2011 state of the sector survey: national summary

nonprofitfinancefund.org ©2011 Nonprofit Finance Fund

Nonprofit Finance Fund®

2011 State of the Nonprofit SectorSurvey Results

March 2011

For more information, please contact Jen Talansky or Anjali Deshmukh at 212.868.6710 or visit nonprofitfinancefund.org

For full survey results, please visit http://nonprofitfinancefund.org/2011Survey

Data is based on a nationwide Zoomerang survey of nonprofit leaders conducted by Nonprofit Finance Fund, January-February 2011.

Generously supported by Bank of America Charitable Foundation

2nonprofitfinancefund.org ©2011 Nonprofit Finance Fundnonprofitfinancefund.org ©2011 Nonprofit Finance Fund

Adjusting to a ‘New Normal’

Nonprofit Finance Fund (NFF) recently conducted its third ‘State of the Sector’ nonprofit survey. The survey focused on the intersection between finance and mission: what financial strategies are nonprofits employing to keep up with ever-climbing demand for services?

We asked nonprofit managers nationwide to assess the current financial challenges they face, and to share the coping and adapting strategies they’re using to manage through these times.

1935 nonprofit leaders responded to our survey. Respondents stretched from coast to coast, representing 48 states. They came from large organizations and small, and from all sub-sectors.

What did we learn from their collective reply?

While there are some signs of hope, many nonprofits are straining under year-after-year increases in service demand. As an ever-resourceful sector, they are creatively responding to these conditions.


Contents

Meeting the Survey Respondents

Examining the Financial Situation

Taking Action

Working with Government and Funders

Taking a Look at Lifeline Organizations

Conclusion

3

4nonprofitfinancefund.org ©2011 Nonprofit Finance Fund

What Areas of Need Do Survey Respondents Address?

Human Services organizations represent over one-third of respondents

Organizational Sectors

19%

14%

4%

9%

35%

9%

7%1%

1%

1%

Arts, Culture, and Humanities

Education

Environment and Animals

Health

House of Worship

Human Services

I nternational, Foreign Affairs

Mutual/Membership Benefit

Public, Societal Benefit

Other, please specify


What Are the Annual Expense Sizes of Respondents?

Most respondents from small- to mid-sized nonprofits

17%

13%

33%

16%

9%

5%6%

$0-250,000

$250,001-500,000

$500,001-2,000,000

$2,000,001-5,000,000

$5,000,001-10,000,000

$10,000,001-20,000,000

greater than $20,000,000


Contents



Taking Action



Conclusion

6


What Levels of Service Demand Have Nonprofits Experienced?

Service demand has climbed over the last 3 years, with each year’s increase coming on top of the prior year’s

31%

42%

21%

5%

35% 36%

20%

10%

41%

36%

16%

7%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

a significant increase indemand for services

a slight increase indemand for services

no change in demand forservices

a decrease in demand forservices

2008

2009

2010


Are Nonprofits Able to Keep Up with the Increases in Demand?

We see a growing trend of organizations struggling to meet demand

54%

46%49%

51%

44%

56%

0%

10%

20%

30%

40%

50%

60%

NoYes

Able to fully meet demand for services?

2011 Expected

2010

2009


What Are Organizations’ Operating Results?

More organizations reported a surplus in 2010 compared to 2009. 44% of respondents ended 2010 with a surplus vs. 35% in 2009.

Respondents' Operating Results

32%

36%34%

26%

40%

35%

44%

30%28% 29%

22%

44%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

2008 2009 2010 2011 Exp

an operating deficit

an operating surplus

break- even financial results


How Many Months of Cash Do Organizations Have Set Aside?

For the 3rd year in a row, 60% of organizations have 90 days or less of cash on hand

14%

17%

31%

19%

19%

12%

18%

31%

19%

20%

10%

18%

32%

21%

19%

0% 5% 10% 15% 20% 25% 30% 35%

None

Enough to cover 1 month ofexpenses

Enough to cover 2-3 monthsof expenses

Enough to cover 4-6 monthsof expenses

Enough to cover more than6 months of expenses

Months of cash

2009

2010

2011


The Recession Is Officially Over. Does It Feel Like It Has Ended for your Organization?

