As Minnesota’s unemploy-ment rate surpassed 7percent during 2009, thenumber of people seekingassistance from nonprofitorganizations alsoincreased. Nonprofits con-tinued to experience anincrease in demand fortheir services while facingdeclining revenue. Sixtypercent of organizationsreported an increase inneed for services, com-pared to 42 percent at theend of 2008. The types oforganizations that mostfrequently experienced anincreased demand forservices were mentalhealth and crisis intervention (89 percent of respondents reportincreased demand for services), food and/or housing (78 per-cent) and employment and jobs (73 percent).Regionally, non-profits in South Central/South West Minnesota most frequentlyreported increased demand (74 percent).

The ability to meet this increase in need for services is undercutby the reduction in revenues to these organizations. Sixty-onepercent of nonprofits reported declining revenue, up from 55percent in 2008. Sixty percent of nonprofits experienced adecline in revenue from foundations and corporate giving pro-grams this year. (This question was not asked in 2008).However, the percentage of organizations reporting a decline

in individual gifts hasremained flat at 47 percentin both 2008 and 2009.The types of organizationsthat most frequently report-ed declining total revenuewere environment related(71 percent), education (69percent) and employmentand jobs (68 percent).

Food and/or housingorganizations were theleast likely to report adecline in revenue (39 per-cent), which explains whyout of the 78 percent ofthese organizations thatwere experiencing anincrease in demand forservices, 93 percent were

able to increase their services in response to the demand.

One way to meet an increasing need for services withoutincreasing expenses is through volunteers. Only 10 percent oforganizations reported a decline in volunteers in 2009.However, declining numbers of volunteers is disproportionatelyaffecting Northern Minnesota. In the Twin Cities Metro area,only 8 percent of organizations experienced a decline in volun-teers while in Northeast and Northwest Minnesota, 19 percentand 18 percent of organizations respectively have fewer volun-teers this year than last.

December 2009

Nonprofit Current Conditions ReportAnalysis of a Minnesota Council of Nonprofits member survey

by Ruth Duran Deffley, membership and chapter coordinator and Jon Pratt, executive director

In December 2008, the Minnesota Council of Nonprofits (MCN) conducted its first Current Conditions survey to provide quick,real-time analysis of the challenges nonprofits were experiencing at the end of last year. A second Current Conditions survey wentout in May 2009 to find out how nonprofits were faring after the 1st quarter of this year.

This report analyze the results of the third Current Conditions survey. The survey was conducted from December 1-8, 2009 andwas sent to approximately 2,000 nonprofits. It was completed by 639 organizations, employing roughly 32,589 staff and hav-ing a combined budget of $2.5 billion, as reported in the survey. The participating organizations represent the full range ofMinnesota nonprofit activity areas, budget sizes and geographic locations. The survey was completed by 59 percent executivedirectors, 4 percent chief operating officers, 7 percent chief financial officers and 8 percent development directors.

Increase in need continues to be coupled with declining revenues

“Cuts have come from administrative. We cut the financial coordinator position and administrative assistant posi-tion due to having mostly programmatic and operational funding. This is a major problem. How do you main-tain a nonprofit agency without administrative dollars?”

~ A domestic violence shelter

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Minnesota organizations with budges under$400,000 per year have faced the most difficultyin 2009. Sixty-three percent of small organizationsexperienced a decline in total revenue and 25 per-cent anticipate a cash shortfall next year. Although59 percent have increased their fundraising efforts,38 percent do not have reserves available and 86percent do not have access to a line of credit.

“Although we have not laid off staff, we havedelayed hiring vacated positions. We alsoreduced specific staff hours during less busytimes. We have instituted a salary freeze andalso a reduction in contribution to retirementaccounts. The goal is to keep the same servic-es available.”

~ A human services organization

To manage the effects of the economy, 32 percent of nonprofitshave reduced their number of employees, 52 percent haveimplemented hiring freezes and/or salary freezes, and 25 per-cent have reduced employee benefits. The larger the organiza-tion, the more likely it was to have cut employee benefits.Thirty-four percent of very large organizations (budget sizeover $10 million) reduced benefits, as did 32 percent of largeorganizations (budget size between $3 and $10 million). Thetypes of organizations that most often faced staff reductionswere health and/or disease related (42 percent), employmentand jobs (41 percent) and mental health and crisis intervention(41 percent).

