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Note: This report is available in its entirety in the Portable Document Format (PDF).
Executive Summary
Nonprofit organizations in the Washington, D.C., region are vital players in the lives of local children and youth, providing a host of much needed services, such as afterschool programs, tutoring and mentoring, youth development activities, child care, and many more. In total, there are more than 1,100 local nonprofit providers of child and youth services in the D.C. metro area. These providers currently face difficult social and economic challenges. From rising social service needs that impact demand for services to state and local budget shortfalls that can jeopardize funding flows, child and youth nonprofits in the region confront tough choices about how to maintain service levels.
Improving the lives of children and youth, particularly in challenging social and economic times, requires that local providers have sound financial structures and maintain good fiscal health. Currently very little is known about the financial well-being of child and youth nonprofits in the D.C. metro area. It is important to know, however, how these groups are faring, because understanding their financial strengths and weaknesses can facilitate strategic grantmaking and effective public policy. This report closely examines the finances of local child and youth nonprofits in 2000 and the changing finances of a panel of local providers from 1998 to 2000. The report provides the first systematic examination of the fiscal picture of nonprofits that serve children and youth in the region and yields the following key findings.
Local nonprofit organizations that serve children and youth in the D.C. region had more than $1.5 billion in revenue in 2000.
- The more than 1,100 local providers also had total expenses of $1.3 billion and assets of $1.9 billion in 2000. Despite comprising a billion-dollar service field, nonprofit child and youth providers are significantly smaller, on average, than other types of nonprofits in the region.
- Local nonprofit child and youth providers in the region relied on client fees for more than half of their income in 2000.
- Among local child- and youth-related nonprofits, 83 cents of every dollar was spent on programs and services in 2000.
- Spending on fundraising and administration was relatively low in the region's child and youth service field in 2000.
Many child and youth nonprofits in the region showed signs of fiscal stress in 2000.
- Nearly one-third of local nonprofits that serve children and youth lost money in 2000.
- Although many child and youth nonprofits were financially stressed in 2000, nonprofit primary and secondary (non-charter) schools fared well financially.
- Compared with local private schools, most other child and youth groups in the region ended 2000 with relatively few assets.
The fiscal health of child and youth nonprofits varied widely across communities.
- Among all jurisdictions in the region, Manassas and Fairfax had the financially strongest nonprofit child and youth sectors in 2000, ranking high on multiple fiscal health measures. These communities had thriving child and youth fields that year.
- On many fiscal health rankings, the District, Montgomery County, Alexandria and Falls Church had reasonably strong sets of child and youth nonprofits in 2000. These localities had striving nonprofit child and youth sectors that year.
- Loudoun, Arlington, Prince George's, Prince William, and Frederick counties had child and youth nonprofits that, on the whole, ranked near the bottom among all jurisdictions in the region on multiple fiscal health measures in 2000. Taken together, these communities had child and youth fields that were financially surviving in 2000.
For many child and youth nonprofits in the region, fiscal stress increased between 1998 and 2000.
- Expenses grew faster than revenues from 1998 to 2000 at the typical child and youth nonprofit in the D.C. region.
- Local child- and youth-related nonprofits, as a whole, became slightly more reliant on user fees between 1998 and 2000. Heavy dependence on user fees can be troublesome for organizations when the ability of clients to pay is reduced.
- There was little change in the proportional spending on programs, administration and fundraising by child and youth nonprofits between 1998 and 2000. The percentage spent on management and fundraising costs remained low.
- The percentage of local child and youth nonprofits that lost money was higher in 2000 than in 1998, and, by 2000, budgets had tightened at nearly half of all providers.
- Although operating margins at many local providers were shrinking, net assets in the child and youth service field increased substantially between 1998 and 2000.
Taken together, the findings show that many nonprofits that serve children and youth in the D.C. area showed signs of fiscal stress in 2000, one year before the 9/11 attacks on the Pentagon and the World Trade Center that exacerbated the decline in the D.C. regional economy and helped to create a growing set of social and economic challenges that linger today. Clearly, not all child and youth nonprofits fared badly. In fact, nonprofit private schools experienced considerable financial success in 2000. But many providers in the region were on shaky financial ground at the beginning of 2001. Such budgetary circumstances can negatively affect both the quantity and quality of nonprofit services.
In the end, the disparities in the fiscal health of child and youth nonprofits across jurisdictions in the region highlight the need for public action, although the applicability of policy choices varies by type of community. For jurisdictions with financially weak child and youth service fields, for example, local officials may need to carefully review the structural relationships among local child welfare agencies and front-line nonprofit providers to determine if regulatory or contractual changes are needed. For communities that have fiscally strong providers, local officials might consider a strategy that monitors the financial health of child and youth nonprofits and acts quickly with infusions of funding or regulatory changes if the fiscal viability of their local providers begins to decline. Indeed, localities with financially strong child and youth sectors cannot be complacent as the social and economic environment in the region continues to change.
Note: This report is available in its entirety in the Portable Document Format (PDF).
Acknowledgments
The author wishes to acknowledge the contributions made by the Morino Institute, the Advisory Board Foundation, the Morris & Gwendolyn Cafritz Foundation, the Annie E. Casey Foundation, the Community Foundation of the National Capital Region, the Consumer Health Foundation, the Freddie Mac Foundation, the Eugene & Agnes E. Meyer Foundation, and the Washington Area Women's Foundation. The financial support from these institutions made this research possible.
The author would also like to thank Jennifer Auer, Constance Lindsay, and Reisha Phills for their research assistance and statistical support. Thanks also to the following members of the advisory committee and research group for their suggestions and comments.
Members of the Advisory Committee
- Maxine Baker, President & CEO, Freddie Mac Foundation
- Chuck Bean, Executive Director, Nonprofit Roundtable of Greater Washington
- Elizabeth T. Boris, Director, Center on Nonprofits and Philanthropy, The Urban Institute
- Kae Dakin, Executive Director, Washington Regional Association of Grantmakers
- Terri Lee Freeman, President, Community Foundation for the National Capital Region
- Irene Lee, Senior Program Officer, Annie E. Casey Foundation
- Mario Morino, Chairman, Venture Philanthropy Partners
- Carrie L. Thornhill, D.C. Board of Education
Research Group Members
- Shirley Marcus Allen, Senior Partner, Venture Philanthropy Partners
- Julie Dean, Program Director, Youth Investment, DC Agenda
- Carol J. De Vita, Senior Research Associate, The Urban Institute
- Sharon Forrest, Chief of Staff, Freddie Mac Foundation
- Kathryn Pettit, Research Associate, The Urban Institute
- Caterina Gouvis Roman, Senior Research Associate, The Urban Institute
- Peter Tatian, Senior Research Associate, The Urban Institute
- Kathy Whelpley, VP of Program & Donor Engagement, Community Foundation for the National Capital Region
The views expressed here are those of the author and do not necessarily reflect those of the Urban Institute, its board, or its sponsors.
The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
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