Leading a Nonprofit in Challenging Times

“Leadership is found in the action to defeat that which would defeat you.”
— Rev. C. T. Vivian, civil rights activist

Many nonprofits today are focusing more on survivability than sustainability. Large and small, nonprofits have had to “pivot” into the pandemic, a storm no one could have predicted.

The impact has been great. The Center for Civil Society Studies found that 1.64 million nonprofit workers lost their jobs between February and May of 2020. The Fundraising Effectiveness Project’s 2020 First Quarter report shows a 6 percent decrease in charitable giving. BDO’s 2020 Nonprofit Benchmarking Survey shows 69 percent of nonprofits have postponed or cancelled events, 87 percent have encouraged or required staff to work remotely and 57 percent limited or cancelled programs.

Nonprofits need adaptive, creative and considerate financial leadership. They can no longer use past history to project the future; the present is a different world with different priorities.

Cash is king; know your financial condition.

First, nonprofits need to assess their current position, particularly their cash position. Many nonprofits have limited liquidity. Others may have reserves that are tied down by donor restrictions. Some thoughts to consider when recomputing short-term and long-term cash flows:

  • What unrestricted liquid assets does the organization have?
  • Will donors be willing to release restrictions on previously made donations?
  • Are borrowing options available?
  • Where does the organization stand with existing or renewing government funding?
  • Is there a way to accelerate any revenues?
  • Can expenses be reduced or payments delayed?
  • What new costs will the organization need to fund for additional program needs, remote working arrangements or other changes related to the post-COVID working environment?

Connect and consider all financial resources.

There are numerous funding opportunities available to nonprofits, such as Payroll Protection Plan funding, CARES Act loans and SBA loans through state jurisdictions. Be aware that the programs are complex and available funds dry up quickly. The National Council of Nonprofits provides an updated listing and resources available at https://www.councilofnonprofits.org/nonprofits-and-coronavirus-covid-19. Nonprofit leaders need to become expert quickly or seek counsel. Many accounting and legal firms have developed teams of experts to help with these challenging decisions.

Understand revenue streams; analyze the knowable future.

Nonprofits need to assess the damage done to existing revenue streams. The in-person, event-based fundraising model cannot be relied upon. Maybe it is time to reassess events anyway. These events can be costly and use up large amounts of staff and volunteer time. Is there a way to generate the same net “profit” with other types of donation requests?

As state and local governments have seen their tax bases shrink, their ability to keep stable funding levels for nonprofits as they balance their own budgets has been compromised. Many states have already told nonprofits their contracts will not be renewed, or will be renewed for shorter periods. Nonprofits receiving government funding would be wise to contact their fiscal agents to better predict these revenues.

Many organizations have seen their capabilities stretched during the crisis. How quickly can program fees be billed and collected? Does the organization have the administrative capacity to support these services?

There is some good news from a recent study of philanthropic individuals by Fidelity Charity, which found that 25 percent of responders planned to increase their donations post COVID and 54 percent planned to maintain prior giving levels. Younger donors plan to give more. Donors will continue to support their favorite charities especially if they know how their funds are being used. The bad news is that volunteers, particularly older volunteers, plan to dramatically reduce their activities. The study also confirmed that almost all donors have concerns about a recession and the state of the current economy. Political uncertainty is giving donors pause as well.

Calculate the impact.

Developing real-time data is vital. Most importantly, nonprofits need to calculate the financial impact of the pandemic. Current accounting for profits and losses must be complete and timely. Cash flow projections are more important than ever and should be fact-based not wish-based. More than likely, budgets will need to be recast.

Just as important as financial impact is mission impact. Programmatic statistics must be documented. How many more meals were provided by a food bank? How many more counseling sessions were provided to the homebound? How much assistance was provided to the newly unemployed?

Programs may need to be evaluated. At this point, some programs may need to be suspended, temporarily or permanently. Leadership should be evaluating how each program contributes to the long-term mission of the organization and its financial impact on the organization.

Collaborating might be the answer.

Consider that collaborating with other nonprofit and for-profit entities might be an answer to a current dilemma. Organizations that work together and share goals often become more productive.

Communicate, communicate, communicate.

Nonprofit leaders will be expected to communicate even if they don’t have all the answers. Employees, volunteers, board members, donors and beneficiaries will look to the leadership for current, reliable information and action plans.

Protect your employees, but be honest with them. Get your HR Department involved in creating policies and processes to accommodate the current environment. Employees main concerns include how and when to report to work, how to report their time, when they will be paid and their expenses reimbursed, and how to report cases of COVID-19. Consult an attorney who specializes in HR matters to assist you. Create an internal committee to foster both participation in the solutions and buy-in from your employees.

Protect your volunteers as if they were your employees. Many will be simply too afraid to continue without reassurances from leadership that their health and safety is being addressed. They are more valuable than ever. Maybe their roles must change, particularly if programs have been suspended. Consider they may have to be retrained to continue to provide donated hours.

Communicate with your board often. Leadership, including the board, will be called on to make difficult decisions. Now is the time to maintain a clear understanding of mission, vision and core values. Remember that boards govern; not manage. The board needs to continue to operate under its existing good governance practices, remain mission-driven and think strategically. Inquiry and analysis, while supporting management will make for better decisions. Boards should balance the need for transparency with the need for confidentiality when communicating with stakeholders.

Donors want to be part of the solution right now. Helping donors understand what your constituents and the organization face allows them to support you in the most effective manner. You can’t just communicate with stakeholders when things are going well. Understanding how the organization is maximizing its impact and leading with its values—the needs of your constituents, staff and volunteers—strengthens the connection and relationship donors feel with your mission.

Finally, communicate with your beneficiaries. Are you open for business or working remotely? How will they be protected if they need services? Have programs been suspended or cancelled? Do they have options to get support elsewhere? Establish a single point of contact or a spokesperson for all public information and media purposes.

What are successful nonprofits doing right now?

  • Focusing on mission: Successful nonprofits put mission first, always.
  • Identifying what went right and wrong: Even successful nonprofits have made mistakes during this crisis. Identifying and learning from mistakes is key to not repeating them. Identify what proved to be obstacles for the organization and the employees. What worked and did not work? How quickly was the organization able to pivot to a new way of doing business.
  • Making a strategic investment: Universally, nonprofits are investing more in technology and training. For operational purposes, investing in internet access, portable equipment have become common ways to conduct business.
  • Moving to digital fundraising: Nonprofits are making it easy for donors to give online. Your website is often the quickest way for a donor to find you and make a donation. Spend time developing Facebook and Twitter strategies, as these will be increasingly important. Consider virtual everything: galas, tours, concerts, productions and meet-and-greets. All can be done with a lot less cost than in-person events.

America’s nonprofits are fighting for the needs of our most vulnerable. Some nonprofits have been able to weather the pandemic better than others. The key has been the ability of their leadership to pivot into the crisis rather than away from it.

Please indicate the industry that your company operates in: *

About the Author(s)
Kathleen has over 35 years of experience in providing auditing, accounting, tax and consulting services to privately held businesses and not-for-profit organizations. She specializes in preparing tax exempt status applications, consulting on charitable regulations and providing outsourced management and accounting services to numerous organizations, including membership organizations, public charities, private foundations, and special improvement districts. You can contact Kathy by email at kclayton@hbkcpa.com
Hill, Barth & King LLC has prepared this material for informational purposes only. Any tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or under any state or local tax law or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Please do not hesitate to contact us if you have any questions regarding the matter.

RECOMMENDED ARTICLES