2nd Annual Nonprofits & the Economy Survey Understanding our Community 2010 Conducted by the Community Foundation for Palm Beach and Martin Counties and Allegany Franciscan Ministries
Table of Contents An Introduction... 3 Key Findings... 4 Survey Results... 6 Organizational Profiles... 6 Challenges... 7 Financial Health... 9 Population Served... 11 Capital Campaigns and Facilities... 13 Endowment... 14 Gauging Interest... 15 Funding Mix... 16 Organizational Response... 16 Cash Flow... 17 Suggestions to Funders... 17 The Good News in a Bad Economy... 18 2
Introduction Headlines in the Wall Street Journal recently touted the news that the Dow Jones had broken the 11,000 threshold. This market s ascent into new territory signaled hope for a recovery from the great economic recession. Last year s collapse of the market wiped out billions of dollars in stockholder wealth. In its wake it left an economic disaster of unprecedented proportions, including foreclosed homes and unemployment in most areas of the country. Many of us remain cautiously optimistic. We are not ready to declare that we will see the last of structural changes in the economy, or that the worst is over for the millions of Americans who saw a dramatic decline in their economic and social well being. In South Florida, the aftermath is still very much with us. We do not have to look far beyond our own neighborhoods, families and friends to find the tenacity of bad times burrowing in more deeply still. This worst of times is accompanied by our dismay at how quickly the safety net unraveled the net that has provided safe harbor for the most vulnerable. The erosion of public and private funding is restructuring the nonprofit sector and many of the social services agencies that have been our first responders in times of urgent need. Community agencies and organizations are not alone in experiencing this withering of organizational capacity. Foundations saw their reservoir of permanent funds diminished and a decline in the income and growth that had been their annual wellspring of grantmaking capacity. No one yet knows how deep and fundamental these changes will be, but this new version of economic trickle down is producing themes of change that are resonating throughout our communities. Again there are themes of doing more with less. But there is also a steady theme of leadership and entrepreneurship. This trend offers hope and optimism in the capacity of the nonprofit sector to transform and adapt to meet the challenges of these unprecedented times. This is the second year that the Community Foundation and Allegany Franciscan Ministries have partnered to take the pulse of the nonprofit sector in our region, hearing directly from our nonprofit community about what they are experiencing in managing their operations and services during the economic recession. The honesty and clarity of their responses illuminate the practicality that is required to stay in business and to run an effective organization. Nonprofits are accomplishing this while addressing internal and external challenges for which no cookbook exists to formulate a worthy recipe. The tough mindedness, creativity and astute assessment guiding the choices and priorities of our nonprofits leaders are worthy of respect and admiration. We all can learn from their experience and example. We express our deep gratitude to the nonprofits leaders and organizations that responded and shared their thoughts, wisdom and precious time. As we continue to find and improve the ways we all can work together, we hope nonprofit staff, board members and their supporters will continue to provide their valued feedback. We welcome everyone to help join the discussion on the issues the survey has helped to identify on YourPBC.org, Palm Beach County s Digital Public Square at www.yourpbc.org/economy. Your partners in philanthropy, Leslie Lilly, President & CEO Community Foundation for Palm Beach and Martin Counties Eileen C. Boyle, President & CEO. Allegany Franciscan Ministries 3
Key Findings In January 2010, the Community Foundation, in partnership with Allegany Franciscan Ministries, conducted the 2 nd Annual Nonprofit Survey to gather data regarding the needs in the community, the state of nonprofits and how best funders could be of assistance. A total of 367 responses were received through the online qualitative survey, with each response representing a significant segment of our community and economy, including: 1 21,704 Full Time Staff Members 49,911 Volunteers 5,796 Part Time Staff Members 4,437 Board Members 236 Open Full Time Positions 257 Open Part Time Positions 9,430 Combined Years Operating 30 Average Years Operating Challenges Nonprofits continue to face unprecedented challenges as more people in our community rely on services and as resources are more limited than ever before. Mirroring last year s results, nonprofits identified the following as major challenges: obtaining funding, recruiting donors and covering employee payroll, benefits and/or insurance costs. Funding for operating expenses emerged