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Oct 21, 2010

Inadequate Tools: How is your Nonprofit Affected?

I just finished my October column for Columbus Business First.  You will recall in More Than Just Money, I devote 21 chapters to the inadequate tools nonprofits have to respond to economic recession and to the challenges introduced by modern grant-making practices. In the chapter Provider of Last Resort (page 165) I recount how over the past 30 years, nonprofits have gradually taken on the responsibility of providing the bulk of services which we call the social safety net. Two recent studies provide rich data to support those themes.

The Brookings Institution just released two studies on suburban poverty and the stress it is placing on the nascent suburban human services nonprofit sector: The Social Service Challenges of Rising Suburban Poverty and The Great Recession and Poverty in Metropolitan America. It reveals a picture of a new node of poverty and the relative absence of suburban governmental intervention. Another case of the buck stopping with the nonprofits, who are expected to be the government but to find on their own the resources elected officials are reluctant to seek from taxpayers.

The bigger find comes from the Urban Institute. They just completed a survey of human service nonprofits and their contractual deals with federal, state, and local government. It provides a picture that will be familiar to nonprofits, but is likely to be an eye-opener for everyone else.  My column focuses on Ohio, but I suspect the picture is similar everywhere: pervasive, late and inadequate payments. In Ohio, local government payments averaged 60 days past due, and I bet the underlying contract terms were already 30 days after invoice and the invoice was after services were provided.  Thus− up to 240 days after the first services were provided. No nonprofit has that much cash. The lucky nonprofits can get lines of credit.  But in Ohio, only 20% were able to do so.  

There are lots of facts about adverse contract terms, onerous reporting requirements, and refusal to cover fully-loaded costs. But you should read the studies, even if they will depress you for a day.