Nonprofits Seeking New Funding Models, Sources, Survey Finds

With the economic recovery providing little relief to the nonprofit sector, many nonprofits are looking to new models and sources of funding to meet growing demand, the Nonprofit Finance Fund's sixth annual State of the Sector survey finds.

According to 2014 State of the Nonprofit Sector Survey (18 pages, PDF), 80 percent of the 5,019 nonprofits polled reported an increase in demand for their services in 2013 — the sixth straight year of increased demand — while 86 percent said they expected demand for services to increase in 2014. In addition, a record 56 percent of respondents said they were unable to meet the demand for their services in 2013, while 58 percent didn't think they would be able to do so this year. When asked to weigh in on their biggest challenges, respondents cited "achieving long-term financial stability" (41 percent), followed by "diversifying funding sources" (21 percent), cuts in government funding (17 percent), and marketing, outreach, and community engagement (17 percent). The survey also found that while 55 percent of respondents said their organizations had three months or less of cash-on-hand and 28 percent ended the most recent fiscal year with a deficit, fewer than one out of ten said they could have an open dialogue with their funders about developing reserves for operating (9 percent) or long-term facility (6 percent) needs.

To address those funding gaps, many respondents changed the way they raise or spend money over the past year (31 percent), or plan to do so over the next twelve months (23 percent). For example, almost one in five (18 percent) said they had pursued an earned income venture, while a quarter (26 percent) said they planned to so, and a similar percentage said they had sought funding other than grants (19 percent) or planned to do so (20 percent). In addition, almost half (49 percent) said they had collaborated with another organization in the past year to improve or expand their services or had invested money or time in professional development (48 percent), while a significant minority said they had upgraded hardware or software to improve organizational efficiency (40 percent) or had conducted long-term strategic or financial planning (39 percent).

Funded by the Bank of America Charitable Foundation and the Ford Foundation, the survey also asked nonprofits about impact measurement and found that fully seven out of ten respondents (70 percent) reported that half or more of their funders had asked them to provide impact or program metrics in their grant reports. Of that group, 77 percent agreed that “[t]he metrics that funders ask for are helpful to us in assessing our impact," while 71 percent said funders never (30 percent) or rarely (41 percent) covered the costs of their impact measurement activities.

"Americans rely on nonprofits for food shelter, education, healthcare, and other necessities, and everyone has a stake in strengthening this social infrastructure," said Nonprofit Finance Fund CEO Antony Bugg-Levine. "The struggles nonprofits face are not the short-term result of an economic cycle; they are the results of fundamental flaws in the way we finance social good."