Posted on October 8, 2010

Human Service Providers Experiencing Problems With Government Payments, Report Finds

Hobbled by the anemic economic recovery, human service nonprofits working to help families and communities weather the recession have reported serious and widespread problems with their government contracts and grants, a new report from the Urban Institute finds.

The report, Human Service Nonprofits and Government Collaboration: Findings From the 2010 National Survey of Nonprofit Government Contracting and Grants (52 pages, PDF), found that 31 percent of respondents nationally felt their experiences with government contracting in 2009 were worse than in prior years, while 82 percent reported having one or more problems with a government contract and 66 percent reported having at least one serious problem. In addition, fully three-quarters of those surveyed (76 percent) said they experienced problems caused by complicated, time-sapping applications; 68 percent said they were short-changed by federal, state, or local government payments that did not cover the full cost of contracted services; 57 percent reported problems with a government agency changing the terms of a contract midstream; and 41 percent said they had to deal with late payments. The report also found that all levels of government were slow in sending checks, with state governments the most likely to be more than ninety days late.

All told, 57 percent of the organizations surveyed reported receiving less revenue from state governments, 49 percent reported receiving less from local government, and 31 percent said they received less from the federal government. Budgets were further pressured by drops in contributions from foundations, corporations, and individuals, and by declines in investment income. In response, 82 percent of human service providers said they were forced to scale back their operations, 50 percent said they froze or reduced salaries, 39 percent were forced to draw on their reserves, and 38 percent cut staff. Moreover, organizations that experienced changes in the terms of their government contracts and grants, late payments, or reduced payments were significantly more likely to resort to staff cuts than organizations that did not have to contend with changes or reduced payments.

The report also suggested that projected state budget shortfalls for fiscal years 2011 and 2012, coupled with declines in charitable donations and investment income and increased demand for services, may push many nonprofits to the breaking point: "Of great[est] concern," the report concluded "is the hollowing of organizational capacity that may take years, if ever, to rebuild."