After the stock market had its worst day since the crash that touched off the 2008 financial crisis, experts urged nonprofits to prepare their finances for the possibility that the economy would face a long-term setback from the coronavirus pandemic.
Nobody knows whether the economy will face as deep a struggle as it did in 2008, a year when charitable giving plunged 5.7 percent, according to “Giving USA,” the steepest decline since it began its survey in 1956.
Fundraising consultants and nonprofit experts urged charities to start planning for a prolonged recession — but some also cautioned that it’s too soon to make any drastic moves, like cutting staff, because it’s not clear yet whether a recession is imminent.
Dan Thain, chief fundraising strategist and creative director at Blue State, said nonprofits should stick with their current fundraising strategies despite the turmoil upending financial markets.
“There are so many unknown unknowns at the moment,” Thain said. “My advice would be to push on, but pull back if you’re not seeing the response rates that you would typically see.”
Meanwhile, nonprofits should be frugal and try to pad their reserves where possible, he said.
“There is a huge threat to the economy right now, which could have a decisive impact on what fundraising looks like in the coming months, if not years,” Thain said.
Using Reserve Funds
Jerry Hauser, CEO, of the Management Center, said nonprofits should look at the current market turmoil “as a one-time or short-lived event” and said nonprofits should avoid laying off staff or making other major structural changes under the assumption that a recession is imminent.
“It’s too soon to say we’re in for a long, rough road, and it’s too risky to erode your ability to deliver on needed programs,” Hauser said.
And while Thain said nonprofits should look to pad their reserves, Hauser said now may be the right time to dip into them, for those nonprofits fortunate enough to have available funds in the bank. He suggested that while nonprofits may take a short-term fundraising hit, the current market turmoil could pass relatively quickly.
“This is a good time for organizations to consider using their reserves, something I’m usually very cautious about,” Hauser said.
Sandi Clement McKinley, vice president for advisory services for the Nonprofit Finance Fund, agreed that the coming weeks and months may be a good time for nonprofits to consider dipping into reserves, if available, while making a commitment to restore those reserves later. That’s a conversation that should include the board of your nonprofit, she said.
She also urged nonprofits to focus on their core missions at a time like this and to shelve plans to expand into areas where they don’t currently have expertise or experience.
“Remember why you are here and who you are serving,” McKinley said.
McKinley warned that the economy could suffer for an extended period even after the coronavirus threat wanes.
“Nonprofits and their funders should be considering the big picture of weathering an economic recession and taking action to make sure nonprofits survive and can ably serve their communities for an extended time,” she said.
Donors Step Up
Meanwhile, donors and foundations continued to pour money into efforts to fight the coronavirus. Philanthropic funding to combat the coronavirus has topped $1 billion, including $182 million from U.S. sources, according to Candid, a foundation research group.
McKinley said she hopes foundations will boost funding for nonprofits’ regular operating needs despite the market hit to their endowments. Foundations also should loosen grant-seeking rules and create emergency funds for nonprofits that experience stepped-up demand due to coronavirus fallout.
“It’s been my experience that foundations are thoughtful and can be incredibly generous in times of need, but sometimes they can be slow to move,” she said.
For their part, nonprofits must know what to ask for and communicate those needs clearly. “It’s a two-way street,” McKinley said.
Gabrielle Fitzgerald, founder and CEO of Panorama, a Seattle-based “action tank,” said she expects to see more cash coming from big donors.
“I do think we’re going to start to see an unprecedented uptick from wealthy donors in both local and global investment,” said Fitzgerald, who directed the $100 million Ebola Program at the Paul G. Allen Family Foundation.
Vu Le, author of the nonprofit blog, Nonprofit AF, urged foundations to release “rapid funds” immediately and “relax on their deliverables and outcomes and be way more flexible.”
Cautious Response
Nicholas Tedesco, CEO of National Center for Family Philanthropy, said a lot of donors feel called to address the coronavirus crisis. However, some want to see if it resolves itself, he said.
“There are a lot of unknowns right now about what’s going to happen with the spread of the virus,” Tedesco said.
The nature of the current crisis is particularly daunting for donors who may lack the expertise to know how best to help with needs directly related to the coronavirus, such as drug development, he said.
“It’s a complex thing. If you’re a wealthy donor without staff, then it’s extremely challenging,” Tedesco said.
Kathryn Kennedy a partner at Cerity Partners, a financial advisory firm in Chicago, agreed that many donors are taking a wait-and-see approach to the impact of the coronavirus.
“People are trying to understand it and understand the government and big foundation responses,” Kennedy said.
Kennedy said that despite the ongoing turmoil in the stock market, she expects charitable giving from wealthy donors to hold up: “These are people who have a dedicated commitment to being charitable and they will continue to give.”
