Nonprofit Growth and Decline During Economic Uncertainty

ABSTRACT

During times of economic uncertainty, why are some human service organizations able to grow while others fail? In this paper, we present qualitative data on differences in the institutional logics adopted and managerial strategies used by child and youth–serving organizations during the 2008–2012 recession. We compare organizations that grew with those that experienced decline, looking particularly at those organizations with increased versus decreased dependency on government funds. We find differences in service population allowed some organizations to remain successful within a government-partnership logic; others faced decline if they did not entrepreneurially adopt a market logic.

KEYWORDS:

• Children and youth
• government funding
• human services
• nonprofit organizations
• organizational growth and decline

Notes

1. Defined as Cook, DuPage, Kane, Lake, and Will counties in Illinois.

2. Including “government grants (contributions)” (from Part VIII, column (A), line 1e) and “program service revenue” (i.e., Medicaid/Medicare reimbursements, government contract payments) (from Part VIII, column (A), line 2).

3. Based on information gleaned from the interviews, such as significant endowment incomes and a sharp increase in “flow-through” government subsidy, we made additional corrections on some organizations’ revenue and government funding figures. The adjustment resulted in moving two organizations into different groups and reducing three organizations’ change in dependency on government funds lower than a threshold of 10%.

4. For this estimation, we considered and decided not to use net revenue (gross revenue minus direct and indirect costs associated with fundraising) for two reasons. First, the fundraising cost data on the Form 990s are not particularly reliable. Secondly, there are no standard accounting practices in reporting fundraising costs (Froelich et al., 2000).

5. This finding is particularly concerning as the Trump Administration proposed the FY 2018 budget with significant cuts to the departments that administer and fund essential services for at-risk children and youth, including Health and Human Services (18%, or $15.1 billion, cut) and Education (14%, or $9.2 billion, cut) (Aisch & Parlapiano, 2017).

6. Only required when organization has gross receipts of more than $200,000, or total assets at the end of tax year greater than $500,000. Any organizations with smaller gross receipts or total assets can choose more-simplified versions of forms, such as Form 900-EX or Form 900-N.