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Half of U.S. Nonprofits on Financial Precipice, New Report Finds

national-report-cover-200w.jpgAround 50 percent of the nation’s nonprofits are operating with less than one month’s cash reserves, a new report by Oliver Wyman, SeaChange Capital Partners, and GuideStar reveals.

Released today and available for free download, The Financial Health of the United States Nonprofits Sector: Facts and Observations examines the finances of more than 219,000 U.S. nonprofits for fiscal years 2010-2014 (the period covered by a previous report on Philadelphia-area nonprofits). The new report provides an overview of the sector; analyzes nonprofit financial health by organization size and mission area; and suggests ways to improve nonprofit financial health.

Here are other findings from The Financial Health of the United States Nonprofit Sector:

  • Some 7-8 percent of U.S. nonprofits are technically insolvent, with liabilities exceeding assets.
  • Restoring these nonprofits to solvency would require an infusion of $40-$50 billion.
  • Some 30 percent of the country’s nonprofits have lost money over a three-year period.
  • Size does not seem to affect financial health. Larger organizations are as likely as smaller ones to be financially unstable.
  • Financial health varies according to business model.
  • Nonprofits that depend on government contracts and fee-for-service revenue use debt more often, operate in a tighter liquidity range, and have smaller reserves.
  • Nonprofits that are more reliant on private philanthropy have less debt and larger reserves.
  • Financial health differs across subsectors as well.
  • Environmental and animal-related nonprofits had the lowest insolvency rate, 5 percent
  • Health and human services agencies had the highest insolvency rate, 13 percent

First Steps

The report suggests several actions nonprofit leaders, funders, regulators, and policy makers can take to improve nonprofit financial health. It recommends these first steps:

  • Nonprofits: use the report to benchmark financial health.
  • Funders: create more flexible funding models.
  • Government: revise current cost-minus contracting practices.

Learn More

Download your free copy of the report

Half of U.S. Nonprofits on Financial Precipice, New Report FindsSuzanne Coffman is GuideStar’s editorial director

Topics: Nonprofit Financial Health