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

Earlier this year Nonprofit Finance Fund (NFF) asked for a few minutes of your time to help us tell the collective story of the nonprofit sector. And that you did. Thanks to you, we received a record 4,607 responses nationwide to our 2012 State of the Sector Survey, more than doubling responses from last year. Notably, human services agencies that comprise our social safety net were represented quite well and the same held true for Arizona responses. With your help, we’ve amassed a wealth of current information on demand for services, trends in government support, board participation, and financial health. Using this data, we now have an opportunity to start some difficult but important conversations about the true state of our sector.

What are the big picture conversations about? As usual, increased demand with decreased or unreliable funding. The chart below highlights that upward trend. In 2011, 85% of respondents reported an increase in demand.

 

 

 

 

 

 

 

 

 

 

 

This increase in demand is coupled with unreliable and insufficient funding, particularly from the government. Although many organizations are reliant on government funding or contracts, payments are often received late and rarely do they cover the full cost of delivering the service:

                 

 

 

 

 

 

 

 

 

 

 

 

If you isolate human services organizations, 56% of the respondents received federal government funding and 69% received state or local funding. Although many organizations depend on this funding to make ends meet, these resources are in steady decline. Post-recession, federal funding sources like Temporary Assistance for Needy Families (TANF) and the American Recovery and Reinvestment Act (ARRA, i.e. the stimulus) offered a short-term solution for nonprofits on the front lines of economic recovery. But this funding may have been a stopgap measure at best, and some of these programs have now run their course. What will happen when the next round of cuts takes effect?

Our CEO, Antony Bugg-Levine, recently mulled over this question in a Washington Post op-ed: although the recession may appear to be over, an existential crisis looms for many of the nonprofits we work with at NFF— and funding instability threatens to bring the crisis to a head. This is particularly apparent for the human services organizations that comprise our country’s safety net: soup kitchens, domestic violence shelters, health clinics, and the emergency service providers who serve the most vulnerable members of our communities. Their demand already outpaces available resources and this is projected to get worse, especially if government funding does not fully return.

So we need to think differently about the ways we manage our organizations, but such dire straits call for even bolder actions. We also need to think about how we approach social problems and how to leverage what we call “Complete Capital” to improve social impact. Applying Complete Capital means thinking creatively about how all our resources— financial, intellectual, social and human— can be brought to bear on a system that is no longer working (and may in fact never have worked well).

Although the survey paints a bleak picture, it should serve as a wake-up call to funders, the government, board members, advocates and everyone who cares about the critical work nonprofits do to build a just and vibrant society. We can’t thank you enough for the time you volunteered in responding to the questions and promoting it to your networks… and the data is now yours. You can use our new Survey Analyzer to slice and dice it by state, sector, or organization size. (This could be handy when explaining to funders that your organization’s financial situation is actually the norm for your sector.) The conversation is just beginning. I look forward to continuing it here, on the ASU Lodestar Center Blog and over at NFF’s own blog, Social Currency, in the coming weeks. Browse the slides, take the Survey Analyzer for a spin, and let us know what you find in the comments below or on Twitter @ASULodestar and @NFF_West.

Angela Francis is a Senior Associate at Nonprofit Finance Fund (NFF). As a 501(c)(3) nonprofit, NFF pushes for improvement in how money is given and used in the sector. Since 1980, they have worked to connect money to mission effectively, so that nonprofits can keep doing what they do so well. NFF provides financing, consulting, and advocacy services to nonprofits and funders nationwide.

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