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Among the biggest challenges nonprofits face is covering their overhead when donors increasingly target their gifts to the charity's specific projects and programs, rather than the groups themselves.

"There is a movement away from the traditional notion of charity, or giving money in good faith, to social investing, where you actually see results," said Jeff Mason, vice president of Social Solutions in Baltimore, which provides performance management software to nonprofits in the human service area.

At a recent conference for nonprofit organizations in Washington, foundations and grant makers suggested that nonprofits may have better luck soliciting funding if they find ways to talk about what their organizations do and whom they serve with more than just numbers.

Mason said his software can help nonprofits take that tack. More funders are focusing on the outcomes of a nonprofit's work rather than how many people it serves, he said. They're looking for clear goals, indicators of program progress, methods of collecting data on program outcomes and evidence of nonprofits using these data to refine their service.

"Most nonprofits have great intentions but no good, clear understanding of the impact of their programs," Mason said.

A study from the Center for Nonprofit Advancement in Washington, D.C., showed that 63 percent of area nonprofits received funding from foundations, down 9 percent from December 2008. The center offers training and advocacy for 800 nonprofits in the region.

Forty-four percent said current funders warned about decreased funding this year and 41 percent said they had not met their 2009 fundraising goals for the first half of 2009. Nationally, 36 percent of grant makers cut their grants, while 27 percent gave more money, according to nonprofit monitor GuideStar.

The trend may be an indication of funders' growing preference for supporting projects and programs rather than the nonprofits themselves, especially their operational costs. This shift has troubled nonprofits for several years.

"People need to understand that keeping the phones and lights going is critical to the mission, but we also understand they want to see direct impact," said Anne Rouse, director of resource development and marketing for Habitat for Humanity of the Chesapeake in Halethorpe.

Nonprofits' operational aspects are often underfunded and rely primarily on individual donations, said Justin Pollock, spokesman for the Maryland Association of Nonprofit Organizations in Baltimore.

Baltimore law firm Ober/Kaler, which gave $35,000 to three local nonprofits last month, has always focused on how it can see the money being put to use, said Joseph Kovars, a principal and chairman of its community grants program.

He said funding programs makes it easier to see where the money is going and helps the firm feel more comfortable in its giving. The firm received 140 grant applications this year, up from 100 last year. Ober/Kaler also granted its customary total, which is down from the unusual $45,000 it granted last year.

The Delaplaine Foundation, a private family foundation now run out of Great Southern Enterprises in Frederick, has its own method of measuring outcomes, requiring grant recipients to complete its Project Program Progress Report.

"Particularly in these economic times, accountability is key," said Marlene Young, a trustee with Great Southern Enterprises. "We look very closely at funding nonprofits whose programs are in line with our mission statement."

The Delaplaine Foundation offers grants from $1,000 to $20,000 to support programs that strengthen the arts and sciences, historical preservation, educational advancement, spiritual enlightenment and physical well-being. Young said the foundation funded 71 organizations this year, versus 65 in 2008, although this year's grant amounts were smaller.

Nonprofits branch out

Some nonprofits are looking to business endeavors to help build revenues.

Sustainable Community Initiatives, a nonprofit in Edmonston, started out training people to collect construction materials from old buildings and has since moved onto a thrift store that sells low-cost building materials and other salvaged goods. This business, Community Forklift, has gone from one employee in 2005 to 15, with five added this year, said spokeswoman Ruthie Mundell.

"There is more and more interest in nonprofits having for-profit arms," she said, adding that for now most of the store's revenues go back into operations, especially for picking up donated goods. But soon, Mundell said, the group hopes to put more money into bringing back the nonprofit's mission.

"The big part of the mission has always been creating jobs," Mundell said.