fact sheet - two
An Unstable, Unpredictable and Fiercely Competitive Funding Environment
June 15, 2003
Governments and other funders have scaled back their commitments to the nonprofit and voluntary sector and have called on the sector to do more with less, yet at the same time, governments have reduced or eliminated public programs and services.
Short-term, project-based funding is increasingly the norm. All funders now subscribe to the new funding strategy partly out of a desire to boost accountability and efficiency in the nonprofit and voluntary sector.
Q. So what is the problem?
A. Raising funds has always been a challenge. But organizations now face greater financial and organizational difficulties due to the growth in short-term, project-based funding from both public and private funders, and renewal of existing contracts is often uncertain.
The organizations surveyed generally supported the funders’ new priorities – such as a desire for greater accountability – and they agreed with the merits of financial diversification. But they expressed growing alarm over the unintended negative consequences of the new funding regime:
Competition has become fiercer for all sources of funding, with smaller organizations often squeezed out by larger groups.
Unstable new funding environment has undermined the capacity of many organizations to provide consistent programs and services.
A majority of respondents – 56% – experienced volatile swings in revenues between 1997 and 2001, with 70% reporting a shift away from core/organizational sources of support to more contingent forms of funding.
95% reported that funding reliability and certainty was an issue for their organization, with six out of 10 organizations reporting that their current sources of income were neither stable nor reliable.
For six of 10 organizations, more than 75% of their funding was for one year or less.
The shift to short-term funding from multiple sources makes the new and heightened reporting obligations from funders an increasingly onerous task, especially for smaller organizations with few resources.