Nonprofit Finance Fund Survey: America's Nonprofits in Danger

New York, March 26, 2009 — America's nonprofits, including the "lifeline" organizations that many depend on for food, shelter, and other basic services, are strained to the breaking point, according to a survey released today by Nonprofit Finance Fund (NFF). The survey of 986 nonprofit leaders in markets nationwide captures the financial state and particular challenges facing these organizations.

Key findings include:

* Only 12% expect to operate above break-even this year.
* Just 16% anticipate being able to cover their operating expenses in both 2009 and 2010.
* 31% don't have enough operating cash in hand to cover more that one month of expenses, and another 31% have less than three months' worth.
* 52% of respondents expect the recession to have a long-term (2+ years) or permanent negative financial effect on their organizations.
* 93% of lifeline organizations that provide essential services anticipate an increase in demand in 2009.

"The survey reveals the precarious state of a sector that is continually asked to do more with less, and brings a long-standing problem into sharp relief," said Clara Miller, President and CEO of Nonprofit Finance Fund. "Lifeline organizations, 91% of which focus on serving vulnerable populations, simply will not be around to provide critical services if we continue with current practices. We must free the entire sector from the archaic assumptions and harmful constraints that keep many organizations perpetually on the brink of survival, and especially at risk in times of recession."

Adjusting to a new financial reality
Nonprofits are taking steps to weather the recession that range from cuts to essential programs to layoffs. When asked to identify actions taken within the past 12 months or planned for the next 12 months: 39% identified "reduce or eliminate programs"; 41% identified "reduce staff or salaries"; and 23 % identified "delay payments to vendors."

"Like many other nonprofits, we have had to make cuts that directly and negatively affect the people we serve," said survey respondent Felix Rouse, CEO of the Boys & Girls Clubs of Newark. "We have temporarily closed one of our five sites. We have reduced our program offerings from 47 to 30, and have had to lay off about 25 employees (28% of the workforce). We are having a hard time with cash flow due to the lack of unrestricted revenue."

Many organizations are experiencing a decline in funding even as demand increases. In 2009, 43% of respondents expect a decrease government funding; 62% expect a decrease in financial support from foundations; and 49% expect a decrease in contributions from individuals.

Change on the horizon
Nonprofit Finance Fund recommends that funders and nonprofits work together to address fundamental practices and strategies, along with tactics, that will improve the strength and readiness of the sector. Many nonprofits leaders who responded to the survey expressed interest in exploring new ways to manage through the crisis and beyond, to continue serving their communities: 58% would like to conduct scenario planning; 52% want help communicating their financial picture to board and/or funders; and 34% are interested in program profitability analysis.

"This crisis presents funders and government with an opportunity to substantively change practices that perpetuate inefficiency and stymie innovation and growth," said Miller. "The talent, resources, and passion that people in the sector bring to the goal of addressing society's most pressing issues must be protected and nurtured. This recession is forcing the issue of how to better invest in what works for the benefit of society."

ABOUT NONPROFIT FINANCE FUND
Nonprofit Finance Fund (NFF) is a national leader in nonprofit, philanthropic and social enterprise finance. Founded in 1980, NFF provides loans, access to capital and consulting services that build the capacity and the financial health of nonprofits. A leading community development financial institution with over $80 million in assets, NFF has provided over $190 million in loans and access to additional financing via grants, tax credits and capital in support of over $1 billion in projects for thousands of nonprofit clients nationwide. NFF has a staff of more than 75 serving nonprofits nationally from offices in Philadelphia, New York City, Newark, Boston, Detroit, Washington, D.C., and San Francisco.