Last month, the Nonprofit Finance Fund released its annual State of the Nonprofit Sector Survey. The survey — featuring a user-friendly interactive analyzer and results outreach kit, among other helpful components — explored the primary challenges facing the nonprofit sector, as well as the renewed need for targeted investment in America’s social infrastructure.

Two Steps Forward, One Step Back

The results are bittersweet.  While economic recovery is on a roll, not everyone can keep pace. Eighty percent of nonprofit and high-need communities reported an increased demand for services, the sixth consecutive year of such a trend.  However, only about half of them were able to meet demand in 2013.  And far fewer — 11% — expect the job to be easier next year.

Nonprofit organizations anticipated the most critical community needs for 2014 as the following:

• Affordable housing

• Job availability

• Strong, well performing schools

• Access to healthcare

Breaking the Bank: the Cost of Stability

For survey respondents, the main challenge seemed to be “achieving long-term financial stability.”  More than half of nonprofits reported having only enough cash-on-hand to sustain themselves for another three months, at most — let alone the full measure of a year. No wonder over a quarter of respondents closed out 2013 with a deficit, and less than 10% felt that they could openly speak with funders about expanding reserves for operating needs.

Image source: http://nonprofitfinancefund.org/

Here’s a breakdown of respondents’ realistic financial projections at the end of 2014:

• 44% anticipated breaking even

• 27% anticipated an operating surplus

• 17% anticipated an operating deficit

• 12% were unable to predict

Clearly, the focus needs to be not only on procuring and allocating funds, but also on the dynamic between nonprofits and funders.  If more funders consistently requested impact or program metrics — most of which respondents agreed are helpful ways of gauging success — perhaps more funders could consider supporting organizations with the costs associated with impact assessment.  As it stands, only 1% of nonprofits reported that funders requested these metrics; 71% said costs were rarely or never covered.

Image source: http://nonprofitfinancefund.org/

Responding Realistically: Buff or Cut?

Despite the roadblocks, nonprofits are adopting a spot-treatment strategy to step up and survive.  Over the last year, nearly half of respondents teamed up with other organizations to improve or expand services.  Roughly the same proportion also invested money and time into professional development and organizational efficacy by upgrading in-house hardware and software.

Components and practices that nonprofits planned to buff up in 2014 included:

• Rely more on volunteers

• Purchase a facility, or renovate a facility they own

• Invest in coaching/training for executive leadership

• Leadership succession planning

• Change fundraising and spending strategy

Likewise, respondents planned to curb costs by cutting down on the following activities:

• Hiring for new positions

• Attending conference/network events

• Using reserve funds

For more specific findings, the interactive survey analyzer allows users to investigate across a variety of limits - by state, sector, age, operating cost, full- and part-time employee base, and more.

With over 5,000 total respondents, 70% of which serve low-income communities, this year’s NFF survey interface offers a robust and insightful dataset.  It’s an integral resource to understanding both your organization and the larger panorama of social impact.  We’ve certainly got it bookmarked!