New survey reveals nonprofits adapting to a new reality

New survey reveals nonprofits are adapting to a new reality

“Nonprofits are changing the way they do business because they have to: government funding is not returning to pre-recession levels, philanthropic dollars are limited, and demand for critical services has climbed dramatically,” asserts Antony Bugg-Levine, CEO of Nonprofit Finance Fund (NFF). The NFF has released the results of its 2013 State of the Nonprofit Sector Survey, which has gathered financial information from more than 5900 nonprofits throughout the country.

One of the noteworthy outcomes is 40 percent of nonprofits have to change the primary ways they raise and spend money. If this statistic doesn’t capture your attention, here are the findings that specifically relate to Louisiana as it compares with national rankings.

In 2012,

  • Nationally, 16 percent of nonprofits reported a deficit between one and five percent, while 15 percent of Louisiana nonprofits reported a deficit between five to 25 percent.

In 2013,

  • In Louisiana, 33 percent of nonprofits anticipate a five to 10 percent deficit; 25 percent have only one month of cash in reserves and cannot predict if they’ll have a surplus or not. Of the 25 percent with only one month in reserves, 19 percent predict a deficit by the  year-end.

These predicted deficits are exactly the kind of scenarios we at Execute Now! want to prevent. Execute Now! is committed to helping our nonprofit clients prepare informative reports and establish helpful financial systems so they can meaningfully prepare and forecast cash flow and reserves. Without this kind of preparation, local nonprofits will find themselves sharing company with the nonprofits statistics above.

As I’ve addressed in recent posts, depending on government funding forces nonprofits to face particular hurdles. The obstacles to government funding I’ve listed below compel nonprofit leaders to use lines of credit and start the lengthy process of cultivating alternative funding sources, which present immediate cash flow challenges. The NFF reports on:

  • Partial reimbursements: Only 17 percent of federal funding recipients receive full reimbursements. Since nonprofits anticipate serving more people, this 83-percent gap must be met by other sources.
  • Late payments: State and local government agencies pay 60 percent of their assistance late while the federal government delays 50 percent of its payments.
  • Ensuing problems: These two government funding obstructions force nonprofits to dip into their reserves or endowments, which they wouldn’t otherwise condone.

In response to the altered philanthropic landscape, increased demand for services and lack of government support, nonprofits are changing the way they do business and adapting to this new reality:

  • 49 percent have added or expanded programs/services while 17 percent have reduced or eliminated programs.
  • 39 percent have collaborated with another organization to improve services.
  • 39 percent have upgraded technology to improve organizational efficiency.
  • 36 percent have engaged more closely with their boards.

While these adaptations to a new nonprofit environment are encouraging, nonprofits should still cautiously optimize their revenue mix. Forty percent of national nonprofits feel they need to reconsider their financial resource mix: similarly, in Louisiana 38 percent admit this necessity.

The most important message nonprofit leaders can take away from this report is the necessity for transparent analysis and discussions about finances; deeper connections with board members, partners and funders; and the willingness to examine more stable revenue sources.

by Erica McGeachy Crenshaw, President/CEO of Execute Now!

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