Additional measures that nonprofits took during the recessionin 2009 were reducing their overall budget (52 percent),reductions in programming (21 percent) and putting expansionplans on hold (22 percent). Thirty-seven percent of organiza-tions held a fundraising special event this year and of these,40 percent saw an increase in income generated from theevent when compared to last year, while 40 percent had adecrease in special event income.

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Small nonprofits have particular challenges

Staff reductions and other measures used by nonprofits to weather the recession

“Despite cutting our staffing and expenses byabout 30% since last fall, we have still beenable to provide the same quality and level ofservices to our clients. We’ve been creativeabout how we go about doing our work andutilizing volunteers to accomplish our mission.”

~ A health organization working with children

The American Recovery and Reinvestment Act of 2009 has helpedsome nonprofits

Employment gains; delays of payment problems reported

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On February 17, 2009 President Obama signed the AmericanRecovery and Reinvestment Act, parts of which provided non-profits opportunities for additional federal dollars. Thirty per-cent of respondents applied for these funds in 2009 and 53percent of those were successful. For organizations that decid-ed not to pursue stimulus funds, the primary reason was thatthe purpose of the funds did not fit the organization (74 per-cent). While 12 percent reported that they did not have thetime or resources to apply and 5 percent did not have theresources to manage government funding. Employment and jobrelated organizations and food and/or housing organizationswere the most likely to receive stimulus money (70 percent), fol-

lowed by human services and/or youth development (57 per-cent) and legal, civil rights, advocacy and/or crime (55 per-cent). Organizations with budgets over $3 million were themost likely to apply for and receive stimulus funds. They notonly have the capacity to apply for federal grants but also theability to manage the funds once obtained.

Seventy-four percent of organizations that were selected toreceive stimulus funds have already received them byDecember 2009, reflecting the legislative intent to quickly getmoney into the economy. Sixty-four percent have used the fundsto retain existing staff and 50 percent have hired new employ-ees. Fifty-two percent have also increased programs.

Despite the challenging economic environment or perhaps inresponse to increased need for their services, 20 percent of non-profits reported hiring additional staff in 2009. Human servicesand/or youth development organizations were the most likely tohire new staff (32 percent), followed by food and/or housing(12 percent) and health and/or disease (11 percent). CentralMinnesota reported the highest percentage of nonprofits hiringstaff (32 percent). Of these organizations that were able to hirenew staff, 58 percent also increased their fundraising activitiesduring the year. Forty-two percent applied for federal stimulusfunds and, of those, 66 percent were selected to receive fundswhile 11 percent are still pending.

The type of revenue an organization relies upon has majorimplications for financial management and program planning.Overall, 30 percent of organizations in the survey have gov-ernment funding as their largest single source of revenue and64 percent of all nonprofits receive some type of governmentfunding. Nonprofits that receive the majority of their govern-ment funds from the federal government reported increaseddelays in payments from the federal government, (32 percentwhen compared to 19 percent in May). In contrast, fewer non-profits that receive most of their government funds from countygovernment reported delayed payments, (28 percent, downfrom 32 percent in May). State government payments experi-enced the least amount of change, with 27 percent of nonprof-its that receive the majority of their government funds from thestate experiencing delayed payments in December and 25percent in May.

“We have been in the very difficult, uncomfortableand painful position of needing to terminate staff(because of reductions in funding from corporationsand foundations) at the same time we were hiringstaff with funding from the economic recovery act.”

~ A youth development organization

Cash flow issues are common across activities and sizes

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Organizations that receive the largest percentage of their rev-enue from government are the least likely to experience cashflow problems, at 29 percent. Nonprofits that rely on individualcontributions as their largest source of revenue were second,with 38 percent experiencing cash flow problems.Organizations that relied primarily on foundations or hadearned income as their main source of revenue were the mostlikely to have cash flow problems, 58 percent and 57 percentrespectively. Revenue source appears to be a significant predic-tor of whether an organization will have cash flow problemsregardless of activity area or budget size.

