slightly starting with data for 2004. By OMB’s own estimate, the increase in threshold could eliminate audit requirements for almost 6,000 entities.
This underscores a key limitation of the database in that although it cap- tures a large proportion of the government grants that flows into the nonprofit
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Government Funding and the Nonprofit Sector 275
sector, it still provides just one piece, albeit a major piece, of the puzzle. Cur- rently, it does not allow us to derive the amount of grants to nonprofits with less than $300,000 in annual federal grants, and more information may be lost by 2004.
The Federal Assistance Awards Data System (FAADS), another database maintained by the Census Bureau, has some of the data needed to fill in the information gap for smaller government grants. Its current format and its data query tools, however, are still in the process of being improved to allow for some of the same type of data analyses.
Looking at the bigger picture, government grants and contracts are a major way that government supports the nonprofit sector, and the FAC database provides us with important information on its value and complexity. How- ever, government funding of the sector does take numerous other forms, as articulated by many nonprofit experts, including Rathgeb-Smith (1998), who lists them as “fees and third-party payments, tax credits and deductions, tax- exempt bonds, regulations encouraging nonprofit service delivery.” We would do well not to forget their contributions when looking into the overall support provided by government to the nonprofit sector.
Note
1. Observation: In calculating the total amount of grants received by each university, the vari- able to use is “amount received” through each program, and not “total expenditure.”
References
Office of Management and Budget. (2003). Audits of states, local governments, and non-profit organizations. Federal Register, 68(124), 38401-38402.
Powers, J. B. (2004). R&D funding sources and university technology transfer: What is stimulating universities to be more entrepreneurial? Research in Higher Education, 45(1), 1-23.
Rathgeb-Smith, S. (1998). Government financing of nonprofit activity. In E. T. Boris & C. E. Steuerle (Eds.), Nonprofits and government (pp. 177-210). Washington, DC: Urban Institute Press.
Weitzman, M., Jalandoni, N., Lampkin, L., & Pollak, T. (2002). The new nonprofit almanac and desk reference. San Francisco: Jossey-Bass.
Nadine T. Jalandoni is the director of research services at Independent Sector. She is coauthor of The New Nonprofit Almanac and Desk Reference and other reports on volunteering and giving. Previously, she was associate executive director of a corporate foundation and research manager at the United Way of South- eastern Pennsylvania (Philadelphia).
Claudia Petrescu is an assistant professor of public policy and public administration at Eastern Michigan University. Her present research interests include best nonprofit management practices, application of business practices to the management of nonprofit organizations, and the relationships between federal funding, charitable giving, and the nonprofit sector.
Gordon W. Green is assistant director of the Welfare Reform Academy at the University of Maryland Foun- dation and also works at the American Enterprise Institute in Washington, D.C. Previously, he was vice president for research at Independent Sector and before that, chief of the Governments Division at the U.S. Census Bureau.
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