The Urban Institute, Center on Nonprofits and Philanthropy conducted a national survey in 2009 amongst nearly 33,000 human service providers with budgets over $100,000. Roughly 62% of nonprofits relied on government contracts as the largest single source of of revenue. Federal, sate and local contracts totaled about $100 billion.
New York Nonprofits
The survey found that of the 2,758 New York nonprofits in the human sector, 43% had between 2 to 4 government contracts or grants. While 36% had five or more contracts and 22% had just one government contract.
Types of nonprofits with government contracts
The types of nonprofits varied across seven areas:
- Community and economic development……….9%
- Employment………………………………………………11%
- Housing and shelter……………………………………26%
- Youth development……………………………………..2%
- Food, agriculture and nutrition……………………..1%
- Crime and legal (related)………………………………4%
- Public safety and disaster relief……………………<1%
- Human service (multipurpose)……………………48%
With the majority of human service providers accounting or almost 50% of government contracts, while public safety and disaster relief accounting for less than 1%.
The survey also found that 62% of government contracts were with the state government. Ninety-two percent of New York nonprofits had a state contract, 69% a federal, and 75% had contracts with the local government.
This demonstrates a large reliance of New York nonprofits on government funding which could prove problematic for many nonprofits in the state. It has been mentioned that the government process is infused with issues that have caused financial distress on nonprofits. This includes:
- Government grants not covering the full costs of services nonprofits provide
- Limitations on administrative costs
- Late payments from the government
In spite of these problems, government grants have a perpetual nature in that nonprofits are able to apply for funding each year or at the end of the contract term, which makes it a valuable source of funding.
Government grants also make it possible for nonprofits to leverage for loans or lines of credit from financial institutions as they wait for government payments to arrive.
Nonprofits of this new economy would be well advised to seek multiple funding streams, thus limiting the impact of delays or changes that could occur with exclusive reliance on one source.
Nonprofit organizations desire to provide services and maintain the smooth operation of the organization. This can be accomplished by using multiple funding streams.
To learn more about the study click here. To read the October 2010 brief click here.