Nonprofits’ Fractured Partnership with Government

At what cost and for how long?

The Urban Institute Center on Nonprofits and Philanthropy recently issued its National Study of Nonprofit-Government Contracts and Grants 2013: State Profiles. In the introduction to the study the authors say, “Governments and nonprofit organizations partner to provide needed services in communities across the country. Contracts and grants are the mechanisms governments use to fund these partnerships.” Reading the report, one can only conclude that government at all levels is a lousy partner. To cite a few examples that drive this conclusion:

• Nationally, roughly half of the nonprofits surveyed report limits on general administrative and overhead costs that the Urban Institute notes “can severely undermine an organization’s capacity and effectiveness by restricting its ability to adequately manage its programs or invest in staff and equipment.”
• Nearly half of all nonprofits indicate funding from government sources has decreased and organizations in every state report that late payment for contracted services furthered the stresses on organizations of reduced funding.
• Funding decreases and late payments are taking their toll. Nationwide, 38 percent of nonprofits ended 2012 with a deficit. As a result, over half of those responding to the survey cut or froze staff salaries and 42 percent covered deficits from reserves. At the same time, only 11 percent cut programs.

For now, nonprofits are shielding the vulnerable children and adults they serve from the impact of a fractured “partnership” with government, but one has to wonder how long this can continue.

What happens once reserves dry up or nonprofit staff burn out from doing more with less? We hear from executive directors among our clients that their young, talented staff are not eager to move into leadership positions in their organizations due to the stresses of managing through the magnitude of these issues. Some are calling for a reinvention of the human services landscape or a reframing of the way we talk about and understand human services nonprofits — a significant recipient of public funds.   Will that be the solution and will it arrive quickly enough?

The ability and willingness of nonprofits to soldier on makes this a quiet crisis that will eventually erupt, and the collateral damage to those served by these nonprofits will be considerable.