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The New Economic Reality – Impact and Response

Nonprofit organizations are experiencing increases in service demand and rising expectations of deficit – these are the generalizations we have all been hearing. The Nonprofit Finance Fund has attached some hard data to these generalizations in a recent survey of more than 1,000 nonprofit organizations of different sizes and sectors from around the country. Among the findings: only 12% of respondents are looking at a breakeven year in 2009, and they are not sanguine that the situation will turn around any time soon; more than half expect a recession-related negative financial impact for the next two years or more. In response, they are taking the expected financial steps of reducing staff and salaries, freezing hires, delaying payments, and using reserves. There are also significant nonfinancial responses: 42% report collaborations with other organizations as a direct response to the financial downturn, 59% report an increase in consultation and communication with their volunteer leadership, and 48% are specifically in touch with funders not only to communicate about the financial situation but also to work toward a more flexible use of grant funds. NFF urges funders to respond strategically by building in flexibility, avoiding restrictions on funding as much as possible, and reducing paperwork, expense, and other process-related stressors on fragile organizations.

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