A New Spirit Emerges in Today’s Resilient NonprofitsBy Hope Goldstein | May 6, 2021
The Marks Paneth Fall 2020/Winter 2021 report Planning for Resilience examined findings from the firm’s most recent Nonprofit Pulse survey of nonprofit leaders. At the time of release, the focus on planning and resilience reflected the need to provide nonprofits with a measure of guidance on best practices for sustainability amid economic instability. What stands out today is the almost visceral compression of time we’ve experienced in the short period between the publication of the report and the current reality. Fall 2020 was a time of deep uncertainty; Winter 2021 was still a time of discontent. Fast-forward to Spring 2021 and what we see now are leadership teams at nonprofits who are putting resilience into practice through a range of smart strategies, some of which are outlined below.
First, are the changes in budgeting currently taking place at nonprofits, from the usual line-item increases based on pre-COVID thinking to what is called ‘what-if’ budgeting. What if donations do not recover…what if programs need to change…what if cash flow remains unpredictable due to an inability to rely on donors or government support as before? CFOs and financial managers at nonprofits are sharing that astute cash flow management is the required skill here, and it has never before been of such importance.
Related to this (and well worth re-examining by management and the board) are levels of debt, and where investments are heading. Many organizations took advantage of the Paycheck Protection Program and stimulus packages and have already applied for and received loan forgiveness. Kudos to the directors and fiscal managers at our nation’s nonprofits for catching the life preservers that were thrown, and for taking quick advantage of them. Interest rates remain low and so there is less debt risk, but even so, there is still a palpable feeling that risk should be avoided. Clearly, investments must be made—but where and how?
Nonprofits are targeting fundraising programs that will achieve a return on investment that support specific programs laser-focused on the mission, and which have good prospects of successful outcomes. The 2020 way was to concentrate on bedrock mission delivery and right now there is little to no appetite to veer away from that strategy. Adventurous programming, and the investments they call for, will likely be rare in 2021 and into 2022. However, when we do catch our collective breaths, there is a good chance that risk-taking will resume, driven by increasing levels of cautious optimism. That begs the question of what, if anything, nonprofits will do with additional available funding from the 2021 American Rescue Plan Act. There is a sense that many nonprofits will examine whether there is any upside in taking part in whatever these programs will offer. This $2 trillion stimulus will be a source of discussion, and some controversy, in the weeks and months ahead.
Next, there is consideration of the inventory of office space and what nonprofits are going to do with it. The corporate footprint has changed – perhaps irrevocably. Many nonprofits maintained their office spaces during the pandemic but noting the efficiencies, cash flow improvement and bottom-line savings attributable to remote work, are exploring options for the future or already benefitting from concessions to lease modifications. A hybrid of virtual and in-person delivery of services is already helping nonprofits reach all their constituents and clients effectively, often at significantly less cost. Technology has enabled this sea change in remote program delivery and never before has an investment proven to be timelier than has the adoption and use of digital platforms, applications and tools that allow nonprofits to be functional and visible to target audiences, funders and staff. It is likely that nonprofits will continue to invest in remote work and the enabling technologies going forward.
Whatever new programming and investments nonprofits choose will likely rely on the diversification of revenue sources. Given the current circumstances, nonprofits should not be relying on single revenue streams – traditional models of funding that worked pre-pandemic may no longer suit today’s environment. New sources of revenue that reflect current conditions must continuously be found.
We recently reached out to two exemplary nonprofit leaders to get some ‘lessons learned’ and for an idea of how they are working in these new times. Warren Scharf, Executive Director of Lenox Hill Neighborhood House, New York, told us that his colleagues were the single most critical element that allowed the organization to work through the COVID crisis. His nonprofit provides services ranging from early childhood education to older adult care. He said that when managing staff during a crisis, “You learn who’s better than before. I found that under pressure the good get even better. It was a case study in human resilience.” Like most nonprofits, Lenox Hill worked with insufficient resources even pre-COVID. Scharf said, “We were, and still are, in uncharted waters. Much credit is due to our C-Suite and managers and staff and to our board who were constantly in communication with us. They really had our backs.”
Similarly, Ruth Browne, President and CEO of Ronald McDonald House New York, offered these observations: “Our staff worked miracles every day. We learned as a team to accept and appreciate the small milestones of accomplishments as they came along. There is a need to believe there is a bright future in order to believe in resilience!” Ronald McDonald House New York remained the home-away-from-home for children with cancer and their families, even as they had to make difficult decisions about their capacity. Browne said, “We accept that we have limitations but are committed to getting back to where we were before. It has been a war-like situation, but we’ve pulled through and are planning ahead.”
Like Warren Scharf and Ruth Browne, today’s nonprofit leaders have been challenged like never before. What might be next on their agendas? Many nonprofits are currently taking stock of their organizations, which includes understanding the mood of the board – without whose financial and moral support some nonprofits would not have emerged whole. What is their disposition at this time, and how are nonprofits addressing their concerns and needs? Together, they are addressing what has happened, and what remains to be done in mitigating the damage, in order to prepare for the opportunities that surely lie ahead.
Nonprofits are being asked to translate resilience into practice as never before. It will be a matter of being sensitive to the new realities of constrained resources, coupled with an entirely revamped way of operating that will drive actions in new directions, conceivably for at least the next two years. The conversations going on now between staff and boards at nonprofits will move organizations forward from the point of being aware of the new normal, to clarity of renewed purpose, and then on to taking concerted action. They will be centered on finding ways to instill energy, to encourage renewed spirit and re-dedication to mission, and on demonstrating, in word and deed, an increasingly optimistic view of the future.
About Hope Goldstein
Hope Goldstein, CPA, is the Co-Partner-in-Charge of the Nonprofit, Government & Healthcare Group at Marks Paneth LLP. Ms. Goldstein brings to her role the skills she has developed during more than 27 years of providing accounting and auditing services to her clients in the nonprofit, higher education and public sector industries. She co-leads a team of more than 60 professionals who specialize in the nonprofit industry and focus on ensuring the accuracy and transparency of... READ MORE +