1. Internship Abstract
Title: Correlations Between Failed Large to Mid-sized Nonprofits: A Closer Look at Why
Nonprofits Fail
Name: Shelly Espejo
Preceptors: Direct Supervisor: Sandra Cristina Guerra, LMSW, Program Administrator
Project Supervisor: Sandra Cristina Guerra, LMSW, Program Administrator
Agency: The Fordham Center for NonProfit Leaders (FCNPL)
Purpose: To re-examine past failed nonprofits and analyze traits that contribute to the failure or success
of nonprofits to incorporate a strategic method for The Fordham Center for Nonprofit Leaders.
Significance: Nonprofit human service organizations play a critical role in building and supporting the
well-being of New Yorkers,enabling 2.5 million of New Yorkers to contribute to their communities.
Nonprofits build the welfare of individuals by training and helping keep workers in good jobs, providing
early childhood education, and respond to emergencies and natural disasters, among many other
community services.
Method: An in-depth analytical review was performed on past studies done by FCNPL,longitudinal
studies done by the Human Service Council, and qualitative studies on FCNPL’s sponsored seminar,
“When Nonprofits Fail: What to Do When Deficits Hit”. Nonprofits’ closures were right after designated
into 5 particular sectors: Financial condition, Infrastructure,Leadership, Oversight, and Relationship
between nonprofits and government funders. Nonprofits’ failures were then analyzed and organized with
recommendations provided by panelists and FCNPL’s book, “Nonprofit Management: A Social Justice
Perspective” allowing identifying major problems among failed nonprofits: instrumental in helping gather
best practices for nonprofit and create a system to success.
Results: Organizations with budgets from $10- $49 million are more likely to be in financial distress than
those with budgets of less than $1 million, and 60 % are financially distressed, having no more than 3
months of cash reserves. Underfunded government payment rates are primary driver of financial distress
with only paying 80₵ or less of each dollar of true program delivery costs. Underfunding and contract
payments delays lead to costly borrowing, acquiring interest not covered by government contracts.
Redundant audits, unfunded mandates,weak internal financial and programmatic reporting, and other
oversight mechanisms add up to overwhelming administrative costs and inability to alert short and long-
term fiscal dangers early enough to address them.
Conclusion: Three major common problems were discovered: cash flow obstacles and chronic
underfunding, ineffective and unworkable programs, and lack of adequate risk assessment in the sector.
Capitalizing the sector,Program collaboration, and Risk assessment (CPR) will serve as an effective
strategic method to A) reduce staff turnover, invest in infrastructure, training, and accounting systems, B)
avoid repeated audits, reduce cost, and highly-designed, appropriated evaluated program, and C)
implement a financial/pragmatic reporting system and enhance board members and staff engagement.