US Charities Look to New Funding Sources - Survey

The economic recovery is not offering signs of relief for the US Not for Profit sector, and many organisations are now looking to new models of funding, according the results of the Nonprofit Finance Fund’s 2014 Survey.

Leaders from more than 5,000 Not for Profits participated in this sixth annual survey with many reporting daunting financial situations forcing them to looking at new ways to secure the future of their organisations.

The survey found that the economic recovery is leaving behind many Not for Profits and communities in need.

It found that 80 per cent of charities reported an increase in demand for services and 56 per cent  were unable to meet demand in 2013 — the highest reported in the survey’s history.

Only 11 per cent expect 2014 to be easier than 2013 for the people they serve.

“Americans rely on Not for Profits for food shelter, education, healthcare and other necessities, and everyone has a stake in strengthening this social infrastructure,” Antony Bugg-Levine, CEO of Nonprofit Finance Fund, said.

“The struggles Not for Profits face are not the short-term result of an economic cycle, they are the results of fundamental flaws in the way we finance social good.”

For many Not for Profits, the funding landscape is changing. Of respondents who receive government funding, nearly half have experienced support decline over the past five years.

The survey found that Not for Profits are working to bring in new money in the next 12 months.

It found that 31 per cent  will change the main ways in which they raise and spend money, 26 per cent will pursue an earned income venture and 20 per cent  will seek funding other than grants and contracts, such as loans or other investments.

As well, 41 per cent of Not for Profits named “achieving long-term financial stability” as a top challenge, yet more than half of  Not for Profits (55 per cent ) have three months or less cash-on-hand.

The survey found that 28 per cent  ended their 2013 fiscal year with a deficit and only 9 per cent can have an open dialogue with funders about developing reserves for operating needs, and only 6 per cent  about developing reserves for long-term facility needs.  

“The closer a system gets to failure, the harder it becomes to devote scarce resources toward building a better future,” Bugg-Levine said.

“The Not for Profit sector’s greatest asset is tenacious, creative, smart leaders who, despite significant challenges and with the right support, have the capacity to lead the United States into a new era of civic and social greatness.”

The survey found that charities are taking wide-ranging steps to survive and succeed.

In the past 12 months:

• 49 per cent collaborated with another organisation to improve or increase services;

• 48 per cent  invested money or time in professional development;

• 40 per cent upgraded hardware or software to improve organisational efficiency;

• 39 per cent conducted long-term strategic or financial planning.

For the first time, the annual survey delved into impact measurement, a core component of some emerging funding models such as pay-for-success. Respondents said that more than 70 per cent  of their funders requested impact or program metrics.

Another 77 per cent  agreed that the metrics funders ask for are helpful in assessing impact.

Only 1 per cent  reported that funders always cover the costs of impact measurement; 71 per cent said costs were rarely or never covered.

Full survey results, along with an interactive survey analyser and a look at trends over the past six years, are available at: www.nff.org/survey.

The Nonprofit Finance Fund is a US community development financial institution with more than $80 million in assets.