Economic Impact of Nonprofits

A new report out Wednesday paints the most comprehensive picture to date of the nonprofit sector in Massachusetts.

The good news is that it's growing. But on a cautionary note, the study finds many of the small nonprofits are economically vulnerable.

The Boston Foundation report suggests these smaller groups take a hard look at their organizational structures and funding...and consider repositioning to remain strong. WBUR's Monica Brady-Myerov reports.

Audio for this story will be available on WBUR's web site later today.

TEXT OF STORY:

MONICA BRADY-MYEROV: Cradle to Crayons, English at Large, and Year up. I've just named three nonprofits in the state out of more than 36,000 with a total revenue of $87 billion in 2007. The number of nonprofits has doubled over the past 18 years. The ones I mentioned provide educational supplies to homeless kids, free English lessons, and technical training to urban youth. The sector as a whole does everything from provide vital health services to visit elderly people with pets.

Elizabeth Keating is the lead author of the study and a visiting assistant professor at Boston College. She says 14 percent of workers in the state are employed by nonprofits.

ELIZABETH KEATING: The employment and the spending is driven by larger universities and large hospitals and our period of study the hospitals have gone from being somewhat financially stressed to being in much better shape due to a large number undergoing mergers and restructuring.

BRADY-MYEROV: After the hospitals and universities are what the report calls "safety net organizations." These are the larger groups that offer social services to vulnerable citizens. But they rely on government funding.

KEATING: The Commonwealth, because it's resources-constrained, has renewed many contracts on the same terms year after year say up to 11 years, so there are organizations now that are getting the same funding today they got in 1997.

BRADY-MYEROV: The report says the state should change those funding terms to keep the sector healthy. The fastest growing segment of the nonprofit sector, is small grassroots organizations. The Boston Foundation defines them as having a quarter of a million dollars or less in total annual expenses.

SOUNDS OF FIELD SPORTS

COACH: All that negativity if you start to get into that back and forth with the other team...it brings it down.

BRADY-MYEROV: Take Metro Lacrosse. It's a free league for kids from Boston that operates with more than 200 volunteers, including this coach who's reviewing a recent game with a group of teenage girls.

COACH: We were aggressive we stayed focused on the game we kept positive sportsman ship, we played like a team and we treated the other team with respect. Is that what we all did?

BRADY-MYEROV: These types of small organizations make up 55 percent of the number of nonprofits but only one percent of the sector's spending, revenue and assets. And Keating says they are living hand to mouth, which isn't efficient.

KEATING: We think the inefficiency in the sector is created by this very huge number of very small organizations who are not economical. They can't benefit from economies of scale and they can't invest in say a computer system that would help them track what they are doing and hence allocate their resources better.

BRADY-MYEROV: The Boston Foundation recommends small nonprofits form strategic alliances or merge to strengthen balance sheets and grow. But critics of the report say a proliferation of small organizations is an indication of a healthy civic life.

RUTH McCAMBRIDGE: The more the merrier as far as I'm concerned.

BRADY-MYEROV: Ruth McCambridge is editor and chief of the Boston based Nonprofit Quarterly. She says not all small groups need to expand their missions or be more efficient, as the report recommends.

McCAMBRIDGE: These are recycled over the past 30 years at least and they have never actually done any good and I don't think they are going to do any good now. And nonprofits generally will ignore it.

BRADY-MYEROV: Last year, a Boston Foundation report, which suggested small arts organizations merge, was met with resistance and anger. But some nonprofits have already consolidated operations and seen benefits. The founder of Metro Lacrosse created Boston Teamworks four years ago. Teamworks has a central administration for six youth-oriented organizations. Emily Helm, of Metro Lacrosse, says the collaboration is working well but it takes a lot of effort and is not a simple solution.

EMILY HELM: The best thing we've learned if you are intentional about really committing, then it truly does impact you ability to save money on back end of things which is very appealing to funding and also to increase programmatically. The combination of those two things as a director is very appealing to me.

BRADY-MYEROV: And Helm says there are intangible benefits besides saving money with a shared copier and refrigerator. She says it brings several heads of small nonprofits and young professionals together. Another member of the alliance, Melissa Harper, president of Good Sports — a group that gives free equipment to urban kids — says her organization has grown because of the professional collaboration.

MELISSA HARPER: We subletted from an architecture firm for a while, we subletted from a software firm for a while and we were in our living rooms for a while. What we have here is ability to run a professional organization which is very different from your living room.

BRADY-MYEROV: The report from the Boston Foundation, which itself is a nonprofit, doesn't address the risk to the sector if its recommendations aren't followed. But researchers say that an average of two percent of nonprofits fail each year, and that number could increase as tight economic conditions force more organizations out of business.

For WBUR, I'm Monica Brady-Myerov.