Friday, October 14, 2011 - 12:11pm
posted by
Angela Francis
,
Senior Associate
Nonprofit Finance Fund

Welcome to Research Friday! As part of a continuing weekly series, each Friday we invite a nonprofit expert to highlight a research report or study and discuss how it can inform and improve day-to-day nonprofit practice.

At Nonprofit Finance Fund (NFF), we use data to help us understand and communicate the financial reality facing nonprofit practitioners on the ground. In previous Research Friday posts, I reviewed key findings from our annual Sector Survey on increased demand for social services and the cash crisis facing providers. This week, in honor of Domestic Violence Awareness Month, I’ll examine the impact of these issues on a specific subsector: Domestic violence service providers in California.

With support from the Blue Shield of California Foundation, NFF recently released Navigating a New Course, a report on the challenges these organizations are facing. Although this study focused on California service providers, anecdotal evidence suggests that domestic violence organizations throughout the country are confronted by similar challenges. The report was primarily informed by two sources:

  1. Financial data showing trends from the field. In 2009, we conducted a broad financial overview of 70 domestic violence (DV) service providers, which was followed by a comparative financial analysis of 18 organizations in 2010.
  2. Lessons learned from our work with agencies in the field. At present, we’ve conducted one-on-one consulting engagements with over one-third of the state’s DV programs.

When combined, the quantitative (financial) and qualitative (lessons learned in practice) data tell a powerful story, and the report’s findings come as DV providers brace for additional government funding cuts. So, what impact will these cuts have? To understand this, it’s important to acknowledge the way that this funding shapes an agency’s program decisions.

For example, most California DV organizations provide shelter and related support services, which are funded primarily through government sources—typically about 75% of their total revenue. Between 2000 and 2008, this revenue mix provided stability and the opportunity to grow, due to gradual increases in overall government funding. The caveat: in order to be eligible for this funding, DV agencies must provide their clients with access to emergency shelter (among a long list of other services). So, for reasons that are driven by their mission and their funders, the “shelter-based” business model has come to dominate this sector.

Unfortunately, the shelter-based business model is a highly inflexible one: most DV organizations’ assets are tied up in facilities, with very little cash on hand to manage risk. What’s more, housing-related services are expensive to operate, but government funding restrictions make it very challenging for organizations to make the necessary facility investments, create reserves, or even build a modest cash cushion to better manage risk.

But “risk” is now around the corner, and DV service providers are anticipating further cuts to their primary funding sources. Logically, this will require a reduction in expenses—but what is left to cut? NFF estimates that government funding has been reduced at least 10% from 2009 levels. As a result of the California budget crisis in 2010, many DV organizations laid off staff or closed temporarily.

An equally dire choice would be to cut back on one of their most costly program expenses—emergency shelters—but funder requirements prevent it. Emily Upstill, Senior Associate at NFF, summarizes the problem: “In my work with these organizations, I repeatedly hear from their management teams that even if they could justify cutbacks to the shelter from a mission perspective, the funding constraints make it unthinkable.” And it’s just as unthinkable to offer holistic wrap-around services or focus more on violence prevention, even though sector veterans know that these approaches are necessary.

DV organizations must now develop new models of sustainability to ensure the availability of the critical resources they offer. A clear look at the pros and cons of the current funding structure is a good first step, and NFF’s new report can help us to understand the many ways that public (and private) funding for this work could be improved. In addition to its observations on California’s DV sector, the report includes an in-depth case study on the Center for Community Solutions, an organization that has grown to serve more than 23,000 adults and children each year through its work to heal and prevent relationship and sexual violence.

The last decade brought growth, a merger, a facility acquisition, and resulting cash flow constraints to the Center for Community Solutions—and, in many ways, it serves as a mirror for the business challenges faced by their peers in the DV sector. Though based in California, their example is applicable to social service agencies nationwide because it demonstrates that a well-capitalized balance sheet is not a direct outcome of program growth. Rather, a strong balance sheet requires long-term strategic planning by nonprofits and more flexible funding sources in support of this critical work.

Throughout October, NFF will continue to write about the financial issues facing the Domestic Violence sector at our blog, Social Currency.

Angela Francis is a Senior Associate, Pacific Northwest & Southwest at Nonprofit Finance Fund. Since 1980, NFF has worked to connect money to mission effectively, so that nonprofits can keep doing what they do so well. We are a CDFI providing nonprofits with loans and lines of credit; we also organize financial training workshops, perform business analyses, and offer customized consulting services to nonprofits and their funders nationwide. In addition to the State of the Sector resources linked above, you can download our survey overview here.


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Comments

Thanks for this excellent and informative post, Angie. It will definitely require sector-level efforts and innovative models to ensure that Domestic Violence shelters and services survive the economic upheaval.

It is unfortunate that the government requires such rigid structure. It would make more sense to review the entire policy during the budget planning, as opposed to just the funding portion. Fortunately, the research sector is providing data that supports the need for non-profit organizations. Thank you for the insight.

I would have never guessed that the funding for DV organizations was 75% of government funds. I believe that it is a shame that we have taken budgeting away from such organizations, especially with DV cases escalating throughout the years. Being a victim of DV this article holds a close place to my heart as I know the fears and tragedies that are directly connected to such cases. I feel that organizations will need assistance in later dates if the government continues to make cuts.

