Community engagement and financial vulnerability during an economic crisis

As donors of time and money analyze nonprofit organizations to determine where they can best invest their donations, comparative information is difficult to find. Without clear and compelling metrics to compare one potential nonprofit recipient to another, how can these donors make informed decisions about where their time and money will best be utilized? Due to the difficulties of comparing the value of one mission to another in an objective way, the metrics used in this study consider nonprofit organizations and their readiness to use donations effectively from an organizational perspective rather than a mission-focused one. The Community Engagement Index (CEI) assesses an organization’s commitment to integrating volunteer support throughout all its operational realms, while the Financial Vulnerability Index (FVI) considers the long-term financial stability of the organization. In this study, a purposive sample of nonprofit organizations in Texas was examined through the lens of the FVI in seven biennial time periods from 2000 to 2012, while CEI results were considered in 2010. The intention was to determine whether the Great Recession of 2007-2009 caused meaningful changes in FVI scores for this sample. Due to inconsistent filings of Form 990 from which FVI data was pulled, consistent FVI information was available for only 29 of the organizations in the sample. The organizations in this sample showed little statistically significant change in their FVI during the time of the recession, though it is difficult to know whether this lack of change is due to the small size of the sample or the strong economic performance of Texas throughout the economic crisis that hit other states more severely. Further testing with a larger sample, as well as CEI data from additional years, would strengthen a future study of this question. The unique nature of the information provided by each of these metrics is shown by the fact that they do not correlate with standard financial indicators.