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Executive Summary

Families and communities are stronger when they have access to the vital building blocks of health and well-being.

Community-based organizations, in partnership with the philanthropic and the government sector, provide those essential building blocks.

A National Imperative: Joining Forces to Strengthen Human Services in America is a report commissioned by the Alliance for Strong Families and Communities and the American Public Human Services Association (APHSA), and produced by Oliver Wyman and SeaChange Capital Partners.

This groundbreaking report focuses on human services community-based organizations, their economic and social impact, and the need to preserve and strengthen their critical role in building foundational supports that contribute to the health and well-being of individuals, families and communities.

Funding for the project was provided by The Kresge Foundation and the Ballmer Group, with additional support from the Health Foundation for Western & Central New York, Selective Insurance Company of America, Mutual of America, and the U.S. Chamber of Commerce.

According to this first-of-its-kind report from the largest national associations representing government agencies and nonprofits in human services, community-based organizations that provide social services are in financial peril:

  • On average, government contracts currently cover only about 70 percent of nonprofits’ direct program expenses and less than half of all indirect expenses.
  • Nearly one in eight human service nonprofits are technically insolvent, meaning that their liabilities exceed their assets.
  • Three in 10 nonprofits have cash reserves that cover less than one month of expenses.
  • Nearly half have a negative operating margin over a three-year period.

The report identifies five “north star” initiatives designed to put community-based organizations on the path of financial stability while improving population health and well-being, increasing economic productivity, and lowering social costs over time:

  • Commitment to Outcomes Efforts should be focused on outcomes and accountability, with funding targeted to outcomes and results rather than outputs or services delivered.
  • Regulatory Modernization Regulators should engage in a review and reform of community-based organization regulation, particularly in the area of litigation risk, which has become a serious issue for organizations.
  • Capacity for Innovation The human services ecosystem must develop its capacity for innovation through better data sharing and analysis, technological strategies and knowledge and leadership exchange. Public and private funders will also need to recognize the importance of the capacity for innovation, and the need to support that through funding.
  • A Strategic Partnership Approach Community-based organizations must look for opportunities for deeper partnerships and networks across the human services sector and related systems. Grants from public and private funders should include allocating financial resources toward partnership development.
  • New Financial Strategies community-based organizations must look to develop more robust finance and financial risk management capabilities, including scenario planning, recovery and program continuity planning, benchmarking and self-rating, as well as reporting and disclosure.

The report also notes that governments are often late with payments by months, if not years. In addition, excessive government reporting requirements tie up nonprofit workers who could be spending that time helping clients instead. And both government and philanthropy place restrictions on funds that make it more difficult for nonprofits to respond to their communities’ changing needs. Further compounding these challenges, the findings come at a time when a recent tax deal is expected to reduce charitable giving to nonprofits by as much as $13.1 billion a year and deep cuts to federal social services programs are favored by the White House.

Human service community-based organizations contribute significantly to our economy. Their services impact one in five Americans. For example, nearly 47 million Americans rely on food banks and almost 700,000 children pass through the foster care system each year. They generate in excess of $200 billion in economic activity through wages and services, an economic impact greater than that of the entire airline industry. Most importantly, they deliver services that are critical not just to the economy but to social impact, particularly in the face of an aging population, growing poverty rates, and the opioid epidemic.

Despite the current financial state of the sector, much of the report actually strikes an optimistic tone, highlighting positive case studies and providing recommendations for how nonprofits can work better with their government and philanthropic counterparts. In Montgomery County, Maryland, the nonprofit association Nonprofit Montgomery, funded by the County’s Department of Health, provides local community-based organizations with tools and training to help them succeed financially and to navigate the contracting process with government agencies.

About the Alliance

The Alliance for Strong Families and Communities is a strategic action network of thousands of committed social sector leaders who through their excellence, distinction, and influence are working to achieve a healthy and equitable society. We aggregate the very best sector knowledge and serve as an incubator for learning and innovation to generate new solutions to the toughest problems. We accelerate changethrough dynamic leadership development and collective actions to ensure policies and systems provide equal access and opportunity for all people in our nation to reach their full potential through improvements in health and well-being, educational success, economic opportunity, and safety and security. 

About The American Public Human Services Association

The American Public Human Services Association (APHSA) is a bipartisan, nonprofit membership organization representing state and local human service agencies through their top-level leadership.Through our member network and three national Collaborative Centers, APHSA seeks to influence modern policies and practices that support the health and well-being of all children and families and that lead to stronger communities. APHSA connects its members to national policymakers and human services organizations across a wide circle of stakeholders in the health and human services sector, as well as key partners in education, housing, employment and others. APHSA also helps members build more capacity for their teams through access to our professional education and development conferences, technical expertise, publications and our Organizational Effectiveness practice. 

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