In the May survey, earned income (any self-generated revenuefrom service, facility rental or product, not from a governmentsource) stood out as the most reliable stream of revenue. In thatreport, 38 percent of nonprofits that relied on earned incomeas their largest single source of revenue reported a decrease inrevenue. Now 50 percent of the same type of nonprofits report-ed a decline in revenue and only 25 percent expect to be with-in 91 percent of their end of year goal in earned income downfrom 45 percent in May.

Individual contributions and GiveMN.org’s “Give to the Max Day”Ninety-one percent of organizations report receiving individualcontributions, and half of these saw their individual contribu-tions decline in 2009. However, 21 percent reported anincrease in individual contributions when compared to 2008.The types of organizations that most often reported an increasein individual giving were mental health and crisis intervention(35 percent), food and/or housing (31 percent) and arts, cul-ture and humanities (26 percent). Those organizations thatmost often saw a decrease in individual contributions werelegal, civil rights and advocacy (54 percent), job and employ-ment (50 percent) and human services and/or youth develop-ment (45 percent). Organizations in Northeast Minnesotawere most likely to report a decline in individual giving at 52percent. Sixty-two percent of overall survey respondents reportthat when compared to 2008’s 4th quarter, individual contribu-tions have decreased both in the average amount and numberof contributions.

In November 2009, a new Web site, GiveMN.org, waslaunched to encourage individual contributions and makeonline donating more accessible to both nonprofits anddonors. On November 17, the Bush, Minneapolis and St. PaulFoundations sponsored “Give to Max Day,” on which dona-tions made that day through GiveMN.org site would bematched in part by the three foundations, up to a total matchof $500,000. Minnesotans set a national record that day,raising $14 million in charitable donations in one day. Sixty-five percent of organizations surveyed participated in “Give tothe Max Day” representing all activity areas and budget sizes.Nonprofits in Greater Minnesota were somewhat less likely toparticipate, 43 percent versus nonprofits in the Twin Citiesmetro area at 74 percent. Sixty percent of nonprofits identifiedbetween 1 and 10 new donors on this day, while 16 percentidentified 11 to 25 new donors.

Eighty-six percent of nonprofits receive foundation and/or cor-porate grants and 55 percent reported a decline in grantsand/or commitments compared to 2008. The activity areasthat most often faced a decline in foundation and corporatesupport were mental health and crisis intervention (74 percent),

legal, civil rights, advocacy and crime (69 percent) and healthand disease related (61 percent). Food and housing typeorganizations were the only ones to report an increase of foun-dation and/or corporate giving, with over 20 percent report-ing an increase. Less than half of organizations surveyed (45percent) will be within 91 percent or higher in achieving theirend of year goal for private grants.

“Being a grant giving organization, we do struggle toreceive grants, so we rely more on individual givingand that has declined dramatically and with staffreductions, we now don’t have the manpower to keeppursuing contributions.”

~ A private foundation

Although 2009 was a difficult and challenging year for mostnonprofits, respondents predict an even gloomier 2010.Because unemployment gains after the recession are notexpected until later in 2010, 62 percent of organizationsboth predict an increase in demand for services and adecline in total revenues next year. Sixty-six percent believethat their organization will suffer from a decline in revenuefrom foundations and corporate giving programs and 52 per-cent think they will see individual contributions also decline.Of the 69 percent of nonprofits that had an operating reservein 2009, 34 percent anticipate using it in 2010 and 67 per-cent anticipate cash shortfalls during theyear.

“2009 has not been as difficult a year as the nexttwo will be. The 2007 Legislature was good for men-tal health and we still benefited from that in 2009.We are starting to see cuts for 2010 and anticipatemore via unallotment and potential reduction infees.”

~ A mental health organization

Nonprofits predict that 2010 will be tougher than 2009

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Recession Era Strategy and Planning

*Response to the question: As you look at the next 12 months, what challengesare likely for your organization?

2009 was a year of uncertainty for nonprofit boards and man-agers. The overall economy, state and county budgets, individ-ual spending and contributing are all spiraled downward, asshown in MCN's Current Conditions survey. In the fourth quar-ter of 2008, 2,798 Minnesota nonprofit employees filed initialunemployment claims, up 47 percent from 4th quarter 2007.