as a top priority for organizations in light of increase of demand for service. Of all the respondents, 75% felt some degree of vulnerability and 2% noted that the organization would cease operations if the economy did not improve soon. Client needs are overwhelming with no solution in sight. Staff reductions for administrative and development positions has the agency running leaner than it ever has: 7% administrative cost overall. Survey respondent Areas of Highest Need This year, agencies reported more and more that the entire population has been affected in light of the economic downturn. They expressed that no one has gone untouched (children, families, elderly, etc.) and people are facing difficulties in many areas (education, unemployment, housing, healthcare, hunger). People are in such need that they line up hours before we give out a simple box of food and then will wait hours more in their cars in the Florida heat to get their food. They are desperate. Most are skipping meals, even the children. Survey respondent 1 Keep in mind that the survey instrument was designed to collect summative information. These figures are qualitative only. 4
Organizational Actions in Response to the Economy Organizations are continuing to cut expenses and increase fundraising activities. A new trend to emerge this year is that more organizations reported they are collaborating with other nonprofits. Forty percent of respondents reported experiencing negative cash flow in the past 12 months (a 15% increase over last year s results) and 30% of those attributed the need to borrow money due to unmet fundraising goals. In order to keep funding we had to relocate and close our doors for a few weeks. We are still trying to recover. For the past few months we have had to borrow money to make payroll. We have seen more people donating, but the average gift is down about 20%. Survey Respondent Gauging Interest: What to Do Nonprofits demonstrated strong interest in building endowment 2, increasing volunteer opportunities, and undertaking collaborative fundraising efforts. Many respondents also expressed an interest in greening of business operations. More non profits are willing to work together in fundraising activities and share in the profits in order to continue to service their clients. I believe we are learning to collaborate more effectively and to think out of the box more! Survey respondent Suggestions to Funders in Addition to Giving Nonprofits repeatedly noted the need for operational support and assistance in establishing partnerships. Many also indicated a need for training and advocacy on behalf of the nonprofit sector. Positive Impact This year, respondents were asked to share some good news. Everyone is feeling the weight of the economy but organizations are making a positive impact. Respondents lauded the dedication of staff and volunteers, increased partnerships and improved business operations. Some of our supporters have been hit hard by the economy and can no longer give as they have in the past. Many still give...but not as much. Many have offered to volunteer since they no longer can give. It warms my heart to see so many believe in our mission! Survey Respondent 2 Questions regarding endowment were newly added this year. 5
Survey Results Organizational Profiles In order to best understand the survey results it is important to have a picture of the organizations represented by the respondents. Survey respondents spanned across a variety of service areas (Figure 1). Top respondents represented health and human service agencies followed by education focused organizations. (Many of the organizations which indicated other may have identified with a primary program area.) These figures closely reflect the respondents from last year s survey. Figure 1 Respondents by Program Area Aging, 3% Other, 15% Arts & Culture, 12% Religion, 2% Human & Race Relations, 1% Community & Economic Development, 8% Education, 15% Health & Human Services, 40% Environment, 3% Grantmaking/Fundi ng, 2% Table 1 reflects the breakdown of respondents by operating budget. Fiscal years for respondents largely began in January (36%), followed by July (31%) and then October (23%). Table 1 Less than $250,000 30% $250,000 - $499,000 12% $500,000-$999,000 12% $1 million - $5 million 27% More than $5 million 19% 6
Figure 2 demonstrates the counties represented. Many of the respondents serve more than one county but the majority serves Palm Beach followed by Martin and then St. Lucie. Figure 2 Respondents by County(ies) Served Other, 9% Broward, 12% St. Lucie, 13% Dade, 7% Palm Beach, 38% Martin, 21% Sixty percent of the respondents were Executive Directors/CEOs. The next highest respondent group included Board Members/Trustees (15%) followed by personnel with primary responsibilities in development/fundraising followed by programs/services (12%). Respondents indicated that Executive Directors/CEOs have primary fundraising responsibilities (52%) followed by Development/Fundraising staff (16%). Challenges When asked to rate the current challenges on a scale of 1 to 3 (1 = not a challenge, 2 = minor challenge, 3 = major challenge), respondents demonstrated that obtaining funding and recruiting donors is of top concern followed by the ability to cover employee payroll, benefits and/or insurance costs. Of less concern at this time is the ability to attract new clients, recruit qualified staff, and competition with other nonprofits. Figure 3 details the total responses. 3 3 The Rating Score is the weighted average calculated by dividing the sum of all weighted ratings by the number of total responses. 7
