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Challenges Facing LA's Nonprofit Sector 2010

Challenges Facing LA's Nonprofit Sector 2010

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Published by Marco Ramirez
The Southern California Center for Nonprofit Management began to survey nonprofit leaders in the Fall
of 2008 in the midst of the state budget delay and the stock market crash. Our goal was to explore how
we might best address the training and consulting needs facing nonprofit leaders and board members
representing organizations throughout the LA region during this extraordinary time.

Produced by www.cnmsocal.org
The Southern California Center for Nonprofit Management began to survey nonprofit leaders in the Fall
of 2008 in the midst of the state budget delay and the stock market crash. Our goal was to explore how
we might best address the training and consulting needs facing nonprofit leaders and board members
representing organizations throughout the LA region during this extraordinary time.

Produced by www.cnmsocal.org

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Published by: Marco Ramirez on Aug 10, 2010
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08/17/2010

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“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.” – Wayne Gretsky 
Over the past 18 months we have been tracking the impact of two competing forces; reduced revenuesand increasing need on those responsible for leading Southern California’s nonprofit organizations. Ourplan, given these extraordinary times, has been to respond to changing training and consulting needs of impacted nonprofit organizations while keeping an eye on what could come next to help them betternavigate a very difficult course.We now have a unique opportunity to translate what thousands of our customers have been telling us inreal time together with our survey findings, and share this knowledge with our colleagues who tell usthey are also struggling to “play where the puck is, while watching where it is going.”We believe the enclosed report tells an important story, and we hope you find it helpful. We think itprovides a current snapshot of the changes underway throughout the sector during the 2008 economicmeltdown. It reflects the tough choices nonprofit leaders made throughout 2009 and the strategiesthey are ready to explore in 2010. It is clear that nonprofits will continue to work hard to change livesthroughout our community, despite growing demand, shrinking paychecks, and no relief in sight as theuncertain stock market and stubborn unemployment numbers make news every day.We will maintain our tracking of conditions throughout the nonprofit sector as a means of providingtools and timely support for organizations throughout Los Angeles. We will keep you posted on whatwe learn. In the meantime, look out for that puck!Best regards,Marilyn Flynn, Ph.D. Regina BirdsellDean, USC School of Social Work PresidentBoard Chair
 
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Challenges Facing LA’s Nonprofit Sector
The Impact of Economic Downturn 2009-2010 and beyond
The Southern California Center for Nonprofit Management began to survey nonprofit leaders in the Fallof 2008 in the midst of the state budget delay and the stock market crash. Our goal was to explore howwe might best address the training and consulting needs facing nonprofit leaders and board membersrepresenting organizations throughout the LA region during this extraordinary time.By the Spring of 2009, as the local unemployment rate hit 12%, trends started to emerge that influencedhow we are responding to the capacity building needs of those we serve. As the jobless numberscontinued to climb, the demand of social services exploded. According to survey respondents needgrew, in some cases, by as much as 150% while income plunged by as much as 50% for someorganizations throughout the region. Layoffs, salary cuts, benefit cuts, tapping reserves or lines of credit, and finally, program cuts followed. Given those changes and challenges, throughout 2009, manyof our clients told us that they could no longer invest the time or money to take advantage of thetraining or skill building they needed more effectively.Our most recent survey begins to tell a new, sometimes sobering story that challenges the sustainabilityof diverse service organizations across every community.We have included a summary of our findings conducted between Fall 2008 through Spring 2010. Onaverage, 95.25 nonprofits participated in the online survey equally representing large and small budgetssizes.As a sector leader, and stakeholder interested in the vitality of our community, we hope you find theinformation useful and informative.
Changing Revenue and Evolving Responses to the Economic Crisis
Organizations were asked how funding levels had changed and what impact those changes had on their nonprofit.
 As noted in the figure 1 below, there are consistent declines in financial support from individuals,corporations, foundations, and government entities.
 
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Figure 1. Biggest cuts by funding source
0%20%40%60%80%100%CorporateFoundationsCounty/StateFederalSpecial EventsIndividualdonorsWinter 09Summer 09Fall 09Spring 10
 
 
On average, 54% report a decline in support from county and state.
 
On average, 60% report a decline in support from foundations.
 
On average, 56% report a decline in support from corporations.
 
On average, 40%-50% report cuts in funding from special events and individual donors. Thelargest cuts in special events were cited in Fall 09 with 70% reporting a decline.
Response to Funding Cuts
Participants were asked to identify the most notable changes in the past year were.
The most common solutions in early 2009 were budget cuts, reduction in staff, and the hope that boardmembers would become more active fundraisersBy late 2009 other common solutions were: eliminating programs, salary and benefit cuts, and tappingin the organization’s reserve or line of credit.By early 2010 41% continued to make staff reductions and are less optimistic that board members willhelp with fundraising. Instead, board members are considering how to use volunteers to cover the

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