Local Government Innovation & Redesign

To support local government redesign efforts and recognize the innovative work already underway, the Public and Nonprofit Leadership Center has partnered with state associations to create the Local Government Innovation & Redesign Guide and host a yearly Local Government Innovations Awards ceremony.

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"Donations are down. Government funding is down. Need is up."

Last weekend the Wall Street Journal ran an interesting, though troubling, article on nonprofit sustainability. With the deep economic recession and increasing loss of jobs nationwide, demand for services often provided by nonprofit organizations is on the rise. However, both private donations and government funding have witnessed steady declines over the last several years.

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According to Giving USA, though private donations doubled between 1987 and 2007, they dropped over 6% in 2008, the largest in Giving USA's 50-year history of following such trends. Equally disheartening, government allocations for some groups fell 5%. As government funding can make up as much as two-thirds of a nonprofit's budget, the cuts have forced many organizations to shut their doors.

At the same time, all over the United States the demand for much-need goods and services are continually rising. Even local nonprofits have been affected. The Wilder Foundation here in Minnesota, known for its long history of providing health and human services, announced plans to eliminate 263 jobs and cut some programs dedicated to the elderly population and troubled children.

One option to combat lower donations and government funding is to consolidate similar nonprofits. Though this hasn't been successful everywhere, it does hold promise for those that can muddle through reorganization and find ways to alleviate some discrepancies. The article cites a Girl Scouts of America Indiana branch that increased their efficiency and decreased operational expenses by merging five local branches. The organization even had enough resources left over to create a fund-raising department, increasing donations by 25%.

Many similar mergers haven't had such positive outcomes. The nonprofit world has an organizational culture that sometimes places limits on what can and cannot be done. The author of the article writes, "Because many nonprofits were founded by people who believe passionately in their causes, they often find it difficult to make the compromises necessitated by a merger."

Though difficult, consolidation of local, similar nonprofits offers a potential solution to limited funding.

Comments

The last couple years have definitely been hard for non-profits. My wife works for an organization that provides before and after school care to dis-advantaged children and their budget has been cut almost 20% after loosing grants. They've tried to make it up with local fundraisers and I've been volunteering my time to help as I work for a company that deals with a lot of non-profits to help them reduce the costs associated with mailing and phone campaigns. Your point about consolidation makes sense, but I can understand how many founders don't want to change; many have been doing things the same way for years and are reluctant to try new methods, even if they might drastically improve efficiency and donation rates.

In response to your post, Nelson, I think the fear is that a merger might NOT solve the problem. So even if an organization is willing to make a merge, the potential for failure holds more weight when you've taken on additional staff and programs, and thus more clients depending on you. I think it is definitely an interesting idea that should be considered by nonprofits in this economic climate, but I can also understand why we haven't seen many nonprofits attempt it yet; the risks may be greater with a merger than the risks of remaining at the status quo.

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