Monday, July 13, 2009

Good News, Bad News, Part Two: 2009 to Date

If you thought 2008 was a bad year for nonprofits, reports about the first six months of 2009 won’t make you feel any better.

A new study by Bridgespan (from a survey of 100 nonprofit leaders) indicates that, compared to the last six months in 2008: the percentage of nonprofits laying off staff has increased from 28% to 41%; the percentage of organizations making programmatic reductions has ballooned; and many agencies have had to draw down on their reserve funds in order to continue functioning.

Almost all (92%) were experiencing serious effects from the economic downturn, with 45% saying that their financial situation had worsened in the first 6 months of 2009. More agencies have had their funding cut, and the magnitude of the cuts has increased. At the same time, demand for services has increased. Significantly, every kind of funding source has cut their levels of support – including corporations, government, private foundations, and individuals. Revenues from special fundraising events have also been affected.

Small nonprofit organizations (with budgets of less than $1 million) have been hit the hardest - 70% worse as opposed to medium organizations at 38% and large organizations at 41%. Larger agencies have been able to cut overhead more easily, and they also have more months of operating expense coverage in their reserves.

All of these statistics add up to one thing: this is no quickly passing storm. We’ve seen 9 months of challenging times for nonprofits, and it’s not likely things will change soon. Every nonprofit organization will need to plan accordingly, and assume that fundraising will continue to be difficult throughout 2009.

The good news is that 33% of the surveyed organizations reported that funders have stepped up giving to meet the current need. This country has a long-standing history of supporting charitable organizations; despite this unprecedented economic downturn, donors have continued to give to organizations they care about even if at reduced levels. And many nonprofits are working creatively and strategically to protect core programs and come up with new solutions in the face of the economic downturn.

The message is that now is a time when it’s essential to continue to communicate actively with your funders – including corporations, foundations, and individuals. Keep them in the loop about what’s going on financially, and how you are continuing to do your good work. Engage your Board actively in assessing programs, staff, and funding. Let your donors know about your current strategies to balance your budget while protecting core programs. Hope for the best, but assume the worst is a long ways from over.