Half of U.S. nonprofits at risk financially

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 face a wide range of growing pressures.

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. 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 po- tential liquidity issues, with minimal cash reserves and/or short-term assets that are less than short-term liabilities.

• Thirty percent have lost money over the last three years.

• About half have less than one month’s operating reserves.

It is likely that the vast ma- jority of smaller nonprofits, with even fewer resources, face even more significant challenges.