Nonprofits’ Message to Funders in Response to the COVID-19 Pandemic
On Thursday, March 12th Nonprofit New York’s Policy Director Chai Jindasurat had the opportunity to speak to funders convened by Philanthropy New York on the webinar: Preparing for COVID-19: Philanthropy’s Response in Times of Crisis. We are grateful to Philanthropy New York for providing Nonprofit New York a platform to share COVID-19 concerns we’ve heard from the sector with the philanthropic community, and to the over 100 funders who joined the webinar. Below is the message shared to New York’s funding community, which we have converted to a public message to funders in response to the COVID-19 pandemic.
1.What we’re hearing from the sector
Nonprofit New York works to strengthen and unite New York’s nonprofits, with close to 1,600 member organizations in the New York City area and reaching 2,700 organizations through our programming.
What I’ve been hearing from our members is consistent with recommendations already made this week by people like Antony Bugg-Levine at the Nonprofit Finance Fund, Vu Le at Nonprofit AF, Lauren Smith at FSG, and our association partners across the country from the National Council of Nonprofits. This crisis is highlighting the very different experiences of our communities based on their access to resources, and the fragility of our social safety net. Some organizations are not set up to allow employees to work from home and are grappling with the possible economic ripple effects.
As we’ve asked organizations to share their concerns, most are wondering how to support those in our communities most vulnerable to the virus- the elderly, the immunocompromised, and those whose livelihood require them to be physically present at their job to be paid - hourly workers, maintenance staff, the staff disinfecting our offices.
So - what are we hearing? Nonprofits are very concerned. Nonprofits in New York City are already financially unstable - 40% have no cash reserves, 10% are insolvent, and less than 30% are financially strong.* Without contingency funds, these concerns are prompting nonprofit leaders to consider different short-term and long-term scenarios ranging from having to lay off staff, making payroll, paying vendors on time, to the ability to cover rent, and plans for possible eviction. Rent for nonprofits is the second largest expense, after personnel costs. Nonprofits are facing serious possible revenue challenges as a result of COVID-19.
2. Financial instability and projected revenue losses
What are the immediate financial risks organizations are facing?
The two biggest revenue loss drivers the sector is telling us about are 1) canceled revenue-generating events, and 2) fee for service reimbursement models.
As was covered in NYN Media, a number of nonprofits in New York have canceled upcoming events, which means a loss of revenue the event would have generated, and costs incurred nonprofits will not get back. The Global Healthy Living Foundation called off its summit because many attendees were immunocompromised, but are only receiving a partial refund and under terms that require them to rebook their rooms within 90 days. At Nonprofit New York, we ourselves decided to move our annual meeting, which came with substantial in-person sponsorship revenue, online.
Arts and cultural organizations are at particular risk for revenue losses from canceled events;** they are concerned about the health of their workforce, many of whom are gig workers, lower attendance and ticket revenue, and postponements that will later lead to a program bottleneck to fulfill grant requirements.
Fee for service reimbursement
Nonprofits that operate on a fee for service model, many of whom are human service providers with government contracts, are very worried about what will happen to their revenue. They are also in need of immediate funds for essential services including food, shelter, and services for homebound people. As a shelter provider shared with us, their revenue is a fee-for-service paid for each per diem occupancy. If they have vacancies they cannot fill because of a quarantine, then it could lead to tens of thousands of dollars in lost revenue. The financial fallout for small organizations like theirs could be disastrous. Another organization shared with us, if their programming was to cease tomorrow due to a quarantine, they would be at risk of losing over $300,000 of revenue on a $2.3M operating budget. This could be catastrophic.
Organizations are desperately seeking guidance from the city to clearly state that contracts will be fully reimbursed even if service levels are reduced. So far the city has not committed to this, stating that organizations still need to fulfill their contractual obligations, but that the city will review contracts on a case by case basis. These organizations could use immediate emergency funding to maintain operations should the city decline to provide emergency operating funds.
3. Missed deliverables, staffing, competing priorities, and new demands
Another major concern is missed deliverables while organizations are shifting their operations, moving to remote work, and postponing their programming. Nonprofits are asking funders to please be flexible with them regarding both their deliverables and reporting during this time, and understanding when funding is up for renewal.
