MANY CHARITIES RAISED MORE MONEY IN '03, BUT COSTS GREW EVEN FASTER, SURVEY FINDS
January 19, 2004
By Stephanie Strom
Many nonprofit organizations responding to a new survey managed to increase their revenue in 2003 despite the sputtering economy, but those gains were more than offset by higher costs.
While 64 percent of the 236 organizations across the country that responded reported more income, 66 percent said they had higher costs for health and liability insurance as well as for wages and salaries and other expenses.
More than half of the respondents reported being in "severe" or "very severe" financial stress.
"The nonprofit sector has been successful in coping, reducing its costs at the same time it has increased its service offerings, but it is under incredible pressure from things it cannot control," said Lester M. Salamon, director of the Center for Civil Society Studies at Johns Hopkins University, which conducted the survey as part of a new partnership with seven umbrella groups for nonprofit organizations.
The partnership, the Listening Post Project, has enlisted more than 500 nonprofit organizations working in five service areas -- children and family services, elderly services, community development, museums and theaters -- that have agreed to participate in Internet-based surveys about trends that affect them.
"They have agreed to be our eyes and ears about what's happening to nonprofits in real time, and this is the first of a number of surveys we'll be doing," Mr. Salamon said.
The nonprofit sector is notoriously bereft of data, but in an era in which donors are increasingly demanding accountability and ways to measure effectiveness, organizations are moving fast to try to quantify themselves.
"Hopefully, this project will help make us better understood," said Sorrel Bowman-Rogers, president and chief executive of the Family Service Agency in Phoenix, which participated in the survey.
Family Service ended each of the last three years with a deficit despite having won government contracts for programs dealing with substance abuse and felons re-entering the community and having joined with other nonprofit agencies to reduce costs, Ms. Bowman-Rogers said.
At the same time, demand for Family Service's programs has jumped, she said, because people have stayed unemployed for longer periods than before and unemployment has risen among white-collar workers, a new client group for the agency.
The organization has been forced to use its cash reserves and about one-third of the proceeds of the sale of its building to cover its operating expenses as state budget cuts and a 22 percent increase in health insurance costs last year ate up more than the additional revenues its new services generated.
"One of the drawbacks of increasing funding through contracts is that, yes, it does increase revenues and on paper would create the impression that you're growing and expanding," Ms. Bowman-Rogers said. "But the majority of most contracts just cover the costs of delivering the services, not any of your operational costs."
Mr. Salamon said the survey results suggested that nonprofit organizations had become more market-driven in response to their tight finances. "This was clearly the winning strategy, and it is absolutely a two-edged sword," he said. "It can come at a cost."
For instance, the Nebraska Repertory Theater in Lincoln staged "Lend Me a Tenor," which was a great commercial success.
"There's nothing wrong with it, but it's a box office play," said Jeff Elwell, the theater's executive artistic director. "It means we can do fewer new, hard-hitting plays, which is somewhat discouraging."