While the U.S. 2007-2009 recession is technically consideredto have ended in May 2009, the lag in employment gains andthe nature of nonprofit revenue streams (including reducedfoundation assets and continuing Minnesota state budgetdeficits) means a tough nonprofit economy at least through theend of 2010.

Each individual organization’s story varied based on theiractivity area, revenue profile and amount of reserves; but clear-ly most organizations saw flat or reduced 2009 revenues. Themajor positive option was the effect of the federal stimuluspackage -- a partial salvation for the states $4.8 billion deficitand welcome support for some nonprofit services.

In addition to MCN’s legislative and budget advocacy, in2009 MCN and the Nonprofit Assistance Fund cosponsored a

series of workshops on Recession Year Financial Leadership,held in St. Paul, Mankato, Duluth, Grand Rapids, Brainerd andonline as a Webinar

In 2009, many nonprofits took additional steps to respond tothe economy and its challenges of declining revenue andincreasing demand for services. These actions included:

• Analysis of financial and programmatic trends over the past1 to 3 years (58 percent)

• Projection of revenue over the next 1 to 3 year (63 percent)• Development of several “what if” scenarios and contingen-

cies based on various assumptions about funding changes(65 percent)

• Analysis of fully-allocated costs of programs, including indi-rect expenses and the level of support for these programs(46 percent)

• Consideration of whether or not the organization shouldintentionally run a short-term or long-term deficit (29 per-cent)

• Renegotiation of terms with funding sources (14 percent)

“We are using careful strategic planning, combinedwith transparency that supports an informed and pos-itive work culture. We have a ‘we are all in thistogether’ approach focusing on continuous improve-ment to and focus on mission.”

~ A residential treatment center

“Our board of directors has been instrumental in help-ing develop the strategic and financial acumen neededto move forward boldly through these times. Peoplefacing homelessness are depending on our success.”

~ A homeless shelter/transitional housing organization

639 MCN member organizations completed thisCurrent Conditions survey, representing a wide rangeof activity areas and budget sizes; similar to the distri-bution of nonprofit activity areas and sizes of organi-zations in the state.

72 percent of the respondents were from the TwinCities Metro Area and 28 percent from GreaterMinnesota. (This is a higher representation from themetro area than for Minnesota nonprofits as a whole.The Twin Cities Metro Area holds 56 percent of allnonprofits while 44 percent are located in GreaterMinnesota.)

MCN plans for 2010 and beyond

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Respondent distribution

MCN will continue to provide information in 2010 to supportnonprofit boards and managers as they cope with a likely sec-ond consecutive year of revenue uncertainty, including briefin-gs with partner organizations such as the Nonprofit AssistanceFund. In January, MCN will issue 2010 Fundraising andRevenue Outlook Reports for the ten primary nonprofit activityareas used in this report, in a quick read format suitable forboards of directors and finance and fundraising committees.

Also during 2009 the Minnesota Council of Nonprofits under-took its own strategic planning, identifying five major goals forthe period 2010-2014:

1. Strengthen the economic sustainability of individual nonprof-its and the nonprofit sector.

2. Deepen relationships among member organizations toincrease knowledge, effectiveness and capacity for collec-tive action.

3. Build bridges between nonprofits and key institutions (busi-ness, local government, philanthropy, etc.) to increase part-nership and cooperation.

4. Increase opportunities for cost saving programs, sharedservices and shared spaces.

5. Strengthen nonprofit community engagement.

2314 University Avenue West, Suite 20, Saint Paul, MN 55114TeL: 651-642-1904 • 800-289-1904 • Fax: 651-642-1517 • www.mncn.org

About the Minnesota Council of NonprofitsThe Minnesota Council of Nonprofits (MCN) is the statewide association of more than 2,000 Minnesota nonprofit organizations. Through itsWeb site, publications, workshops and events, cost-saving programs and advocacy, MCN works to inform, promote, connect and strengthenindividual nonprofits and the nonprofit sector.

Copyright ® 2009 Minnesota Council of Nonprofits. All rights reserved. Short sections of text may be quoted without explicit permission, provided that full credit is given to the source. Additional copies of this report can be downloaded from MCN’s Web site atwww.mncn.org.