2 New Surveys Confirm Charity Leaders’ Perceptions: Recession’s Impact Runs Deep

Two studies released this week offer fresh evidence that the recession has created havoc for nonprofit groups:

• Ninety-two percent of the nearly 100 respondents in a survey conducted in May by the Bridgespan Group said they were feeling the effects of the downturn.
• Eighty percent of charity officials reported that their organizations were experiencing financial stress, in another study conducted in April by the Johns Hopkins University’s Listening Post Project. Nearly 40 percent of the 363 respondents described the stress as “severe.”

The financial picture for charities has gotten more grim over the last six months, according to the studies.

When Bridgespan, a nonprofit consulting group in Boston, first surveyed charity leaders about the recession in November, 75 percent of respondents said they had suffered from the recession’s effects.

Small organizations have been hit the hardest, according to the May study.

Seventy percent of organizations with revenue of less than $1-million reported that their financial picture had worsened in the past six months, compared with fewer than half of larger organizations.

The study found that an increasing percentage of charity leaders were tapping reserve funds and creating contingency plans.

Charities were also taking steps to protect their most important programs.

Nearly half (48 percent) of the nonprofit organizations said they had renegotiated terms with donors to focus on their main programs, up from 34 percent in November. More than 60 percent realigned staff members to support such programs, slightly more than in November.

William Foster, a partner at Bridgespan and a co-author of the new report, said these steps to bolster core operations are a “small silver lining” to the brutal economy.

“The economic tightness is forcing nonprofits to do things that would be healthy habits in any economic time,” Mr. Foster said. “If we’re going to come out of recession smarter than we came in, it will only be if tough decisions and thoughtful economizing has taken place.”

Staying Positive

Despite the deepening unemployment rate and stagnant stock market, the study found that charity leaders were optimistic about their organizations’ financial picture.

Forty-five percent said they expected their groups’ financial outlook to be better in a year. Just 22 percent thought their outlook would be worse.

The Listening Post Project, which is supported by the Johns Hopkins Center for Civil Society Studies and 10 other nonprofit organizations, found a similar resilience among charities in its survey.

Nearly 70 percent of respondents rated their groups’ financial performance as successful, despite the pressures they were facing. Just 27 percent said they had been forced to reduce their services.

Groups that serve people who face big challenges fending for themselves, such as elderly individuals and those with disabilities, were even more likely to maintain or increase their assistance.

“The message out of this sector is, We will do everything we can to avoid [cutting services],” said Lester M. Salamon, director of the Johns Hopkins Center for Civil Society Studies. “That’s a very heroic stance. But of course, there are questions around how far you can push these organizations before they break.”

Bent, Not Broken

Few charity officials in the survey were worried that their breaking point was near.

Only 13 percent of the respondents said they were concerned about their nonprofit organization’s survival. But those numbers rose significantly among people at theaters and orchestras, which were the hardest hit of all charities in the study. Twenty-four percent of orchestra leaders and 33 percent of theater officials reported concern about their groups’ fate.

Midsize groups, with revenue of $500,000 to $3-million, said they felt the effects of the downturn more severely than their larger and smaller peers, according to the Listening Post Project study.

Mr. Salamon said that midsize organizations — as well as cultural charities — were perhaps suffering the most because they received less government support than larger organizations and human-services groups.

Government money has provided somewhat of a buffer against the downturn, with 35 percent of charities in the study reporting declines in that type of support compared with 53 percent who said they had seen a drop in donations from individuals.

The study found that nonprofit groups were developing many ways to cope with the recession, including working more with other charities (47 percent) and expanding efforts to promote themselves (48 percent).

The Listening Post study, “Impact of the 2007-09 Economic Recession on Nonprofit Organizations,” is available online at the Johns Hopkins Web site.

More information about the Bridgespan report, “Nonprofits Turn to Tougher Measures as Downturn Deepens,” can be obtained online.