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More than 1.5 million nonprofit organizations perform a variety of charitable and other activities each day cross the US. Indeed, they constitute a significant percentage of the overall American workforce. Nonetheless, many are facing some significant financial challenges, according to a recent article by Bruce DeBoskey, which appeared in the Chicago Tribune online edition.

Diverse Business Demographics

According to the article, nonprofit organizations rack up some serious economic statistics: They contributed 5.4 percent of the nation’s GNP in 2014. They employed 14.4 million workers in 2013. In addition, over 25 percent of Americans volunteered for nonprofits in 2014.

A Variety Of Financial Risks

Despite the remarkable work they do and the number of folks involved in their activities, many nonprofits face serious financial challenges. Mr. DeBoskey, citing a study of over 219,000 nonprofits by Oliver Wyman, SeaChange Capital and GuideStar, mentioned the following concerns in particular:

  • Large Percentage At Risk: Half of US nonprofits are at risk, “Facing inadequate cash reserves, negative income margins and technical insolvency.
  • Insolvency: As many as 8 percent of nonprofit organizations have liabilities exceeding assets, indicating they are insolvent.
  • Losing Money: Thirty percent of these organizations have actually lost money over the last three years.

Indeed, the challenges are greater in the smaller to medium-sized nonprofits, which are hampered by limited financial resources.

Tax Law Changes Pose New Threats

The sweeping tax reforms legislated by Congress and signed by the president may further affect the financial health of nonprofit entities. An expected decrease, from 30 percent to 5 percent, of those who itemize their deductions under the new law is expected to hit nonprofits hard. Mr.DeBoskey suggests that overall charitable giving in 2018 may fall by $20 billion. In addition, changes to the estate tax exemption make less people likely to give to charity upon their passing.

Nonprofit Patrons Can Get Involved

Donors and patrons of nonprofit organizations can help, according to the article. Included among the potential remedies are covering overhead expenses, encouraging restructuring or mergers, and the creation of “Rescue Funds” for particularly important organizations. In addition to digging deeper into their pockets, donors need to become “More careful, strategic and thoughtful with their giving than ever before.”