This week, the Nonprofit Finance Fund released its 2013 “State of the Sector Survey”, indicating that across the country “39% will change the main ways they raise and spend money” in the coming year. According to NFF CEO Anthony Bugg-Levine:
“Nonprofits are changing the way they do business because they have to: government funding is not returning to pre-recession levels, philanthropic dollars are limited, and demand for critical services has climbed dramatically. At the same time, 56 percent of nonprofits plan to increase the number of people served. That goal requires systemic change and innovation – both within the sector, and more broadly as a society that values justice, progress and economic opportunity.”
An NFF press release includes the following top-line findings from the survey:
Nonprofits need new funding sources and models.
- 42% of survey respondents report that they do not have the right mix of financial resources to thrive and be effective in the next 3 years.
- 1 in 4 nonprofits has 30 days or less cash-on-hand.
- Over the next twelve months, 39% plan to change the main ways they raise and spend money.
- 23% will seek funding other than grants or contracts, such as loans or investments.
Nonprofits that receive government funding face particular challenges:
- Only 14% of nonprofits receiving state and local funding are paid for the full cost of services; just 17% of federal fund recipients receive full reimbursement. Partial reimbursements require additional funding to cover the growing gap as nonprofits serve more people.
- Government is late to pay: Among those with state or local funding, just over 60% reported overdue government payments; over 50% reported late payments from the federal government.
Under these challenging conditions, many nonprofits are unable to meet growing need in their communities:
- For the first time in the five years of the survey, more than half (52%) of respondents were unable to meet demand over the last year; 54% say they won’t be able to meet demand this year.
- This represents a worrying trend; in 2009, 44% of nonprofits said they were unable to meet demand.
- Jobs (59%) and housing (51%) continue to be top concerns for those in low-income communities.
- 90% of respondents say financial conditions are as hard or harder than last year for their clients; this is actually a slight improvement from prior years’ outlook
Nonprofits are changing the way they do business to adapt to the new reality. In the past 12 months:
- 49% have added or expanded programs or services; 17 percent reduced or eliminated programs or services.
- 39% have collaborated with another organization to improve or increase services.
- 39% have upgraded technology to improve organizational efficiency.
- 36% engaged more closely with their board.
Within the Greater Washington region, the picture looks similar. Looking at a subsection of Catalogue-profile nonprofits operating in Maryland, Virginia, and D.C., an overwhelming majority (86%) project their service demand will slightly or significantly increase in 2013, while 58% responded that they will not be able to meet that demand. This continues a trend of demand for services exceeding the supply seen in since at least 2008. Another concerning statistic — over 40% of surveyed nonprofits in the region indicated that they do not have the right mix of financial resources to “thrive and be effective” over the next three years.
The NFF discusses the result of this data – that nonprofits are forced to “innovate to increase efficiency, access new kinds of funding, evaluate impact, and work collectively to tackle social problems.” The question we, supporters of the nonprofit community, must ask ourselves is whether we’re creating an environment that fosters such innovation.
In a TED Talk earlier this month, Dan Pallotta challenged listeners to let nonprofits take risks and possibly fail, but have the (financial) freedom to truly innovate and search for new solutions to society’s intractable social problems. Such work takes a commitment on the part of the funding community to support innovative nonprofit leaders — and is the only way that the nonprofit and philanthropic communities will not only weather the current economic uncertainties, but thrive and create sustainable, positive change in coming years.