Community Variation in the Financial Health of Nonprofit Human Service Organizations

Abstract

Nonprofit human services organizations (HSOs) provide vital services to communities. Yet studies show that the density of these nonprofits varies from one community to the next, often with fewer quantities located in vulnerable communities. These findings have led to concerns regarding the ability of the human services subsector to meet community needs. In this article, however, we make the argument that organizational density is a limited indicator of a sector’s ability to provide services, and suggest that financial health is a more robust indicator. We model six measures of financial health as conceptualized by Bowman and examine relationships between these measures and indicators of community vulnerability. Our results indicate that variation exists in four of our six outcome measures (equity ratio, months of spending, mark up, and months of liquidity), and that contextual effects (e.g., being located in a minority or low-mobility community) partially explain these variances.