87%

13%

0% 20% 40% 60% 80% 100%

No

Yes

Does it feel like the recession has ended?


Contents



Taking Action



Conclusion

12


What Personnel-Related Actions Did NPOs Take in 2010; What Actions Are Planned for 2011?

There were signs of personnel-related growth in 2010

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

None of the above

Freeze all replacement hires

Improve or increase staff benefits

Reduce staff hours

Reduce staff benefits

Reduce staff

Freeze or reduce salaries

Retain all current personnel

Rely more on volunteers

Give raises

Hire staff for new positions

Make replacement hires

Personnel: actions taken vs. actions planned

Taken in 2010 Planned for 2011


What 2010 Financial Management Actions Did NPOs Take; What Actions Are Planned for 2011?

Nonprofits are taking a range of actions to manage their financial situation

0% 10% 20% 30% 40% 50% 60% 70%

None of the above

Merge with another organization

Sell assets such as a building or securities

Acquire new assets such as a building or securities

Expand your space

Collaborate with another organization on expenses

Reduce occupancy costs

Delay payments to vendors

Speed up the collection of receivables

Add to reserve funds

Increase annual expenses

Hold funder conversations to explain your situation

Raise less total revenue than anticipated

Use reserve funds

Raise more total revenue than anticipated

Develop/maintain 'worst-case' contingency budget

Reduce annual expenses

Engage more closely with your board

Pay vendors on time

Financial management: actions taken vs. planned



What Service-Related Actions Did NPOs Take in 2010; What Actions Are Planned for 2011?

In spite of financial difficulties, many NPOs are providing more service

0% 10% 20% 30% 40% 50% 60%

None of the above

Reduce or significantly restructure geographies served

Decrease amount of service per client

Decrease the number of clients served

Increase amount of service per client

Expand geographies served

Reduce or eliminate programs or services

Partner with other NPOs to improve/increase services

Increase the number of clients served

Add or expand programs or services

Service-related: actions taken vs. actions planned



Contents



Taking Action



Conclusion

16


What Are Nonprofits’ Experiences with Federal Funding?

Yes20%

No67%

Sometimes 14%

Federal government pays for full cost of services?

2%

50%

19%

21%

7%

0% 10% 20% 30% 40% 50% 60%

Ahead of schedule

On schedule

1-30 days late

31-90 days late

90+ days late

When do you receive payment from the federal govt?


What Are Nonprofits’ Experiences with State and Local Government Funding?

Yes 24%

No63%

Sometimes 13%

State/ local govt pay for full cost of services?

1%

35%

23%

28%

14%

0% 10% 20% 30% 40%

Ahead of schedule

On schedule

1-30 days late

31-90 days late

90+ days late

When do you receive state/ local govt payment?


Which Financial Topics Do NPOs Feel Comfortable Discussing with Funders?

At 58%, program expansion easily tops the list

58%

32%

23%

21%

19%

9%

5%

23%

0% 10% 20% 30% 40% 50% 60% 70%

Program expansion

Facility needs

Working capital needs

Cash flow concerns

Operating reserves

Building reserves

Debt burden

I don't feel my funders are willing tohave open dialogue on these topics


What Do Nonprofits Feel Funders Can Do to Better Help their Nonprofits?

“If I could ask funders to do one thing differently to be most helpful to my organization, it would be ______”*

2%

2%

2%

4%

4%

5%

8%

8%

11%

11%

13%

50%

0% 10% 20% 30% 40% 50% 60%

give capital for facilities & big projects

support & engage in collaboration

pay full cost of services

be open to change

give more money

consider cash flow concerns

make the grant process easier, cheaper

other

provide longer term support

fund what already works

listen, learn, communicate

give GOS or capacity money

*The themes ‘Fund small nonprofits’, ‘provide or help us manage loans’, and ‘support the arts’ each represent 1% of the responses


What Types of Technical Assistance Would Be Helpful?

