Alliance publishes new report on nonprofits and the economy

Almost three-quarters of local nonprofits saw demand for their services climb in FY 2011 and almost half cannot meet their current level of demand. Among safety net organizations—those that provide food, shelter, health care and other lifeline services—96 percent experienced higher levels of demand this year and 63 percent cannot meet their demand.

According to the Alliance’s new report on Mid-South nonprofits and the economy, local organizations have yet to see any of the upswing that financial analysts say is underway. Charitable giving is still depressed, poverty and unemployment are high, and the public finance crisis has cut millions of dollars from nonprofit programs.

Downstream and In Demand III is based on a survey of 116 local nonprofit leaders about how their organizations and operating environment were affected by the recession in FY 2011. As in past years, rising poverty and another wave of funding cuts have strapped nonprofit budgets. More than one-third of respondents told us they reduced or eliminated services this year, and thirty percent ended the year with an operating deficit.

Our research shows that Mid-South nonprofits are tenacious and innovative in dealing with tough times. Their leaders have taken bold steps to analyze program costs and make strategic budget decisions. They’ve invested in staff and technology, honed their marketing and fundraising functions, and sought out partnerships and collaborations that cut costs and increase impact. Nonetheless, most are worried about how they’ll continue to serve their clients under current conditions, and how the Mid-South community will contend with persistent poverty and a frayed safety net.

Key findings from Downstream III include:

  • 60% of respondents lost a major funding source this year.
  • 50% of participants experienced reduced funding from a long-time funding source this year.
  • Most funding cuts in FY 2011 were from Federal grants and contracts and United Way.
  • 66% of participants have less than six months of cash reserves available, and almost one-third of these have less than one month of reserves.
  • More nonprofits are turning to earned income to compensate for shrinking funding. 35% of participants reported that earned income  increased as a proportion of total revenues in FY 2011.
  • Only 24% of respondents developed a contingency plan in FY 2011, suggesting that many others have not prepared for an uncertain future.
  • Government contracts pose an increasing challenge for organizations that rely on them. More than 80% of participants with government contracts were not fully reimbursed for the cost of services they provide, and many others say late reimbursement and mid-stream cuts significantly affected their operations.
  • Staff raises and benefits were reported as a crucial means of maintaining service quality, but the ability to invest in these is strongly correlated with size. Small organizations were much less likely to have given raises or hired new positions, and significantly more likely to have reduced or frozen salaries.

Want to know more about how the recession has affected local nonprofits? Check out Downstream and In Demand III to learn more about funding trends in the Mid-South and their implications for our community. Find out how nonprofits are working to secure their missions, preserve critical programs, and serve more people, and what’s needed from funders, public officials, and others to sustain their work. We welcome your thoughts and questions on the report and we’d love to hear about your own experiences with recession-era challenges and strategies.

Wishing you and your loved ones very happy holidays,  from the Alliance for Nonprofit Excellence.

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