October 13, 2010

Human service nonprofits deliver a range of programs and services, including assistance for children, families and the elderly, job training and providing housing and shelter - many of which are provided through contracts with federal, state and local governments. Government contracts and grants are the largest revenue source for thousands of the country's human service nonprofit organizations, and in many instances those sources are in jeopardy, according to a report issued by the Urban Institute and released by the Kentucky Nonprofit Leadership Initiative, an outreach program of the University of Kentucky College of Agriculture.

Results from "Human Service Nonprofits and Government Collaboration: Findings from the 2010 National Survey of Nonprofit Government Contracting and Grants," the first national survey of its kind, provides a window into the role the nonprofit sector plays in helping government provide essential services to individuals and communities.

"This national survey documents the critical role that the nonprofit sector plays in our communities," said Danielle Clore, director of the Kentucky Nonprofit Leadership Initiative. "Many essential needs would go unmet or vital services disrupted without this partnership between nonprofits and government. From an economic standpoint, nonprofits employ roughly one in 10 Kentuckians, and the sector contributed over $17 billion to the economy in 2007."

The survey, which ranked states in areas of concern, placed Kentucky among the worst in several problem areas, including government failure to cover full program costs, as well as complex reporting and application requirements.

"Nonprofits are indispensable partners, but when they aren't getting paid on a timely basis or reporting is unnecessarily complex and burdensome, it's individuals, families and communities who suffer," Clore said. "There is a ripple effect that impacts each of us and the economy."

The survey also made clear that the recession is hitting nonprofit organizations in Kentucky very hard. Kentucky was on par nationally with the 42 percent of human service nonprofits who reported a deficit in 2009. In addition, Kentucky was among the five worst states reporting reduced revenue from investment income and among the 10 worst reporting reduced revenue from individual donations.

To deal with these issues, 42 percent of Kentucky human service nonprofits participating in the survey reported drawing on reserves, 38 percent reported freezing or reducing salaries, 21 percent reduced employee benefits, 17 percent laid off employees and the same percentage borrowed or increased lines of credit. Only 8 percent reported reducing programs and services to individuals and communities.

"The news from the Urban Institute report highlights some troubling issues regarding contracts among nonprofits and our government partners," Clore said. "State and local budget woes will only exacerbate these issues, and this means more Kentuckians will be hurting.  We look forward to working closely with policymakers and government leaders to explore these issues further, identify areas for improvement and commit to working together to develop responsible solutions. There are many opportunities to better meet needs, improve efficiency, save money and enhance the tax and donor investments in our communities." 

In conjunction with the release of the Urban Institute's survey results, the National Council of Nonprofits issued Special Report: Costs, Complexification, and Crisis: Government's Human Services Contracting "System" Hurts Everyone, along with Internet resources that provide additional context to the Urban Institute's findings. This includes identifying specific practices that contribute to the problems nonprofit human services providers have experienced and examples of how late payments from governments to human service nonprofits affect the economy and all taxpayers, not just recipients of services.

The National Council of Nonprofits' report views the solutions as being straightforward, achievable through coordination and follow-through. The report states, "Importantly, this call to action is not issued solely by nonprofits. Earlier this year, the U.S. Government Accountability Office issued a similar call, on behalf of government."

The Kentucky Nonprofit Leadership Initiative is a state association of nonprofits that serves and strengthens Kentucky's nonprofit sector through educational opportunities, consulting services and resources for organizations and their leaders. Visit the initiative's website, http://www.kynonprofits.org, for more information about the survey and reports from the Urban Institute and the National Council of Nonprofits.