Not Worth It: Chicago Catholic Charities Quits 75 Government Contracts

For the thousands of nonprofits who have or are considering government contracts, this is a blockbuster story. David Struett of the Chicago Sun-Times writes that the Catholic Charities of the Archdiocese of Chicago plans to relinquish 75 of their government contracts to strengthen and sharpen the organization and its services. The cut will amount to about 12% of its budget and will result in laying off three hundred staff members.

For those who are interested in the problems and risks inherent in the “business model” of nonprofits primarily supported by government, you can go here for a webinar and resources on the topic.

Their reasoning will come as no surprise to other government-dependent nonprofits. “Over the last decade,” observes Sally Blount, president and CEO of the organization, “navigating the government services sector has grown more complex, and funding has not kept up with the high rates of inflation. That means that many contracts no longer cover their direct costs, much less the increasing costs of administering them.”

What that generally means, of course, is that private money is being used to offset the difference. In this organization, which is 73% reliant on government money, that can lead to a lack of agility, which can get in the way of running the programs the community needs most. (Indeed, the organization is not just quitting dozens of its government-funded programs but piloting new programs too.)

One of the interesting things we found when looking further into the organization is the bold and inventive way it set up its financials in its 2023 impact report (Spirit, Winter 2023) to clearly exhibit the gap of $50 million between the government contracts and specific program fees and the costs of doing business. Presenting the financials this way demonstrates the operating losses before the injection of more than $40 million in private funds to offset that gap. This reporting design speaks to the potential of financials to clarify rather than obscure reality. Board chair Michael Monticello says, “If we want to increase our impact over the years ahead, we must sharpen our strategic focus, while simultaneously reducing the time our staff spends navigating an increasingly complex and uncertain government funding environment.”