Nonprofits Ask: What Economic Recovery?

Struggling charities look for new ways to ensure their survival

More than half of charities say they were unable to meet demand last year. More than half of charities say they were unable to meet demand last year.

Many U.S. nonprofit organizations can only look on in dismay as the economic recovery passes them by.

On Monday, the Nonprofit Finance Fund reported that many charitable groups faced daunting financial situations and were looking at new ways to secure their future for the benefit of those they serve.

In a survey of some 5,000 nonprofits nationwide, Nonprofit Finance Fund found that 80% of respondents had experienced an increased demand for services, the sixth consecutive year for increased demand.

In addition, 56% were unable to meet demand in 2013 — the highest reported in the survey’s history — and only 11% expected 2014 to be easier than 2013 for the people they serve.

“Americans rely on nonprofits for food, shelter, education, health care and other necessities, and everyone has a stake in strengthening this social infrastructure,” Nonprofit Finance Fund CEO Antony Bugg-Levine said in a statement.

“The struggles nonprofits face are not the short-term result of an economic cycle; they are the results of fundamental flaws in the way we finance social good.”

New Funding Landscape

The funding landscape is changing for many nonprofits. Of respondents who received government funding, nearly half had seen support decline over the past five years.

Thirty-one percent of nonprofits surveyed said that in the next 12 months, they would change the main ways in which they raised and spent money.

Twenty-six percent said they would pursue an earned income venture, and 20% would look for funding other than grants and contracts, including loans or other investments.

In other findings:

  • 55% of nonprofits had three months' cash on hand or less
  • 28% ended their 2013 fiscal year with a deficit
  • Only 9% said they could have an open dialogue with funders about developing reserves for operating needs
  • Just 6% said they could discuss developing reserves for long-term facility needs

“The closer a system gets to failure, the harder it becomes to devote scarce resources toward building a better future,” Bugg-Levine said.

The survey found that nonprofits were taking wide-ranging steps to survive and succeed. In the past 12 months, 49% had collaborated with another organization to improve or increase services.

Forty-eight percent had invested money or time in professional development, 40% had upgraded hardware or software to improve organizational efficiency and 39% had conducted long-term strategic or financial planning.

Nonprofit Finance Fund said that for the first time, its annual survey had delved into impact measurement, a core component of some emerging funding models such as pay-for-success. It found the following:

  • Respondents said that more than 70% of their funders had requested impact or program metrics
  • 77% agreed that the metrics funders asked for were helpful in assessing impact
  • Only 1% reported that funders always covered the costs of impact measurement, while 71% said costs were rarely or never covered.

The survey was supported by the Bank of America Charitable Foundation and the Ford Foundation.

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