The Transformative Possibilities of Nonprofit Collaboration

Abstract

It may seem counterintuitive, but economic slow-downs are known to spark entrepreneurial ventures. A Kauffman Foundation study showed that more than half the companies on the 2009 Fortune 500 list were launched during a recession or bear market, along with nearly half the firms on the 2008 Inc. list of America’s fastest-growing companies.Nonprofits manifest similar urges toward reinvention when times are tough, and the tumult of the past decade has accelerated their cooperative and collaborative efforts. Recent trends underlying accelerated collaboration in the nonprofit sector include:

• Tremendous growth. Between 2000 and 2008, the total number of nonprofits in the five counties of southeastern Pennsylvania grew by 36% (from 11,000 to 15,000). At the national level, nonprofits also experienced similar growth across every subsector.
• Squeezed balance sheets. The Nonprofit Finance Fund’s (NFF) 2011 State of the Sector Survey reported that roughly one-third of responding nonprofits had a deficit and 10 percent  had “no cash;” 41% of respondents believed 2011 would be harder than 2010. The Economy League of Greater Philadelphia reported similar findings for southeastern Pennsylvania.
• Greater demand for services. With the nation struggling with high unemployment, home foreclosures, and other tough economic conditions, 41% of NFF’s survey respondents said demand for their services increased significantly in 2010, a trend evident since 2008.
• Contracting budgets. Most states are dramatically cutting programs in order to cover budget gaps. The Center for Budget and Policy Priorities reported that despite stronger-than-expected state revenues for 2011, 42 states and the District of Columbia had to plug $103 billion in budget gaps for fiscal year 2012.
• Sector contraction. The IRS’s recent decision to revoke the tax-exempt status of approximately 275,000 nonprofits for failing to file legally required annual reports will undoubtedly result in many nonprofits merging together or even closing their doors.

The impact of these changes cannot be understated. If the federal government accorded the nonprofit sector the same status it does other economic sectors (e.g., manufacturing), it would qualify as this region’s third largest, with 242,000 employees earning more than $11 billion in wages.