State and local governments across the country partner with nonprofits to deliver a bevy of social services — from health care to housing to early childhood education. But many of those nonprofits are struggling financially.

According to a first-of-its-kind report from the largest national associations representing government agencies and nonprofits in human services, governments underpay nonprofits and burden them with costly or time-consuming regulations. Meanwhile, a large share of nonprofits fail to manage their budgets wisely.

The report includes findings from a survey of executives at 40 government agencies and 177 nonprofits, plus a review of three years of tax filings from more than 40,000 nonprofits. Among the key findings:

  • On average, government contracts cover only about 70 percent of nonprofits' direct program expenses and less than half of indirect expenses.
  • Nearly one in eight human service nonprofits are technically insolvent, meaning that their liabilities exceed their assets.
  • Three in 10 nonprofits have cash reserves that cover less than one month of expenses.
  • Nearly half have a negative operating margin over a three-year period.
  • About one-third also have no plans in place to deal with financial challenges.

Read the full article about money problems facing nonprofits at Governing magazine.