In an article in Michigan Nonprofit Association’s May-June newsletter, Dione Alexander of the Nonprofit Finance Fund likened running a nonprofit to “walking a tightrope without a safety net while juggling.” This image either paints us as highly skilled and adventurous with nerves of steel—or a bit foolhardy, like kids who jump off the garage on a dare or wander onto a frozen river in November perhaps. There’s no doubt, though, that a really good nonprofit executive is a master of complexity.
There are times, however, when our very competence drives others to take liberties that make our jobs more difficult.
One executive director told me that the state contract that comprises most of her budget requires that her organization never turn anyone away or even put them on a wait list. But they have just been informed that the state will not pay for any work done under this contract since mid April until September—and the amount they will be owed at that time will be between $700,000 and $800,000. The organization has a credit limit far less than that so this makes the near future nerve wracking at best. In short, the state has forcibly taken a loan from this small organization while the agency worries about how to make payroll and tries to convince vendors to wait to be paid. Says the executive, “We’ve always had to ‘slow pay,’ and all the providers have always found a way to make it through so there’s never really been a huge up-in-arms, ‘this-has-got-to-stop’ reaction.”
The problem of states making late payments to nonprofits is growing considerably, as many state budgets become more constrained and that is causing plenty of fall out at the agency level. And we know that late payments on contracts is not the only issue you may have in contracting. The same executive director I spoke to told me that the state is only covering about 80% of the costs of providing the contracted service. These issues are, of course, not new but they are definitely making a bad situation worse for many organizations as nonprofits experience declining revenues from other sources.
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