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Nonprofits’ financial stress persists

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Financial strain

Financial strain

Nonprofits expect continuing financial strain and operating challenges this year, although they also see signals the financial stress may be easing, a new survey says.

Eight-seven percent of over 1,900 nonprofit leaders throughout the U.S. surveyed by Nonprofit Finance Fund believe the recession has not ended, 85 percent expect an increase in service demand this year, and only 46 percent expect they will be able to fully meet demand.

In 2010, the survey says, 77 percent of nonprofits saw an increase in demand, compared to 71 percent in 2009 and 73 percent in 2008.

Sixty percent of nonprofits have three months or less of cash on hand, 10 percent have none and only 9 percent expected 2011 will be financially easier for their clients.

Yet 44 percent of nonprofits ended 2010 with surplus, up from 35 percent in 2009, while 25 percent added to reserve funds in 2010, and 35 percent raised more revenue in 2010 than anticipated.

“Years of uncertainty have forced nonprofits to adjust to the ‘new normal’ of scarce resources and increased demand,” Rebecca Thomas, vice president of consulting services at the Nonprofit Finance Fund, says in a statement.

“Some of the adjustments we’re seeing are creative and healthy – such as strategic collaborations to improve impact in a community,” she says. (Other effects – layoffs, people who need services being turned away, organizations operating deficit or with no cash – are further compromising the social safety net at a great cost to America.”

Groups that provide critical services to people in need have had a particularly tough time meeting demand for services, the survey says.

Eighty-seven percent of those “lifeline” agencies saw a rise in demand for services, compared with 68 percent of “non-lifeline” agencies.

Sixty percent of lifeline agencies served more clients in 2010, yet only 43 percent were able to fully meet demand.

Only 37 percent of lifeline agencies expected to be able to fully meeting demand in 2011.

Still, the survey says, nonprofits are “coping with the ‘new normal’ of fewer resources, and are taking significant and creative steps to meet the needs of their communities.”

In the past 12 months, it says, 55 percent of nonprofits added or expanded programs or services; 49 percent increased the number of clients served; 47 percent partnered with another organization to improve or increase services offered; 39 percent reduced annual expenses; and 36 percent relied on more volunteers.

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