Figure 3 Current Challenges (1 = not a challenge, 2 = minor challenge, 3 = major challenge) Recruiting donors Obtaining funding Covering employee payroll, benefits and/or insurance costs Marketing our services/programs Meeting needs/interests of current members/clients/participants Recruiting qualified, reliable volunteers Strategic planning and evaluation Competition with other nonprofits Attracting new members/clients/participants Recruiting qualified staff 2.2 2.1 2 1.9 1.8 1.7 1.7 1.6 2.7 2.7 When asked what the biggest need is for organizations in these times, 270 respondents provided open ended feedback. Almost every response indicated the need for funding operating support, diversification, and sustaining sources. Nonprofits told us Sadly, due to the downturn in our economy, we are seeing and serving people who used to donate to us. Need is up 60% 100% according to our front line partners. Due to the economy and high unemployment rate, the characteristics of the population we are serving has expanded to include formerly "financially secure" individuals and families who, through no fault of their own, are now desperate and do not have many options to alter their situation; they simply don't know where to turn or believe they can control their destiny. These are challenging times but it also presents an opportunity to expand and analyze current programs and services to ascertain that they are fulfilling the mission of the agency. 8
Financial Health Respondents were asked how the state of the organization has changed in comparison to one year ago. The responses indicated an increase in demand for services, number of clients served/members participated and total expenses. Total revenue has decreased overall. As an observation, one could ascertain a disconnect between the rising demands and expenses and the decline in revenue as an extraordinary challenge for nonprofits in this economic climate. Organizations largely reported some sense of vulnerability. Twenty percent indicated that the organization was financially healthy and not currently vulnerable, an increase from 12% last year. Figure 4 demonstrates overall responses. Figure 4 Current Financial Health We will be closing our doors if the economy does not improve soon. 2% We are experiencing chronic financial problems but expect to survive. 22% We have been financially healthy to date but feel vulnerable in the future. 55% We are financially healthy and not currently vulnerable. 20% Over the next three years, organizations primarily expect to increase programming to meet current needs and evaluating existing programming in direct response to the state of the economy, similar responses to last year. Figure 5 details organizational outlook through the coming three year period. It is important to note at this point, that there seems to be a disconnect between the challenges in obtaining funding and the expressed perspective that services will continue to expand. 9
Figure 5 Three Year Outlook We will expand services in key areas of need and/or identified areas for growth. 52% We will evaluate and reconfigure our current offerings. 30% Our services/offerings will remain unchanged. 12% We will reduce services/offerings. 5% We will cancel all of our programming and close our operations. 2% Forty one percent responded that they have at least four or more months of cash reserves available with 10% or respondents reporting that there are no cash reserves available (Figure 6). Last year, 63% or respondents said they had at least 2 months of reserves. One could suppose from these numbers that more organizations are recognizing the importance of maintaining a healthy reserve in order sustain operations in difficult times and/or that organizations are relying less on cash reserves. Biggest organizational need: Nonprofits told us The biggest challenge is acquiring new donors in during this time and getting existing donors to maintain their level of giving. Building the capacity of the organization to meet the growing financial need related to the increased demand for program services. Recruiting and building the donor base while attracting more foundation and corporate funding partners. In a word, FUNDING. 10
