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Recession seen weakening most nonprofits

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Daring to Lead

Daring to Lead

The vast majority of nonprofits say the recession and market turmoil of the past three years left their organizations in a weaker financial position, with minority-led groups faring worse than those led by whites, a new study says.

About 84 percent of more than 3,000 executive directors surveyed say their nonprofit were harmed by the recession, and 28 percent of minority-led nonprofits reported a severe impact caused by the recession, compared with 18 percent of white-led groups, says a brief based on Daring to Lead 2011, a study conducted by the Meyer Foundation and CompassPoint.

By the end of 2010, more than a quarter of nonprofits reported having downsized their budgets, while four in 10 had held steady and 34 had larger operating budgets.

The study could not conclude how many organizations met their budget expectations for 2010 and 2011, however, and it may be that nonprofits whose budgets increased due to federal stimulus grants may have to “right-size” once that funding runs out.

About 28 percent of nonprofits receive a majority of their funding from government sources, the study says, and more than half of those groups have operating reserves of less than three months.

Amid this worsening financial scenario, four in 10 nonprofit executive directors say they have only moderate financial literacy and almost the same number say they find financial tasks “depleting” or “somewhat depleting.”

Nonprofit board members, on the other hand, tend to have strong financial skills, the study says, but executive directors say their boards are less effective in the areas of public policy and fundraising, and only about four in 10 boards are engaged in strategic decision making.

To better weather the recessionary environment, the report recommends that nonprofit executive and board members bolster their financial acumen; that boards expand their role beyond financial oversight to include long-term sustainability; and initiate conversations with funders about sustainable nonprofit business models.

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