Fiscal Stress Hits Not for Profits - Johns Hopkins Survey
6 July 2009 at 4:02 pm
The news is not good from the prestigious Johns Hopkins University in the US which is describing the effect of the economic downturn on the Not for Profit sector as the ‘perfect storm’.
The survey reveals that 80 percent of Not for Profit organisations are experiencing fiscal stress and close to 40 percent of them reported that this stress was "severe" or "very severe."
Theaters and orchestras were particularly hard hit, with nearly 75 percent of the former and half of the latter reporting "severe" or "very severe" stress.
Contributing to this stress has been a perfect storm of impacts including declining revenues (51 percent of organisations); increased costs, particularly for health benefits; declining endowments; and decreased cash flow as a result of restricted credit and government payment delays.
The 363 organisations that participated in the survey as part of the Johns Hopkins "Nonprofit Listening Post" differ widely in size, cover all regions, and represent a diverse array of fields, including children and family services, elderly services and housing, community development, education, arts and culture, and others.
Despite the dire challenges, more than two-thirds of the organisations indicated that they have been "successful" or "very successful" in coping with the current fiscal crisis.
It says this is consistent with experience in prior recessions, during which Not for Profits boosted employment while for-profit employment declined.
Lester Salamon, director of the Johns Hopkins Center for Civil Society Studies, which conducted this survey says organisations are displaying exceptional resilience in the face of enormous fiscal challenges with nearly three-quarters of the organisations reported being able to maintain or actually increase the number of people they serve, and this was especially true of service to vulnerable populations.
He says that to achieve this result, NFPs have displayed unusual resolve and launched inventive coping strategies.
• Well over half of all organisations have launched new or expanded fund-raising efforts, targeting individuals, state and local government, the federal government and foundations.
• Substantial proportions of organisations are tightening their belts further, cutting administrative costs, creating collaborative relationships with other NFPs, instituting salary freezes, postponing new hires, and relying more heavily on volunteers.
• Substantial numbers are also stepping up their marketing and their advocacy.
Additional findings of this survey included:
• While cultural institutions have been particularly hard hit by the recession, a third or more of child-serving and elderly-serving organisations also reported "severe" or "very severe" fiscal stress.
• Beyond the 51 percent of responding organisations that reported declining revenues, a substantial majority also anticipated further revenue declines over the coming months, particularly from private giving and government support.
• Among revenue sources, losses were particularly widespread from individual contributions (losses for 53 percent of organisations), corporate contributions (losses for 44 percent of organisations), and foundation support (losses for 42 percent of organisations).
• Reflecting their heavier reliance on donations, theaters and orchestras saw the worst revenue losses, witbh close to 80 percent of the theaters and 70 percent of orchestras reporting losses.
• Government support, which plays a larger role than philanthropy in the funding of NFPs, declined at fewer organisations, but more than a third (35 percent) of organisations experienced declines in this important source of support, as well, and over 40 percent reported delays in government payments.
• More than half (57 percent) of organisations experienced increased health benefit costs, underlining the importance of health benefit reform for nonprofits.
• Not for Profits were also affected by the general collapse of investment asset values. Among the organisations that have endowments, 80 percent reported that they had decreased in value.
• Despite these realities, 73 percent of responding organisations reported being able to maintain or increase the number of people they serve, and for organisations serving vulnerable populations, this figure was even higher (96 percent for organizations serving people with disabilities, 92 percent for organizations serving the economically disadvantaged, 86 percent for organizations serving the elderly, and 82 percent for organizations serving children and youth).
The full text of the report "Impact of the 2007-09 Economic Recession on Nonprofit Organizations" is available online at www.ccss.jhu.edu