Arts and Culture / Human Services

2015 State of the Nonprofit Sector Survey: How Does Budget Size Impact Nonprofits?

July 21, 2015

NFF formally released the 2015 State of the Sector Survey results in April. This post, part two of a series of survey-related blog posts, will explore this year’s data beyond the national results. We’ll also be collaborating with peer organizations to share how our survey data continues to elevate, inform, and corroborate parallel work in the field. Read our first post here.

This year, NFF heard from 5,451 organizations from around the country and from a variety of sub-sectors. Every year we publish our findings in aggregate, but we always like to peek under the hood for stories that might be lost at the national level. Below, we’ve taken a closer look at trends in the organizational demographics, and the operational and financial health according to the budget size of various organizations. We found that organizations simultaneously face comparable and unique challenges depending on their size (as measured by annual operating expense). For the purposes of this analysis, nonprofits (NPOs) were grouped into distinct budget bands to better understand their operating realities.

Organizational Profile
The survey asked organizations to select their total annual operating expense for fiscal year (FY) 2014. We aggregated the following budget bands to simplify our analysis: $0-50k and $50-100k, $1-2m and $2-5m, as well as $10-20m and greater than $20m.

Indicators of Financial Health
NPOs were asked to share their end of year financials for FY 2014. When examining this financial health indicator, there was a strong, positive correlation between budget size and operating surplus in FY 2014. The bigger the budget, the more likely the organization reported a surplus.The smaller the organization, the more likely they were to finish FY 2014 with break-even financials.

We also looked at the interplay between organizational mission and budget size for the two largest sectors represented in the survey, which were human services (29%) and arts & culture (17%). Arts & culture nonprofits were more likelyto have smaller operating budgets than their human services counterparts.Conversely, as budget size increased, human services organizations were more likely to be represented. For example, for NPOs with budgets of >10m, 42% were human services and just 9% were arts & culture organizations. Similarly, for NPOs with budgets of less than $100k, 26% were arts & culture while 16% were human services. For the remainder of subsectors, the distribution by budget size was fairly even.

Top NPO Challenges
Every year we ask NPOs to identify their 3 greatest organizational challenges. While we have seen some stabilization in the post-recession years, the sector remains plagued by long-term sustainability issues. Nationally, organizations identified the following top challenges: long-term financial sustainability (32%), staff retention and competitive wages (25%), and raising funding that covers full costs (19%). When broken down by budget size, sustainability concerns remained but took different forms for the various budget bands. The >10m NPOs considered cuts in government funding as a top challenge, while smaller organizations (<100k) struggled with mobilizing volunteers and marketing and community engagement.

>10m NPOs

  • Ability to offer competitive staff pay and/or retain staff (28%)
  • Cuts in government funding (22%)
  • Achieving long-term financial sustainability (17%)

500k-1m NPOs

  • Achieving long-term financial sustainability (38%)
  • Ability to offer competitive staff pay and/or retain staff (24%)
  • Raising unrestricted revenue/general operating support (21%)

<100k NPOs

  • Achieving long-term financial sustainability (28%)
  • Raising funding that covers full costs (26%)
  • Marketing, outreach, and community engagement & Engaging and mobilizing volunteers (21%)

While the sector as a whole has moved beyond the fragile recession and post-recession years, a sector-wide brittleness remains firmly entrenched. Larger organizations were more likely to finish FY 2014 with surpluses but struggled with cuts in government funding. And smaller organizations were more likely to break-even, yet faced the challenge of effectively marketing to and engaging with their communities. Every year our survey data allows us to understand the nuances and unique challenges that individual organizations face. We hope that by understanding how organizational size (as measured by annual operating expense) can impact operational and programmatic realities, we can move the sector-wide sustainability conversation forward in a meaningful way.