A National Imperative: Building a Stronger Social Sector

The Alliance for Strong Families and Communities and the American Public Human Services Association (APHSA) are launching a rigorous study on the financial health of the social sector. A National Imperative: Building a Stronger Social Sector will use data-driven analysis and original research to assess the health of the sector and of nonprofit human services organizations in America, identify the internal and external forces creating challenges across the sector, and drive to cross-sector solutions and recommendations that will ensure the sector’s strength and vitality into the future.

Generous funding in support of this initiative comes from Ballmer Group Philanthropy and the Kresge Foundation. SeaChange Capital Partners, a nonprofit merchant bank, is advising the project and providing expertise. Oliver Wyman, a global leader in management consulting, is guiding the project’s execution, as well as providing research and analysis, cross-sector expertise, and marketing and communications support.

This initiative is motivated by a growing concern about the precarious financial state of the social sector. The social sector promotes healthy, stable communities and supports the long-term health of our society through a variety of programs and services—from child welfare and juvenile justice, to substance abuse treatment and behavioral health care, to homelessness, housing, and community development programs. Yet the sector is facing significant financial stress that is thwarting its ability to deliver on its mission.

For example, recent analysis shows some disturbing statistics for New York City-based human services nonprofits (from Risk Management for Nonprofits, March 2016, by Oliver Wyman and SeaChange Capital Partners):

  • 18 percent were insolvent (liabilities greater than assets) over the period of 2009 to 2013
  • More than 40% had a negative margin (net income/total revenue) for the period of 2010 to 2013
  • Half receive less than 10 percent of their revenue from private philanthropy, and these organizations account for 65 percent of the sector’s total spending

Finding a new way forward will require the participation of stakeholders across the sector to address several key challenges, including the rapid pace of change in science and technology, healthcare reform, regulatory concerns, shifts in philanthropic giving, population and demographic trends, growing income inequality, greater emphasis on outcomes and impact, maintaining necessary organizational capacities, and the lack of funding for the full cost of delivering services.

A National Imperative is a bold and thoughtful response to the many challenges facing the sector. The initiative will collect and analyze data from organizational and agency financial statements, surveys of human services nonprofits and public sector agencies, and interviews with stakeholders from across the sector. Findings and recommendations will be summarized in a written report, and cross-sector leaders will convene to finalize recommendations, set goals for budgets and next steps, and commit to making changes necessary to ensure the long-term health of the sector.

About the Social Sector Survey

The data collection phase of this initiative was launched with a survey on June 12. All Alliance members should have received a unique link to the survey via email, and should complete the survey through the link in the email. Chief executives of social sector organizations that are not members of the Alliance can complete the survey online through this link.

Direct questions to the survey support team at Oliver Wyman.

The deadline to complete the survey is Friday, June 30 at noon CT.

Related Reports

Disruptive Forces: Driving a Human Services Revolution
This 2011 report identifies six disruptive forces expected to fundamentally change and transform the nonprofit human services sector, creates a vision for the sector during the next three to five years, and highlights suggested actions to preserve quality services within the boundaries of anticipated fiscal and other challenges. Follow-up case studies and articles show how Alliance members have responded to the disruptive forces.

Risk Management for Nonprofits
This report outlines concrete steps that organizations can take to manage financial risk more effectively. These recommendations come from a study of New York City nonprofits by SeaChange Capital Partners and Oliver Wyman – conducted in the wake of the collapse of the city’s Federation Employment & Guidance Service (FEGS) – on how to incorporate private sector risk management practices into the operations and governance of nonprofits. Organizations that fail to adopt stronger risk management practices may find themselves in an increasingly precarious situation.

Understanding Overhead: A Governance Challenge for Nonprofit Trustees
A companion piece to Risk Management for Nonprofits, this report discusses the importance of understanding and accounting for “overhead” expenses in evaluating the health of nonprofit organizations. The report serves as a high-level guide for trustees of nonprofits on how to make smart, informed decisions around funding overhead.

Oliver Wyman for Society Social Impact Annual Report 2016
This annual social impact report covers Oliver Wyman’s contributions to society in 2016 and the work of some nonprofit organizations it supports.

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