Managing Editor
Northeast Florida’s nonprofits have been hurting from the recession, according to the recent “State of the Sector” report by the Nonprofit Center of Northeast Florida.
The report was underwritten by the Jessie Ball duPont Fund.
Rena Coughlin is CEO of the Nonprofit Center and Sherry Magill is president of the Jessie Ball duPont Fund.
They responded to five questions regarding the state of the area’s nonprofits that file IRS Form 990 reports.
The “State of the Sector” report covers 1998-2008. You found that 42 percent of the nonprofits were operating in the red. Do you think that percentage increased over the past two years? The economy has not been easy.
Coughlin: The graph representing nonprofit fiscal health is a roller coaster of ups and downs that tracks the overall health of the economy. The 42 percent in the red for 2008 is definitely an increase over the past couple of years and likely a predictor of even higher percentages in 2009 and 2010. Nonprofits had been clawing their way out of the economic recession of 2001-2002, when they had exactly the same percentage of organizations ending their fiscal years in the red as this year.
Magill: We do think, based on the 2008 data, that the percentage of nonprofits operating in the red either held steady or increased, given the fact that the economy has not improved, giving has not increased, and governments have cut social and human service spending. We will not know for certain until the data is available.
Will that 42 percent in the red turn around and survive?
Coughlin: The majority will survive. But last year, nonprofit experts were predicting that we’d end 2010 with up to 100,000 fewer nonprofits nationwide. If we head into a double-dip recession, it could be perilous. So many families and businesses, including nonprofits, have been hanging on by downsizing and scrimping that a prolonged recession could mean:
• One, more people needing more nonprofit services than ever and more stress on the nonprofits to deliver those services with shrinking infrastructure and resources;
• Two, a second market collapse that would wipe out millions in potential charitable donations;
• Three, continued government cuts to social services, arts, and environment funding that helps support service delivery through nonprofits; and
• Four, a higher ‘mortality rate’ for nonprofit organizations.
Magill: If the economy im-proves, we expect that private giving will increase. Whether or not governments restore the cuts to social and human service providers remains to be seen. We do think that nonprofits are adapting to reduced revenues, but we are concerned that some of that adaptation will eventually mean a reduction in services. Nonprofits, like any enterprise, cannot operate at a deficit indefinitely.
What do nonprofits need to do to survive and to be prepared for a better economy?
Coughlin: Nonprofits are doing a lot to adapt to the poor economy and prepare themselves for what’s next, good or bad. A local survey by the Jessie Ball duPont Fund asked nonprofits how they have changed to deal with the recession. Here are the findings, in summary:
• Reduced staff, 35 percent.
• Reduced or frozen wages/bene fits, 46 percent.
• Made strategic organizational
changes, 76 percent.
• Changed board operations, 52 percent.
• Increased advocacy with gov- ernment 59 percent.
Magill: Develop best-case and worst-case financial scenarios; ensure that expenses do not exceed revenues so that the organization is in danger of going out of business; help the public, legislators and funders understand the services they provide; make sure the people who benefit from their services are being well-served.
Are those who depend on the services of nonprofits receiving the assistance they seek?
Coughlin: That’s an incredibly complicated question without an easy answer. My belief is that no nonprofit is underperforming or underserving willingly. If there’s a gap in service, then there’s usually a lack of funding, a geographic area that is underserved, or just too many people needing the same assistance. If we think about food security issues, emergency utilities or rent assistance, and emergency housing, then it’s very provable that need exceeds assistance.
The “State of the Sector” report tells us that, compared to other communities of similar size and population, we have far fewer nonprofits per capita.
Magill: Many are, but we are concerned that many individuals and families with children are falling through the cracks of the local social safety net system. Charities admit that demand is exceeding their capacity to provide services.
Will there be a stronger nonprofit network when the economy improves?
Coughlin: Unequivocally.
Magill: Honestly, I don’t know. We hope, and we and other funders have stepped up efforts to strengthen the local sector. The Nonprofit Center of Northeast Florida is working on capacity building. Our hope is that these efforts will increase organizations’ abilities to weather this storm, but the economy must add jobs at a much faster rate than we have seen.
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