Guest editorial: Nonprofits struggle through difficult times

By on February 25, 2010

Guest editorial
by Marilou Jones
Director of Communications
Donors Forum
At a time when the need for nonprofit services is growing, nearly half of Illinois nonprofits had to make cuts in full-time staff last year as a result of financial woes. This is one of several disconcerting findings in Donors Forum’s recently released report, Economic Outlook 2010: Illinois Nonprofits Still Reeling After Rough Year.

In November 2009, Donors Forum, a membership association of more than 1,000 grantmakers, advisors and nonprofits in Illinois conducted an update of the prior year’s economic outlook report. The results of the survey—not surprisingly—show grantmakers and nonprofits alike are feeling the harsh effects of the economy.

Seven in 10 of the nonprofits surveyed (71 percent) reported they had decreased their budget in 2009, and nearly as many (66 percent) reported that their operating reserves had declined. Indeed, 63 percent had only three months or less of reserves, and only 11 percent had more than 12 months of reserves.

There are few indications that any relief is coming. Well over one-third of grantmakers (37 percent) plan further decreases in their giving levels, while 20 percent plan increases. These plans reflect grantmakers’ concerns about nonprofit sustainability. More than four in10 grantmakers (42 percent) reported that they had increased their focus on support for nonprofit capacity building and sustainability in the past 12 months, and more than half of those gave specific examples of strategies they were employing.

These concerns occur at a time when 67 percent of nonprofits reported an increased demand for services—holding steady from a year ago, but a distinct increase over the last five years. However, the number of agencies reporting a coinciding decrease in their ability to meet that demand increased to an alarming 41 percent from 21 percent a year ago.

Nonprofits also reported declines in funding. The most commonly reported cuts were in foundation giving, with 68 percent of nonprofits reporting such declines. Nearly two-thirds (62 percent) also reported declines in government funding, and 40 percent of nonprofit respondents reported delays in receiving government payments (reimbursements for services provided to the public) during 2009, most frequently (91 percent) from the state.

Of those affected by late payments from the state, 97 percent indicated that the delays caused cash flow problems, leading to short-term borrowing, delaying payments to vendors, and service and staffing cuts.

“While grantmakers and nonprofits alike have had to make spending cuts, they continue to seek creative solutions for supporting the programs and services nonprofits provide,” said Valerie S. Lies, Donors Forum’s President and CEO. “Grantmakers are changing funding strategies to bolster nonprofit sustainability and target the most effective programs.

Nonprofits are also making tough programmatic and strategic choices, while pursuing new and more aggressive fundraising approaches. To continue to serve our families and communities, nonprofits will need the steadfast support of individual and institutional donors, as well as timely reimbursements from government funders that contract with nonprofits to provide vital human services.”

The full report is available at DFoutlook2010 or on Donors Forum’s website

Donors Forum strengthens philanthropy and the nonprofit community in Illinois by providing resources—education, networking, public policy leadership, research, library services, publications, and a website —for grantmakers and nonprofits. In so doing, Donors Forum increases the ability of the nonprofit and philanthropic sector to meet the needs and enhance the lives of individuals, families, and communities throughout Illinois.