Figure 6 Cash Reserves Don't know 11% We have no cash reserves. 10% Four or more months 41% Two to three months 24% One month or less 13% Population Served Organizations were asked two questions related to the populations directly served by the agency (1 being the most in need, 6 being the least in need). When reviewers examined responses indicating specifically populations identified as most in need (children, young adults, middle aged adults, the elderly, minorities, immigrants, and individuals with disabilities), the responses were closely aligned. Throughout the open ended comment, respondents noted that no population has gone untouched and that rating the populations in any order of need was extremely difficult. When asked about priority areas of need in direct correlation to population served respondents ranked the following in order of priority: 1. Education 2. Unemployment 3. Healthcare 4. Housing 5. Hunger 6. Social Activities 11
In much the same vein as last year, many of the respondents indicated that not one area is exclusive of the other. Much like the previous question, there are many emergent priorities at this point in time and they may not be exclusive of one another. Surveyors followed by asking for commentary in order to better understand the challenges facing organizations. The word cloud 4 below visually depicts the responses (those words which appear largest were more frequently mentioned). Nonprofits told us Families and individuals are experiencing severe difficulties paying for their housing, utilities, purchasing food. Children are living in conditions of extreme poverty. These are challenging times but it also presents an opportunity to expand and analyze current programs and services to ascertain that they are fulfilling the mission of the agency. 4 Word clouds were created using www.wordle.net. 12
Capital Campaigns and Facilities Closely mirroring last year s responses, 54 respondents noted that the organizations they work for are currently undertaking a capital campaign. An additional 34 respondents noted that they are1 postponing plans to launch a capital campaign. Of those currently in the process of a capital campaign, financial goals average just over $7 million. Total, this figure represents a goal of $297,415,000in current capital campaign goals, which represents approximately $80 million increase over last year. At the time of the survey $87,652,000 had been raised demonstrating 42% of capital funds have been acquired as reported by the respondents. This further demonstrates that $209,763,000 remains to be raised solely based on the 41 respondents that reported dollar figures (Figure 7). Figure 7 Capital Campaign Progress COMBINED GOAL: $297,415,000 Still Needed, $209,763,000 Raised to Date, $87,652,000 Respondents noted that many of the campaigns have been postponed or delayed and/or that a public launch was delayed. Some of the respondents noted that they were undertaking the campaign because of a lead donor. Primarily mirroring the results from 2009, in response to being asked whether the organization owns or rents its space, 33% responded that they own their space while 45% reported that they rent their space. An additional 18% indicated other and commented that space was either donated, partially rented/partially owned, home office space or they do not currently have facilities 13
Capital Campaigns: Nonprofits told us We have extended the campaign drive dates We are taking advantage of reduced real estate prices to expand and/or improve existing facilities. Endowment Due to the significant request for operating support and the continued need for identifying sustaining sources, questions related to endowment were newly added this year. Fifty six organizations noted that they currently had an endowment, forty four of which provided figures. Combined, total endowments equaled $373,432,250, ranged from $3,500 to $84 million and averaged approximately $8.1 million. As demonstrated in Figure 8, 64% of those with endowments reported some decrease in the past year and only 7% reported a significant increase, which may be attributed to newly established endowments. Forty eight organizations reported that there was a spending policy for the endowment and eleven organizations noted that they relied on corpus (invaded principal) within the past 12 months to sustain operations. Figure 8 Endowment Significant increase 7% Slight increase 16% No change 16% Slight decrease 32% Significant decrease 30% 14
Gauging Interest Nonprofits demonstrated strong interest in building endowment and increasing volunteer opportunities. Many respondents also expressed an interest in greening business operations. Overall the trendline indicates that organizations are looking for sustaining funding sources, decreasing costs and improve operations (Figure 9). Organizations reported little interest in merging operations and sharing back office space. 70% Figure 9 Gauging Interest 60% 50% 40% 30% 20% 10% 0% Merge operations with another nonprofit organization Utilize shared space and back office services w/ another nonprofit(s) Increasing volunteer opportunities Greening operations for cost effeciency Undertake collaborative fundraising efforts Building an endowment Not Interested Possibly Very Interested Endowment: Nonprofits told us We have not touched the corpus of the endowment in many years. We made cuts and adjustments throughout the organization at the beginning of the economic crisis and adhered to the strategic plan and the planned spending rate. This has allowed for the endowment's initial losses to recover somewhat. 15
