Nonprofit woes

Human service nonprofits helping families and communities weather the recession report "serious and widespread" problems with their government contracts and grants, according to a new Urban Institute study.

Nearly 33,000 human service nonprofits had government contracts and grants last year, which provided the single largest source of revenue for 62% of them. The nearly 200,000 contracts totaled about $100 billion.

These problems include government payments that do not cover the full cost of services, complex and time-consuming applications and reporting requirements, and governments changing the terms of existing agreements and paying contracts late.

Responding to a national survey by the Urban Institute, 41% of human service nonprofits — groups that address such pivotal concerns as food assistance, public safety, housing, employment training, community and economic development, youth mentoring, and child care — indicated that government agencies made late payments in 2009. Twenty-four percent regarded delinquent payments as a big problem.

"Government processes differ from agency to agency and often from contract to contract, which exacts a heavy toll on nonprofit providers," the research team noted in a companion brief.

STUDY FINDINGS
• All levels of government were slow sending checks, but state governments were most likely to be over 90 days late. Late payments were a problem for 83% of Illinois nonprofits and 80% of those in Maine.

• 68% of nonprofits said they were hampered by federal, state, or local government payments that do not cover the full costs of contracted services, and 44% cited the practice as a major problem.

• 57% reported problems with governments changing contract terms midstream, including cancellations, reduced payments, and postponements, with 26% of the nonprofits citing such after-the-fact changes as being a serious problem.

• Overall, 31% of respondents nationally said their experiences with government contracting in 2009 were worse than in prior years. 82% reported one or more contracting problems, while 66% had at least one big problem.

• 56% of organizations reported less revenue from state governments, 49% from local governments, and 31% from the federal government.

• Nonprofit budgets were further strapped by drops in contributions from foundations, corporations, and individuals. Seventy-two percent also experienced declines in savings and investment income.

• To cope with the financial strain, 82% of human service providers scaled back their operations, with 50% freezing or reducing salaries, 39% drawing on financial reserves, and 38% reducing staff.