Fiscal Health of Nonprofits

Orange County is home to 3,181 nonprofit organizations, up nearly 70 percent from a decade ago. As the number of organizations grow, how well are they doing in meeting their financial goals?

To determine how nonprofits are faring in a time of economic hardship and lowered donations, Kathleen Costello, director of the Gianneschi Center for Nonprofit Research, and Shelly Arsneault, professor of political science, pursued their question as part of a survey administered by CSUF’s Center for Public Policy and conducted by the Social Science Research Center.

Costello and Arsneault presented the results at a town hall event organized by the report’s co-publisher, OneOC, formerly known as the Volunteer Center of Orange County.

“Over the past 15 years, we have been researching the nonprofit sector to help understand their role in the economy and in service delivery,” Costello said. “Providing them with data on how and where people are giving, and providing a context for this data, helps them with planning for future growth and development.”

What Costello and Arsenault found was that, contrary to national trends, the total amount of funding in Orange County increased, although the majority of funds went to the top 10 organizations — all of which, with one exception, were hospitals. In fact, the $4.56 billion in donations to these 10 nonprofits made up 54.2 percent of the total of all OC nonprofit revenues for that year.

So while overall figures look good, donations for those organizations that aren't in the top 10 may have remained static or declined.

So what does this all mean?

“Well, the hospitals skew the data,” Costello admitted. “But you have to remember that we're looking at revenue, not just donations. Hospitals earn revenue from many different payers for patient care, so that makes them big players. This isn’t to suggest that all their funding comes from charitable donations.”

That said, the majority of nonprofits are quite small with $25,000 or less in gross receipts. And for many of these groups, the needs are greater as money gets tighter.

Why People Give to Nonprofits

“Responders who gave more money this year to specific charities than before did so because they made more money (31 percent), or saw a greater need (28 percent) or believed in the mission of the organization (21 percent),” said Arsenault. Nine percent gave another reason, she added.

The reason given by those who gave the same amount as the previous year? Forty-six percent did so because their economic situation was the same, 29 percent did so because it was habit, and 16 percent because they believed in the mission of the organization.

The outlook is good for future giving, according to Arsneault. Sixty-four percent of respondents reported that over the next 12 months, they will contribute the same amount of money, while 17 percent will give less, and 14 percent will give more. Those who said they would give less, said it was because of limited income/poor economy (58 percent), unemployment (12 percent) or they were on a fixed income (11 percent).

Survey Purpose

So how does the data help nonprofits?

“First, it defines the number of active organizations in the county,” said Costello. “This is valuable information to funders who may want to invest in groups that focus on specific problems. They can see how large an organization is and if there are others offering similar services.

“Secondly, it’s a great resource for policymakers and for those who work for nonprofits, such as attorneys, financial planners, accountants, fundraisers and so on,” she said. “And finally, it provides basic information to the groups themselves, in terms of market share and whether or not there are others that they can partner with to achieve their goals.”

"Because so little formal research is done about nonprofits as a sector of the economy, they often do not enjoy the position in policymaking that their size and scope warrant,” Costello added. “This makes them vulnerable to budget cuts — cuts that they can often ill afford since many are quite small and have limited funding. By providing basic information, we can help nonprofits work cooperatively so they all benefit. We think they deserve a voice. Nonprofits are often so focused on their own survival they don’t have the ability to gather this kind of information.

“It’s also clear that messaging is a key component of their success,” added Arsneault. “If you look at the reasons given by those who responded, the majority of reasons have something to do with the message — there is a belief in the mission, there is a greater need/awareness — this is critical information that nonprofits need when they are thinking strategically about how to communicate with the public and their donors.”