61%

38%

35%

31%

23%

20%

19%

15%

12%

9%

7%

0% 10% 20% 30% 40% 50% 60% 70%

Fundraising assistance

Tools to communicate financials to board, funders

Organizational performance measurement support

Financial scenario planning

Program finance analytics

Assistance analyzing your current financial situation

Working capital/ line of credit

Collaboration or merger feasibility analysis

Assistance negotiating with banks, other lenders

Debt restructuring and/ or financing

Other

Helpful technical assistance or capital access services


Contents



Taking Action



Conclusion

22


How Many Respondents Primarily Provide Essential Services?

Are you a "lifeline" organization?

49%

51%

0% 10% 20% 30% 40% 50% 60%

Yes

No


What Are the Trends Among These Lifeline Organizations?

“Lifeline” organizations that provide critical services to people in need are finding it hard to meet the demands in their communities: 87% saw an increase in demand for services in 2010,

compared with 68% of non-lifeline organizations.

60% of lifeline organizations increased the number of clients served in 2010, yet only 43% were able to full meet the demand for services.

Just 37% of lifeline organizations expect be able to fully meet demand in 2011.


Contents



Taking Action



Conclusion

25


We learned to do more with little and still maintain our budget…

What Makes You Proudest about how your NPO Responded to 2010 Financial Challenges?

We were able to keep personnel moves and budget issues from affecting services to clients. We were very proactive in reducing staff and overall expenses as well as defining our core service offerings. This helped when we lost 85% of our funding in October 2010...

We survived almost 4 months without our major income source from the [local government] by laying off 2/3 of the staff and operating on minimal expenses. Our laid off staff put in over 1000 hours of volunteer time during that period...

We reduced expenses and ended the FY in the black despite a very difficult fundraising year. We "turned the corner" by engaging our board in fundraising...

I’m most proud of the way the staff has come together, made huge sacrifices, increased their workload so as not to compromise our program offerings - all the while, reducing expenses while increasing revenues. I’m proud of the staff's "We Can Do It" attitude. In addition to the budget amendments, the organization became debt-free.


Conclusions

Nonprofits face ongoing increases in service demand, while the financial situation for many continues to be difficult. Half the respondents say they need funders to provide more unrestricted or general operating support.

Nonprofits are responding to this ‘new normal’ with creativity and resilience, even finding ways to increase services in the face of funding uncertainty.

While some nonprofits are adapting to changed circumstances in healthy ways, such as strategic collaborations and careful expense management, others are entering into situations that threaten their survival, such as substantial layoffs or deficits.

Now more than ever, nonprofits need open dialogue with internal and external stakeholders, and support for the overall organization and core programs.


About Nonprofit Finance Fund®

: Where Money Meets Mission

®

Nationwide network of experts in nonprofit finance Served thousands of nonprofits & funders since 1980 CDFI with $235 million in loans and over $1.2 billion in capital

leveraged for nonprofits Financial consultant with over 1,000 customized

consultancies/workshops Hundreds of strategic partnerships to advance the sector Debt, PRI/MRI management, New Markets Tax Credits Assistance in structuring philanthropic equity for change Thought leadership to advance friendlier funding practices across

the nonprofit sector

“[NFF is]… arguably the most influential voice in the ongoing effort to reshape thinking and practice about nonprofit capitalization.” -The NonProfit Times


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Where Money Meets Mission®

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For the full survey results, please visit our web site, nonprofitfinancefund.org, or click on this link:http://nonprofitfinancefund.org/2011Survey

For questions related to the survey, please contact Jen Talansky or Anjali Deshmukh at 212.868.6710.

Thank you.

2011 state of the sector survey: national summary

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