On Philanthropy: New Study Outlines Unprecedented Financial Risk To Many Nonprofits

By Bruce DeBoskey
Tribune News Service

WWR Article Summary (tl;dr) An important new study finds that half of U.S. nonprofits are at risk financially, facing inadequate cash reserves, negative income margins and technical insolvency.

Tribune News Service

Across the United States, more than 1.5 million nonprofit organizations engage in remarkable work to transform lives, communities and the planet. Unfortunately, these organizations currently face a wide range of growing pressures.

Consider these facts:

-In 2013, nonprofit organizations employed more than 10.6 percent of the workforce (14.4 million). More individuals are employed by nonprofits than by the national defense, construction, real estate and space research industries combined.

-In 2014, the nonprofit sector contributed $937.7 billion to the U.S. economy (including wages and salaries) _ comprising 5.4 percent of the nation’s gross domestic product. Among the 199 nations tracked by the World Bank, nonprofits would rank as the 16th largest economy.

-In 2014, more than 25 percent of the U.S. population volunteered for a nonprofit.
Nonprofits face financial challenges

An important new study finds that half of U.S. nonprofits are at risk financially, facing inadequate cash reserves, negative income margins and technical insolvency. The Financial Health of the United States Nonprofit Sector: Facts and Observations was published in January 2018. Conducted by Oliver Wyman, SeaChange Capital Partners and GuideStar, this comprehensive study examines the Form 990 tax filings of more than 219,000 U.S. nonprofits.

Only larger nonprofits (with revenues above $200,000 or assets above $500,000) are required to file a Form 990. Regardless of their size, churches and other places of worship are not required to file Form 990s.

The new study reached some worrisome conclusions about the health of this segment of the nonprofit sector, including:

-As many as 8 percent are technically insolvent, with liabilities exceeding assets;

-Thirty percent face potential liquidity issues, with minimal cash reserves and/or short-term assets that are less than short-term liabilities;

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