Some cities look to save money by merging nonprofits

The San Francisco Examiner features a story about the mayor's call for nonprofit mergers. As more and more cities, counties, and states look at options like this, what are the factors being examined? Is the true impact of the nonprofit community understood? The article below offers few details about why the City arrived at this decision. As the article relates:

The City lacks a clear vision and plan for the $500 million it spends annually on nonprofit organizations that provide vital services to residents, according to a new report.

That assessment comes as nonprofits face an uphill battle to survive during the recession, and as demand for charity increases. More than half the 804 nonprofits that received financial aid from The City last fiscal year provide health and human services to residents.

San Francisco is also facing a projected $438 million deficit for next fiscal year — a deficit that will result in layoffs, service cuts and decreases in contracts with nonprofits.

Now, a survey commissioned by Mayor Gavin Newsom suggests that struggling nonprofits should merge with others or completely shut down. The report’s authors also want nonprofits to find funding from more than one source and will complete a plan that lays out future priorities for nonprofits.

The report also calls for better oversight of organizations that receive public money.
“City departments should more assertively implement, monitor and take action on corrective action plans for nonprofits with grave performance and compliance issues,” the report said.
San Francisco organizations that receive 100 percent of their funding from taxpayers are most at risk in a down economy, said Sandra Hernandez, CEO of the San Francisco Foundation, which co-authored the report with City Attorney Dennis Herrera.

The San Francisco Foundation is an umbrella organization that grants funds to a variety of smaller nonprofits.

Charity arms
A new report suggests some city nonprofits would be better off merging or shutting down entirely.
7,093: Registered nonprofits in The City
54,000: San Franciscans employed by nonprofits
804: Nonprofits contracted by The City in 2007-08
$483 million: Amount spent by The City on nonprofits
$58 million: Amount spent by The City on indirect costs