Government cuts are the new norm these days and I fear it will only get worse before it gets better. Domestic violence shelters are essential for those women who have no place to go when they have been living in an abusive relationship for years. I feel that domestic violence is still something that most officials (even government officials) do not take seriously and assume that it's a "family issue" and should be resolved inside the family only. More awareness and education is needed on this topic to get more support. If more people see that these battered women need this type of service, maybe word can spread to government officials about the importance of the fight against domestic violence. Taking away these precious services will only perpetuate the cycle of violence further and keep these women living in fear.

This was a very insightful post. As somebody who doesn't know much about this sector I enjoyed viewing the statistics and learning something new. I can only hope that this situation will continue to improve. It's inspiring to see people still making a difference against the odds!

It's a real shame what is going on with the available capital and financial stability for the NP's in California, as well as the rest of the country. I did want to mention a new program that I know about from a Community Bank located in Fremont, Ca. Fremont Bank is a community bank that is making a commitment to the NP sector. In fact they have just announced a Bee Charitable credit card. It will allow the card holder to designate a charity that will receive a donation for every purchase made. The NP sector does need to re-define their financials, and they should look at partnering with some type of financial institution who is looking to be socially responsible. I think that is one of the things that the big banks will never have the capacity to provide. Just due to their size and bureaucracy that occurs in the financial dealings of a nonprofit.

It is so sad to think that these DV shelters are stuck in a rut do to the many rules and regulations of government funding. I think that government officials need to reevaluate their regulations on DV programs, as a more lenient structure will benefit both the shelters and the people who use them. Domestic violence is not going to go away any time soon, so it is important that we keep places like these open for the women in abusive relationships that have no where else to go. Thank you so much for this informative post!

I was a six year old little girl living in southern California when my mother decided to make a drastic change in her life. With the help of a DV Womens shelter, she was abel to kick her dependency of drugs and get the help she needed to get back on her feet. These programs are so very important to all economic classes. DV and drugs have no boundaries and have the ability to effect anyone. I'm very grateful for the people who make these places a reality even when the government makes it really difficult. -Heather Kelsay

Thank you for your insight about the challenges faced by domestic violence organizations. I just recently began volunteering at Sojourner's Center in Arizona (a shelter for abused women and their children) and have become increasingly interested in the amount of challenges these organizations face. It is so hard to believe that the government will fund these shelters, but not the prevention programs! Statistics show that one in four women experience abuse at one point in their life, does the government plan on housing all of these women AND their kids? It seems to me that prevention is the best (and cheapest) answer!

Lindsay Mullins

Thank you for the post I learned a lot about what is going on with DV finance issues. My family fostered a woman and her baby when I was younger because they were victims of DV so this post really hit home. The funding issues going on with the shelters since these are so important! Although I wish the problem of DV would just go away on its own, it is unrealistic to think that way and that is why this funding is so important. Thank you again for your insight and all of the information. - Marissa Rahm

It is a shame that due to the economy these DV shelters are suffering. I hope once the economy turns around the budget for these DV shelters will only get better. This was a very inspiring and informative post. Thank you

Audrianna Townsend

As someone who doesn't know much about this sector, this was a very insightful and inspiring post. It is sad to see that these DV shelters are suffering and I can only hope to see that this situation improves. Domestic violence is not going to just stop any time soon, which we all hope it would, and i really hope that the budget for these DV shelters will get better. Hopefully once the economy turns around, there will also be a turn around for these DV shelters for the women in abusive relationship who have no where else to go. Thank you for this informative post.

Nicole Ionescu

The economic downfall has effected many, but I am amazed to see how much it is effecting these domestic violence shelters. I am one who does not know much about this sector, but seeing these statistics greatly shocked me. Domestic violence is something that has been around forever and seems like it will never come to an end which is why these shelters have such a huge importance. I hope that once the economy is stimulated the domestic violence shelters will begin to pick back up.

The recent recession has hit our country hard and no matter what sector you are in we are all going to have to figure out how to do things differently now. In order for most nonprofits to get the resources they need today they are going to have to diversify there methods of acquiring income. This goes for any institution or individual for that matter. Also, our methods of advocacy within the nonprofit sector will have to be more focused. Budget cuts and less access to federal money has proven to be especially crippling to our organizations dedicated to the most disadvantaged in our communities. The vulnerable have been hardest hit by this economic crisis. It will only get harder and harder but we must fight for every crumb and penny to heal and utilize those most under utilized in our society. DV is a serious issue and I hope there is more focus on its prevention in the future.

Joseph Bonanno

It’s really sad to realize that people that need the help the most are getting cut off. I volunteer once for a shelter for victims of DV, it was a sad experience looking all these victims not getting the right tools to survive because of budget cuts. We need this shelter to help and educate victims.

Cynthia Inzunza

Thank you for this information! I didn't know much about this sector. It's a shame that the government is making so many cuts. I volunteer for many non profits whenever I can but I know that's not enough. I hope the situation changes and the government can provide more funding because these shelters are so so important to victims who have no where to go.

As someone who doesn't know much about this sector, this was a very insightful and inspiring post. It is sad to see that these DV shelters are suffering and I can only hope to see that this situation improves. Domestic violence is not going to just stop any time soon, which we all hope it would, and i really hope that the budget for these DV shelters will get better. Hopefully once the economy turns around, there will also be a turn around for these DV shelters for the women in abusive relationship who have no where else to go. Thank you for this informative post.

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