What’s different in this economy?

Nonprofits have been hit especially hard by the economic downturn in recent years. As foundation endowments shrunk alongside corporate, government and personal budgets, charitable contributions plummeted. The good news is, the latest reports show signs of a rebound.

According to the Nonprofit Research Collaborative 2010 Fundraising Survey, the number of nonprofits reporting decreased contributions dropped by 14 percentage points, while those reporting increased contributions grew by 13 percentage points. That’s promising, but there’s a long way left to go.

Nonprofits represent a trailing sector. That means they are typically the last to rebound because they rely on the liquidity of other sectors. Those with endowments have often had to draw from them during tough times. Worse yet, as personal wealth has decreased, the need for many of the services nonprofits provide has risen.

Economic circumstances have led many nonprofits to look at new options to use their resources more efficiently. Certainly budget cuts and staff reductions have been a reality, but so have mergers. Many nonprofits are maximizing resources by joining forces organizationally, operationally (such as by sharing offices and administrative staff), or at the program level. Assuming strong mission alignment and a sound agreement between the organizations, this can be an extremely effective approach, particularly for smaller organizations.

Another trend that can emerge in a difficult economy (or, frankly, in any economic circumstance) is the concept of grant chasing. When funds are in short supply, it can be very tempting to pursue funding for programs that aren’t tightly aligned with your mission. The problem – in addition to your legal responsibility to use funds for exempt purposes – is that it can easily get out of hand. Organizations can quickly find themselves spending time managing multiple programs that aren’t aligned with their overall strategy.

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