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A quarter of Wisconsin nonprofits responding to a survey about their financial health do not have the cash reserves to ensure their survival beyond a month - one sign of a challenging general outlook for the state's charitable organizations.

"A cautious realism is really setting in," said Salli Martyniak, president of Forward Community Investments, which on Tuesday released the findings of its third annual Wisconsin Nonprofit Economic Impact Report.

"In years past I would have said it was cautious optimism, that nonprofits thought they could make up the difference" as donations dropped while needs kept rising, she said. "I think now there is a new normal, and that's something everybody is trying to get their hands around, as far as what it looks like, what it means for nonprofits and what it means for communities."

Among key findings of the report, based on responses from 325 Wisconsin nonprofits:

• Thirty-eight percent planned to reduce or modify services, compared with 33 percent in 2010 and 29 percent in 2009.

• Twenty-four percent of nonprofits responding had cash reserves of one month or less; 27 percent had two to three months' worth of reserves; and 49 percent had four months or greater.

• Nonprofits with annual operating budgets under $500,000 or above $5 million were less likely to report "chronic financial problems" than in 2009 and 2010. However, the report saw an increase this year in nonprofits in those budget categories who described themselves as "healthy but vulnerable."

• Nearly half of nonprofits who receive government funds reported a decrease in their contracts, up from 28 percent in 2010.

"This is really one of the most startling numbers," Martyniak said of the government funding drop. "While other states might have been experiencing this earlier on, in 2012 we'll probably see some of the biggest cuts that our Wisconsin nonprofits have seen from the state government budget."

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A lot of nonprofits are "treading water," said Crystel Anders, director of Community Shares of Wisconsin, which represents more than 60 nonprofits.

"We just find that nonprofits are busier and busier. There's an expectation to do more and more with less," said Anders, who has followed the FCI survey results for the past three years.

"I do think that nonprofits are extraordinarily flexible, and many tend to be very entrepreneurial in order to respond to some pretty hard knocks. I'm not sure what the new normal is, but I have a faith in the ability of nonprofits to be able to continue their work."

Created in 2009 to see how nonprofits were weathering the recession, the survey showed an uptick in optimism in 2010 that faded in 2011. FCI, which provides loans and advisory services to nonprofit organizations, sent out its 2011 survey to 3,790 contacts between July 14 and Aug. 4. Of the 325 respondents, 29 percent are human services nonprofits; others are in education (14 percent), community development (12 percent), health care (12 percent), advocacy and social action (12 percent), housing (8 percent) and art/culture (7 percent). The survey was sponsored by Wegner CPAs; a full report is online at www.forwardci.org/.

In light of realities reflected in the survey findings, nonprofits are looking for ways to broaden their funding streams, said Katie Castern, manager of agency development for the Community Action Coalition.

"The big push is on diversifying funding sources, so that if one government funding source gets reduced, it doesn't pull down your whole program," Castern said.

Threats to the federal Community Block Grant program, which provides 14 percent of Community Action Coalition's $4.6 million budget and is used to match and leverage other funding, created "a lot of uncertainty" for Community Action Coalition earlier this year, Castern said.

In the end, those federal funds were cut only 3 percent. Still, the agency has had to cut back its 2011 office hours to four days a week, and now staffs its free clothing center only three days a week instead of four.

"We serve families that are affected by poverty," Castern said. "With people losing jobs and losing their health insurance, we're seeing people who have never needed help before, people who were middle-class but suddenly are hurting. So there's a new pressure on nonprofits with (higher) numbers to serve. For human services, there's a lot more need out there right now."

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