Despite the economic recovery in the U.S., many nonprofits are struggling with increasing demands for services and reduced funding, a new study from the Nonprofit Finance Fund (NFF) found.

The struggles nonprofits face are not the short-term result of an economic cycle. They are the results of fundamental flaws in the way we finance social good.

Among the more than 5,000 nonprofits polled for the sixth annual “State of the Nonprofit Sector” survey, 56 percent were unable to meet demands last year—the highest percentage in the survey’s history—and 58 percent reported they won’t be able to do so in 2014.

“The struggles nonprofits face are not the short-term result of an economic cycle. They are the results of fundamental flaws in the way we finance social good,” NFF CEO Antony Bugg-Levine said in a statement.

The survey found, for example, that almost half of nonprofits that receive government funding reported a decline in this type of assistance over the last five years.

This was the case for many Meals on Wheels programs last year. Amid federal budget cuts under sequestration, which are still ongoing, the Meals on Wheels Association of America reported that 70 percent of its members were reducing the number of meals delivered to seniors throughout the country last summer.

“The real impact of sequester is that our programs don’t have the ability to expand to meet the growing need,” MOWAA President and CEO Ellie Hollander said in a statement. “We should be investing in these programs to ensure our seniors have the nutritious meals they need to remain healthy and independent.”

The NFF survey found that 80 percent of nonprofits reported an increase in the demand for services last year, the sixth year in a row. And despite news that charitable giving was up in 2013—in fact, a Blackbaud study found that charitable giving in 2013 had the largest year-over-year increase since the Great Recession—the top challenge for nonprofits is achieving long-term financial sustainability, according to NFF.

Nonprofits need to come up with alternative funding models and strategies, said Kerry Sullivan, president of the Bank of America Charitable Foundation, an NFF survey sponsor.

Some groups are already taking additional steps to ensure long-term success. Almost 50 percent of those surveyed by NFF collaborated with other organizations over the last 12 months in an effort to improve or increase services. Forty-eight percent invested in professional development for their staff members, and 40 percent upgraded software and hardware to increase organizational efficiency.

“Today, it’s clear that government funding and traditional philanthropy alone can’t cover the critical work of nonprofits addressing pressing challenges in our communities,” Sullivan said.

(Stockbyte/Thinkstock)