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Third of Region’s Nonprofits May Close

Diane Weaver Dunne

October 19, 2009

The recession has hit the region’s nonprofits hard, with nearly a third concerned that they may shutter their operations in the coming year, according to the annual survey conducted by the United Way of Central and Northeastern Connecticut of the nonprofits in its 40-town service area.

Susan Dunn, executive director of the local United Way chapter, said it was “alarming” that one in three nonprofit executives said that they were either “concerned” or “very concerned” that they might close in the coming year.

“One out of three is significant,” said Dunn, noting that the responses are consistent with other financial indicators that illustrate the financial fragility of the region’s nonprofits.

The Nonprofit Pulse Survey, in its sixth year, is a longitudinal measure of the fiscal health of the region’s approximately 1,900 nonprofits.

In last year’s survey, the vast majority of respondents — two out of three — were concerned that funding would dry up in the coming year.

They weren’t entirely wrong.

The recession has dealt them a double whammy: corporate, public sector and individual funding is down, resulting in a reduction in staffing, while the demand for services has increased 72 percent.

The state’s nonprofits have encountered a perfect storm in regard to funding, said Ronald Cretaro, executive director of the Connecticut Association of Nonprofits.

Decreased or flat government, corporate and individual funding was felt by most of the region’s nonprofits. The unaffected were the exceptions, Cretaro said.

Government funding from local, state and federal budgets also fell, with two out of three saying they will be affected by changes in public sector budgets.

Even when government funding remains flat, it translates into a loss for nonprofits because their costs continue to go up, he pointed out.

Cretaro said he also is worried that budget deficit woes will bleed into nonprofit budgets even more in the coming year. He expects more cutbacks to be ordered by Gov. M. Jodi Rell when the state comptroller certifies that the state continues to incur a budget deficit.

“It doesn’t bode well for nonprofits in the coming year,” said Cretaro.

Charitable giving is also down. Individual and corporate funding fell by 20 percent and 10 percent, respectively over the previous year. As a result, nearly a third have tapped into their reserve funds, double the number in 2008.

Notably, 25 percent do not have any reserves and 6.4 percent have depleted their reserve funds, consistent with the survey’s findings that nearly a third of the region’s nonprofits may close.

Dunn and Cretaro said that most of the nonprofits are holding their own by finding ways to economize their operations, reduce staffing, cut programs that have lost funding, and by increasing collaboration with other nonprofits.

About 25 percent of the respondents said that they considered a merger during the last 12 months, up from 21 percent a year earlier.

And few expect the federal government’s stimulus program to help alleviate their financial strain.

However, there has been an up tick in volunteerism this year, consistent with a four-year trend, Cretaro said. “Despite [the economy] being so bad, they know that other people are hurting as they are,” he said.

Nonprofits Hurting

Here are some key results of the United Way’s survey of area member nonprofits:

• Nearly 50 percent of respondents report that revenue from individual contributions will decrease, up from 29.4 percent in 2007 and the highest “decrease” level ever recorded. In two years, this has increased eight fold from 6.9 percent of respondents indicating that revenue from individuals would decrease.

• The downward trend in reporting an increase in contributions from individuals begun last year continues (21.1percent in 2009 versus 34.1percent in 2008).

• The respondents reporting that revenue from individual contributions is 20 percent or less of the organization’s revenue increased from 72.7 percent in 2008 to 78.9 percent.