Nonprofits say they’re still hurting

Nonprofits are adapting their operations and finances to the tough economy but many continue to see rising demand for services and a threat to their ability to serve clients, a new survey says.

Among 4,607 nonprofits responding to a survey by the Nonprofit Finance Fund, 85 percent experienced an increase in demand for services in 2011, compared to 77 percent in 2010, 71 percent in 2009, and 73 percent in 2008 that reported greater demand in previous surveys.

The 2012 State of the Sector survey from Nonprofit Finance Fund also found that 88 percent of respondents expect an increase in demand for services in 2012, while 57 percent have three months or less cash on hand, and 87 percent said their financial outlook would not improve in 2012.

“Nonprofits are adapting to continued economic pressure in all sorts of creative and substantive ways, but for many, these are stopgap measures that won’t make up for the bigger forces at play – decreasing government support, the unwillingness of some private foundations to evolve funding practices, and a lack of necessary support from some boards,” Antony Bugg-Levine, CEO of Nonprofit Finance. “We must rethink the way we fund solutions to our most pressing social problems.”

Among human-service organizations, which represent 38 percent of nonprofits responding to the survey, 58 percent were not able to meet demand in 2011, while 60 percent said they will not be able to meet demand in 2012.

Among those same human-service agencies, 56 percent received federal or state funding or contracts, 69 percent received state or local funding, 52 percent received late payments from the federal government, 62 percent received late payments from state or local government, and 65 percent or more that received late government payments used reserves to cover the gap.

Reflecting efforts to adapt to the unsettled economy, 55 percent of respondents added or expanded programs or services; and 52 percent increased the number of people served; 50 percent hired for new positions.

And while 23 percent cut staff in 2011, only 10 percent expect to cut staff in 2012.

The survey showed challenges in communication among funders, boards and nonprofits.

Only one in five nonprofits say they are comfortable talking with funders about cash-flow concerns, for example, and only 6 percent are comfortable talking with funders about debt.

And 73 percent say their boards do not do enough to “leverage” their relationships to support fundraising, while 38 percent say their boards are not able to sufficiently understand and communicate what drives their organizational expenses.

“Year after year, our survey finds nonprofits, and many of the people they serve, in dire straits,” Bugg-Levine says. “Many people believe the crisis is over, but our social safety net is still in peril. Nonprofits dipped into reserves last year to tide themselves over but expect 2012 to be even worse. Government, funders, boards and nonprofits need to work more collaboratively to ensure that crucial services can be delivered and secure a true economic recovery.”

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