100,000 Nonprofit Groups Could Collapse in Next Two Years, Expert Predicts

More than 100,000 nonprofit groups nationwide will fail within the next two years, including a few “big brand-name nonprofits,” a scholar of philanthropy and government told charity leaders assembled here to discuss the fallout from the nation’s financial meltdown.

Paul C. Light, a professor of public service at New York University, said that grant makers and others should focus resources on strong organizations and pull the plug on those that are likely to fail.

The problems facing New York City nonprofit groups are especially serious, speakers said.

Money woes have caused a social-service crisis in New York City of the magnitude faced by New Orleans after Hurricane Katrina, and nonprofit organizations need to respond now to prevent a similar scale of devastation, said Geoffrey Canada, president of Harlem Children’s Zone.

Possible Solutions

At the forum, sponsored by the Foundation Center, New York Regional Association of Grantmakers, and the United Way of New York City, speakers focused on an array of approaches to dealing with the problems charities face.

Among them:

Advocacy. Several speakers urged nonprofit leaders to engage in advocacy for their charitable organizations.

“Where is our voice in Washington?” said Mr. Light, who exhorted his colleagues to contact aides to President-elect Barack Obama to ensure that they are aware of the needs and challenges facing social-service organizations.

More foundation grants. Mr. Light also proposed that grant makers help alleviate the strain on social-service organizations by giving a lot more over the next few years.

“If you’re not going to raise payouts now,” said Mr. Light, “when are you going to?”

Increased operating support. Charities will be hit hardest by a loss of corporate donors from financial-services and other industries, as well as a decline in city and state tax revenue that is expected to sharply shrink funds available for government grants and contracts to charitable groups.

Stephanie Palmer, executive director of the NYC Mission Society, called on foundations to make more grants with no strings attached to help nonprofit organizations, particularly those without endowments, cover their operating costs.

Mergers and other alliances. Collaboration is the key to strengthening charities and keeping struggling nonprofit groups afloat, said New York Secretary of State Lorraine Cortes-Vazquez.

While she was wary of nonprofit mergers, Ms. Cortes-Vasquez said she believed nonprofit groups could follow the example of many municipal government agencies and cut costs by consolidating administrative and accounting services and pooling health insurance.

“Organizations do not fail because of the service they offer,” she said. “They fail because they don’t have administrative capacities.”

Sharing back-office functions, she said, could take the burden off small and mid-sized charities, allowing them to focus their energy on serving the needy.

Time to Act

Without organized action and strategies, said Mr. Canada, the consequences will be dire.

Residents in need of the services nonprofit organizations provide will die, and New York will return to the impoverished and crime-ridden city it was in the 1980s.

But Mr. Canada noted that social-service charities had one advantage that Gulf Coast charities did not have dealing with Hurricane Katrina: They have sufficient time to anticipate problems and devise solutions.

“We’ve got a couple of months to prepare ourselves for the next two years,” said Mr. Canada. “We can either give New York a fighting chance, or watch the decline of this great city back to what it was.”