Nonprofits Still Anxious About Economy’s Instability, Survey Finds

Many nonprofit organizations did better financially in 2010 than in the previous year, but heightened demand for services and continued anemic fund raising keep them from feeling fully recovered from the recession, according to a report to be released this week.

Indeed, 87 percent said that they did not feel like the recession was over yet.

The poll of more than 1,900 organizations nationwide was conducted by the Nonprofit Finance Fund, a New York group that works with charities to improve their finances, and supported by the Bank of America Charitable Foundation.

Forty-four percent of organizations ended their 2010 budget year with a surplus. That was up from the 35 percent that ended 2009 in the black.

Most of the organizations surveyed were small to midsize, with budgets of less than $2-million. Half of them were what the survey called “lifeline” organizations that provide direct services to the needy.

• Just over a third said they raised more money in 2010 than they anticipated.
• A quarter of groups said they added to their reserve funds.
• Sixty percent said they have three months or less of cash on hand.
• Forty-four percent of groups said they expect to break even at the end of their 2011 budget year, while 26 percent said they expect to end with a deficit. Thirty percent said they expect to end with a surplus.

“While there are certainly some glimmers of hope, the increasing demand plus continued financial instability do give us cause for concern,” said Rebecca Thomas, a vice president at the organization. “The question that begs to be asked is whether this is the new normal for the sector.”

Services in Demand

Many groups fear that might be the case, the survey suggests, in large part because the weak recovery from the recession continues to send the homeless and the jobless to charities for help.

Three-quarters of organizations in the survey said they faced an increase in demand in 2010. Almost as high a percentage said they had seen increases in both 2008 and 2009.

Just 9 percent of groups surveyed believe that the people they serve would be better off financially in 2011.

Eighty-five percent said they expect an increase in demand for services, while just 46 percent said they would be able to fully meet it.

Organizations that serve the needy reported that they had found it particularly hard to meet demand. Eighty-seven percent saw an increase in demand in 2010, compared with 68 percent of other organizations.

What’s more, 60 percent of those organizations said they increased the number of clients served in 2010, but just 43 percent were able to fully meet the demand for their services.

One of the organizations surveyed was the Tumbleweed Center for Youth Development, in Phoenix, which houses abused, neglected, homeless, and troubled youths. It has lost more than $1-million in government grants over the past three years and laid off nine of its approximately 70 full-time employees. Meanwhile, its waiting list for services has tripled.

Last year its finances stabilized somewhat, but Dick Geasland, Tumbleweed’s executive director, isn’t sure the worst is over. “We’re moving along and not losing any [more] money, just keeping our head barely above water,” he said

Questionable Expansions

Still, many other organizations said they are hiring staff members and expanding their programs and services.

In the past year, more than 40 percent of the nonprofits in the survey said they had either made replacement hires or added new staff positions. Just 27 percent of groups had laid off workers.

Fifty-five percent added or expanded programs or services in 2010, and about the same percentage plan to do so in the next year. Those figures gave Ms. Thomas pause.

“There is this question of whether organizations are expanding beyond their means at a time when finances are precarious,” she said.

Officials of the Nonprofit Finance Fund were more encouraged by results that showed nearly half of organizations surveyed said they had collaborated with another group to improve or increase services.

That, Ms. Thomas said, is a sign groups are adapting to the new, austere realities of today’s financial landscape. (Read more about efforts to collaborate.)

The Nonprofit Finance Fund’s “2011 Survey of the Nonprofit Sector” is available free on the group’s Web site. Go to: http://nonprofitfinancefund.org.