Guest Author: Ernie Smith, Associations Now
An analysis of the nonprofit sector’s financial health highlights a strong imbalance among organizations, finding that many are struggling to make ends meet. The report recommends that nonprofits plan for risk and donors limit restrictions on how nonprofits can use funding.
A new report from GuideStar comes with a stark conclusion: A huge number of nonprofits are teetering on the edge of financial peril.
According to The Financial Health of the United States Nonprofit Sector, released this week [registration] and produced by Oliver Wyman, GuideStar, and SeaChange Capital Partners, the nonprofit industry as a whole is a financial force—representing 5.5 percent of gross domestic product (GDP) and a 10th of the U.S. workforce.
However, looking at a micro level, a stark picture appears: The report says that more than 7 percent of nonprofits are technically insolvent, while 30 percent struggle with cash reserves and another 30 percent have lost money in the past three years. Most startling of all, around half of all nonprofits have less than a month of reserves at the ready.