Business

Doing Better: NC’s nonprofit sector needs better government support

Nonprofit organizations in North Carolina have never been more influential. They have also rarely been under greater stress.

Two important new surveys – one from the N.C. Center for Nonprofits and the other from the national Nonprofit Finance Fund – frame the situation in hard data. Together, they show both the tremendous promise and the spreading fault lines within our state’s nonprofit sector, which plays a crucial role in advancing education, health care, arts and an array of social services.

In this column, we’ve frequently explored the expansive ways in which nonprofits nurture talent and improve communities across North Carolina – from the Chordoma Foundation’s groundbreaking cancer research and Communities in Schools of North Carolina’s innovative methods for enhancing student achievement to the pioneering efforts of Belmont Abbey College, Davidson College and other institutions to make higher education more affordable.

In fact, nonprofits provide more than 400,000 jobs in North Carolina – or 1 out of 10 jobs in the state, contributing $38.5 billion to the state’s economy, according to a new economic impact report produced by the N.C. Center for Nonprofits. Predictably, the greatest concentration of these jobs is in major metro areas. The Triangle region is home to about 121,000 nonprofit jobs, while the Piedmont Triad has 72,000 and Charlotte has about 60,000.

Labors of love

Most of these nonprofits are labors of love. Forty-three percent of them have budgets of less than $100,000 and 84 percent operate on less than $1 million, the N.C. Center for Nonprofits report shows.

Their assistance provides a crucial social safety net for residents whose lives continue to be upended by the decline of the state’s manufacturing base and shrinking access to government services. Increasingly, though, nonprofits are grappling with their own problems.

The 2015 State of the Sector Report by the Nonprofit Finance Fund found that 78 percent of our state’s nonprofits experienced an increase in demand last year. But 60 percent of them said they were unable to meet those needs – substantially higher than the national average of 52 percent.

Nonprofits try to extend their services as broadly as possible anyway because they are often the last resort for many people – and that puts nonprofits themselves at financial risk, as these new studies make clear. In 2014, 17 percent of our state’s nonprofits had an operating deficit and more than half didn’t have enough cash on hand to operate for more than three months.

What can be done to help accelerate this sector’s growth and ensure its stability at a time when its expertise is needed more than ever?

Our state government has an outsized impact on that answer.

The Nonprofit Finance Fund survey found that 71 percent of nonprofits in North Carolina that provide public services through state grants and contracts say the state government rarely or never covers the full costs of programs they deliver on the state’s behalf. In particular, nonprofits are having trouble receiving support for indirect costs that are needed to deliver these programs – such as rent, supplies and technology and fees for auditing and compliance.

Late payments

When the money does arrive, it frequently isn’t on time. Nonprofits receive payment from state agencies more than a month late between 30 percent and 50 percent of the time. They deal with the resulting cash-flow issues by tapping emergency reserves, using unrestricted income and accessing lines of credit.

Meanwhile, nonprofits’ financial burdens would increase if bills currently circulating in the legislature are signed into law. A Senate bill would put a cap on sales tax refunds for nonprofits, primarily hitting nonprofit hospitals and educational institutions, but also potentially affecting programs and services of smaller nonprofits that partner with them.

The House is considering a bill that would create a study on the impact that the acquisition of previously taxable property by tax-exempt nonprofits has on local governments. This could potentially have significant implications for many nonprofits that acquire real or personal property from individuals or businesses that pay property tax.

When he arrived in America in 1831, Alexis de Tocqueville was struck by how nonprofits, or what he called “associations,” elevated the quality of life. He wrote: “Wherever at the head of some new undertaking you see the government in France, or a man of rank in England, in the United States, you will be sure to find an association.”

Democracy in America, he knew, would not be the same without a flourishing nonprofit sector. Nearly 200 years later, we shouldn’t forget it.

Christopher Gergen is CEO of Forward Impact, a fellow in Innovation and Entrepreneurship at Duke University, and author of “Life Entrepreneurs: Ordinary People Creating Extraordinary Lives.” Stephen Martin, a director at the nonprofit Center for Creative Leadership, blogs at www.messyquest.com. They can be reached at authors@bullcityforward.org and followed on Twitter through @cgergen.

  Comments