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In this paper the Social IMPACT Research Center at Heartland Alliance and The Chicago Community Trust examine the financial conditions of Illinois human service nonprofit organizations.

The analysis reveals that nonprofits are an important subset of the business community that are generally well-managed; however, by their very nature they rely greatly on public support which leaves them, their employees, and the people they serve particularly vulnerable during state fiscal crises. 

• Human service organizations are generally well-managed – fundraising costs are low, representing only 1.6 percent of total expenses, debt-to-asset ratios are healthy, and the majority have a positive change in net assets from the beginning of the year to the end.
• Illinois human service organizations rely heavily on government funding. If public support goes down or contracts are canceled, organizations of larger sizes with better revenue mixes may fare better, but the effect on smaller organizations could be devastating:
  • Forty percent of revenue comes from public funding, and smaller human services nonprofits are particularly reliant on it.
  • Half of total revenue comes from program service revenue, which includes government fees and contracts.
• These organizations do not have huge reserves, and over 1 in 10 carry a negative fund balance. Late state payments put many human service organizations in very precarious situations because there is not much to fall back on.

A cross-sector analysis reveals overarching similarities but also variation as the financial conditions tend to vary by sector and also by size of the organization within the sector:

• Overall, most sectors appear financially stable with revenues exceeding expenses, healthy debt-to-asset ratios, and on the aggregate positive, though generally modest, changes in net assets.
• Certain sectors, including crime and legal-related, youth development, and other human services, tend to rely more heavily on public support as a percent of total revenue and may be more susceptible to state budget cuts.
• Other sectors, including mental health and crisis intervention, employment, and housing and shelter, are more reliant on program service revenue, which includes government fees and contracts. These organizations may be particularly impacted by late payments and cancelled state contracts.
• Much of the variation between sectors might be explained by the nature of the services they provide; sectors that offer more reimbursable direct services to clients see greater revenue from program services than other sectors such as crime and legal-related programs which generally do not receive state-reimbursed revenue for their services.
   

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