Funding Mix Nonprofits were asked to compare their funding mix in the past six months to the same period of time last year. Figure 10 represents those organizations which responded to the question and for which the items referenced were applicable. More than half of the respondents reported the greatest decreases in the areas of foundation grants, corporate donations and individual donations (excluding bequests). Consistent with other areas within the survey, decreases in funding are exceeding areas of increase. 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Figure 10 Funding Mix Decreased Unchanged Increased Organizational Response Organizations are all looking at a variety of measures to improve their capacity in these uncertain times. When asked what actions the respondents have taken specifically due to the economy, Figure 10 demonstrates that nonprofits have primarily cut nonessential expenses. Respondents also indicated that they have increased fundraising activities and are looking to collaborate with other nonprofits. These responses are closely related to last year s responses. 16
Figure 11 Organizational Actions (based on number of responses) Lay off staff 64 Turn away clients 40 Increase fundraising activities 141 Eliminate programs 58 Delay payment of payroll 13 Delay payment of bills 53 Cut nonessential expenses 185 Borrow money 35 Use prior year cash reserves 87 Collaborate with other nonprofits 127 Cash Flow In regards to cash flow, 40% of the respondents indicated that their organization experienced negative cash flow in the previous 12 months (compared to 52% last year). Of those demonstrating cash flow problems, 30% attributed the challenges to unmet fundraising goals, 21% attributed it to normal business cycles, and an additional 20% indicated other reasons and provided open ended responses increased expenses and/or increased demand. Sixty seven organizations noted that they borrowed money in the past twelve months. Stabilizing cash flow was the top reason that organizations borrowed month in the past 12 months, followed by inability to make payroll/benefits payments. Suggestions to Funders There were varied and many suggestions for funders who have faced unprecedented challenges. The ideas ranged from supporting operating expenses to offering more training opportunities to doing more site visits to providing more networking opportunities. The feedback provided is very much appreciated and will be shared (without attribution) with colleagues at other funding institutions. Suggestions for Funders: Nonprofits told us As funders, you are in a unique position to observe our local non profit world and how service agencies interact with one another and impact our communities as a whole. Given this, you also may be in a unique position to act as a catalyst for change, for improvements to the overall effectiveness of non profits...what each of us wants and works to achieve a better life for all. 17
The Good News in a Bad Economy This survey has helped shine a light on the challenges facing families, individuals, nonprofit staffs and volunteers. But in the midst of these difficult stories, we also knew that there was good news to be shared. The word cloud below demonstrates the words most frequently mentioned in the stories that we shared. The Good News: Nonprofits told us That fact that we have served more with less funds. We are getting beautifully streamlined and have also increased our volunteer base as well. Currently 5 staff and 70 volunteers are serving over 3,000 a year. The nonprofit providers have been willing to collaborate more effectively and have been willing to cross boundaries and cultures to do so. This has led to amazing partnerships and out of the box thinking. The SafetyNet Challenge kept us operating last year and was the only reason we did not have to cut services. This collaboration was a great example of how foundations can work together. The good news is there were foundations willing to alter their funding priorities in order to address the dire financial impacts a weakened economy was having on our communities. Times like this can bring out the best in team work. Our staff, despite being overworked and underpaid, are working harder to serve the clients who seek our services. The staff is pulling together to do the best possible with limited resources. The goodness of volunteers never ceases to amaze me. Especially in bad times, people help other people. Every success is even more important and celebrated more than before, given the obstacles to achieve them. 18
For a copy of the survey instrument, please contact the Community Foundation for Palm Beach and Martin Counties at 561 659 6800 or by email info@cfpbmc.org. Special thanks to the Community Foundation for the Fox Valley Region for sharing the instrument utilized in their community. 19