The Nonprofit Finance Fund (NFF) has released its annual State of the Sector survey, and it shows nonprofits like yours are struggling with a tough funding environment and increasing need for the services you provide. This is requiring tough choices – and changing the way you do business, according to the survey.Here’s a summary of the report from the NFF. Does it capture your situation? Are you better or worse off than your peers?According to NFF:Nonprofits need new funding sources and models:• 42% of survey respondents report that they do not have the right mix of financial resources to thrive and be effective in the next 3 years.• 1 in 4 nonprofits has 30 days or less cash-on-hand.• Over the next twelve months, 39% plan to change the main ways they raise and spend money.• 23% will seek funding other than grants or contracts, such as loans or investments.Nonprofits that receive government funding face particular challenges:• Only 14% of nonprofits receiving state and local funding are paid for the full cost of services; just 17% of federal fund recipients receive full reimbursement. Partial reimbursements require additional funding to cover the growing gap as nonprofits serve more people.• Government is late to pay: Among those with state or local funding, just over 60% reported overdue government payments; over 50% reported late payments from the federal government.Under these challenging conditions, many nonprofits are unable to meet growing need in their communities:• For the first time in the five years of the survey, more than half (52%) of respondents were unable to meet demand over the last year; 54% say they won’t be able to meet demand this year.• This represents a worrying trend; in 2009, 44% of nonprofits said they were unable to meet demand.• Jobs (59%) and housing (51%) continue to be top concerns for those in low-income communities.• 90% of respondents say financial conditions are as hard or harder than last year for their clients; this is actually a slight improvement from prior years’ outlook.Nonprofits are changing the way they do business to adapt to the new reality. In the past 12 months:• 49% have added or expanded programs or services; 17 percent reduced or eliminated programs or services.• 39% have collaborated with another organization to improve or increase services.• 39% have upgraded technology to improve organizational efficiency.• 36% engaged more closely with their board. For more on the survey and detailed data, go here.