The stock market may be rebounding, but for charities the negative impact of the recession has only deepened over the past year, according to a survey released this week by the Bridgespan Group, a nonprofit consulting group in Boston.
Ninety-three percent of charity leaders said their organizations are feeling the effects of the economic downturn, according to the survey, which updates similar surveys of more than 100 charity leaders that Bridgespan conducted in November 2008 and May 2009. A year ago, the share of charity leaders reporting that their groups had suffered from the downturn was 75 percent.
Eighty percent of the charities surveyed last month said they had lost financial support, compared with 52 percent in 2008.
Even as the economy showed signs of improvement this summer, many charities continued to struggle. More than 40 percent of charity leaders said their group's financial situation had worsened over the past six months. Only 15 percent said their financial status was improving.
Charity executives have been forced to make some tough decisions. Nearly half said they had dipped into reserves to cope with declining revenue. More than 40 percent said their groups had laid off staff members, compared with only 28 percent in the 2008 survey.
"For many nonprofit groups, the bulk of their costs are employees," says Sarah Sable, a Bridgespan consultant and a co-author of the report. "When you have cuts of greater than 20 percent, you can only do so much on the program side. Ultimately, you'll be forced to make some cutbacks in your staff."
The charities are retrenching even as a greater number of people are requesting their services.
Fifty-eight percent of the charities in the latest survey noted an increase in demand, up from 30 percent a year ago.
For years, many philanthropy experts have argued that the nation has too many charities, and that mergers might be one solution to the problem.
But amid the economic crisis, mergers have been rare. Only 19 percent of charity leaders in last month's survey said they had examined opportunities to merge with or acquire another nonprofit group, down 1 percentage point from the 2008 survey.
"People thought there would be a mass rush to merge, but that's a tricky proposition," says Alan Tuck, head of Bridgespan's New York office and a co-author of the report. "In the nonprofit world, there is not enough support in place for implementing mergers, and that inhibits activity."
The survey also lends credibility to a forecast that charity leaders have been making for months: fund raising in 2010 could be even rougher than in 2009.
More than two-thirds of the charity leaders said they had been told by their supporters that future grants and gifts are likely to decline.
"There are definitely signs that it could be a while before things turn around," Mr. Tuck says.
More information about the report, "A Year of Managing Through Tough Times," can be obtained at http://bridgespan.org.