Survey: Nonprofit fiscal stress declines from 2003 levels

 Despite continuing fiscal challenges, the percentage of nonprofits reporting severe fiscal stress fell between 2003 and 2006, according to a recent survey by the Johns Hopkins Nonprofit Listening Post Project. Reflecting this, a substantial majority – 76 percent – of nonprofits in all fields, and of all sizes, reported generally successful financial performance during 2006.

The nearly 750 organizations surveyed are involved in children and family services, elderly housing and services, community and economic development, and culture and the arts. The study followed similar surveys conducted in 2003. "While a third of the organizations still reported 'severe fiscal stress' in 2006, this was down from the 51 percent of organizations reporting this level of stress three years earlier," said Lester M. Salamon of the Johns Hopkins Center for Civil Society Studies and the Listening Post Project.

This is surprising since two-thirds reported reductions or no growth in their major source of support – government – and that the new survey included a larger proportion of small nonprofits, which generally are financially more precarious, Salamon said. The major source of revenue growth was fees and charges and despite this reliance on new fees more organizations said they increased services to the poor (40 percent) than reported they reduced services (8 percent).

"Persistent crisis has become a way of life for America's nonprofits," said Peter Goldberg, president and CEO of the Alliance for Children and Families. "What this survey shows, however, is that America's nonprofit executives have become skilled crisis managers."

"We view the report's findings as quite heartening," said Tangie Newborn of the Alliance for Nonprofit Management. "They illustrate the ongoing development of nonprofit management as a field requiring sophisticated management techniques."

The bad news – cause for concern

 There was, however, evidence of ongoing fiscal stress, such as:

• A third of the organizations reported having to increase their staff working hours
• Wait times increased at a quarter of the organizations
• Staff turnover increased at a quarter of all organizations
• Staff training was cut at a quarter of the organizations

Reflecting this, half or more of the organizations reported serious concerns about funds declining or costs increasing, though in each case the concerns were less widespread than in the past.

But concerns are growing about a range of human resource issues: board recruitment, staff recruitment and retention and executive transition were identified as "very significant" challenges by 46, 38, and 28 percent of organizations, respectively – all higher than three years earlier and all echoing the findings of a local study commissioned by the Hawai‘i Community Foundation.

Despite significant media and government attention, accountability demands were identified as a "very significant challenge" by only a quarter of the organizations.

"This suggests that the audiences nonprofits care most about – those that support them – actually have a good deal of confidence in the way these organizations manage themselves," noted Tom Lengyel of the Alliance for Children and Families. "Apparently, the high standards of transparency and accountability that most nonprofits have set for themselves are paying off and should be continued."

Click here for the full report, "Nonprofit Fiscal Trends and Challenges."