Approximately 50 percent of U.S. nonprofits are operating on a financial precipice, a new report by Oliver Wyman, SeaChange Capital Partners, and GuideStar reveals.

The Financial Health of the United States Nonprofit Sector: Facts and Observations examines the finances of more than 219,000 U.S. nonprofits for fiscal years 2010-2014, the period covered by a previous report on Philadelphia-area nonprofits. It provides an overview of the sector; analyzes nonprofit financial health by organization size and mission area; and suggests ways to improve nonprofit financial health. The analysis was derived from GuideStar’s proprietary archive of digitized IRS Form 990 data.

Nonprofit financial insecurity is a significant issue, John MacIntosh, partner at SeaChange and another of the report’s authors, explained. “The scale of the problem is vast. Just restoring currently insolvent nonprofits to solvency would require an injection of $40 to $50 billion dollars. Changes to federal tax code may exacerbate the issue, by changing charitable donations and/or by increasing the likelihood of future pressure on federal budgets for human services.”

The report suggests several steps nonprofit leaders, funders, regulators, and policy makers can take to improve financial health in the sector. Initial steps include:

• Nonprofits – use the report to benchmark financial health.
• Funders – create more flexible funding models.
• Government – revise current cost-minus contracting practices.

The Financial Health of the United States Nonprofits Sector: Facts and Observations is available for free download (registration required).