Staffing is also an immediate concern. Nonprofits want to make decisions that put staff and client health needs first, but most cannot afford to cover extended absences. Requiring staff to use their paid time off (PTO) is not ideal, but likely what many will have to do where possible. Nonprofits would never want someone to go unpaid if their PTO runs out but they are required to stay home to reduce exposure to others. For government contracts, there is currently no wiggle room for authorized absences of this kind. - this is a place where private funders could really help. The city mandates five days of paid sick leave, but the recommended quarantine period is 14 days.
In addition to the concerns about maintaining cash flow and staying open, we're hearing concerns about the workforce and timely competing community needs, specifically the Census and voter registration.
As both providers and employers, the sector is worried about the mental health and welfare of staff and constituents (especially the uninsured).
Asian organizations and organizations with Asian staff are concerned about the expressions of racism experienced on a daily basis.
The new demands of this crisis could be significant for the nonprofit sector: asking staff to be available to serve more communities; if schools close many children will need food; if workers are laid off more people will need help accessing financial relief and housing support; if the economy falls demand for all services will go up.
Center equity: prioritize those most vulnerable during this pandemic
Center the needs of people with medical needs, people with disabilities, gig economy workers, and those who have care responsibilities in their lives. As we do try to plan meetings and carry on as best we can, we should be very conscious of who is not able to be at the table (virtual or otherwise, individual and organizational)
Leverage position of influence: we need pressure on government to support nonprofit contractors and provide resources in the way they are for small businesses
- Funders can use their platform to set an example and speak out against mis-information, racism, and xenophobia.
- Private funders can also put pressure on government to put in place commitments to nonprofits; they offered loans and grants to businesses, nonprofits need support also
Proactively communicate with grantees: most organizations have not heard from their funders yet
- Ensure open lines of communication, sending messages of support and willingness to engage in a conversation about how organizations are being affected and what they need.
- This could be done through virtual office hours and/or “town hall” sessions to hear directly from organizations about community needs
- Grantees may be overwhelmed by set of questions; send out an email that says, we’re here, we’ve converted funding for rapid response, and you will be flexible with grantees regarding deliverables
- Be conscious of the funder grantee power differential; as we have been seeing from full or true cost initiatives elsewhere, grantees are often scared to ask for what they really need
Fund the sector’s COVID-19 needs: rapid response, unrestricted funding, and working capital
- Rapid response funding for new costs incurred by organizations responding to the COVID-19; Recovery grants—ideally, general operating support. Some immediate needs might include technology purchases to allow staff to work remotely (i.e., laptops, software subscriptions, support for implementation and training)
- Funding to cover the period of time staff cannot go to work, cannot work from home and that does not unfairly reduce their PTO balances for practicing good prevention
- Near-term funding to support organizations that will lose crucial revenue from cancelled or low-turnout events
- Longer-term funding to support planning efforts around crisis management, disaster preparedness and recession planning
- Working capital loans
- Organizations cannot operate without indirect costs; now is the time to fully fund indirect rates
- Emergency grants to small organizations who will be hardest hit
- Specific to the census, funder support for capital or tech needs that can help nonprofits bolster their capacity to still carry on digitally while working remotely and organize trainings and meetings
Alleviate reporting and restrictions: be flexible with deliverables
- Remove restrictions and contingencies on existing grants (e.g., convert program-restricted grants to general operating support, maintain sponsorship/gift levels to events even if they are canceled, etc.)
- Suspend reporting requirements
If anyone wants to talk further about nonprofit concerns please feel free to contact Chai, or leverage Nonprofit New York’s convening and communications capacity to disseminate information. Thank you for your support of the nonprofit sector during this pandemic.
- National Council of Nonprofits: Nonprofits and Coronavirus, COVID-19
- Candid.org: Funders respond to Coronavirus
- Candid is adding information related to COVID-19 pledges on the free, publicly accessible Measuring the State of Disaster Philanthropy funding map
- Nonprofit Finance Fund/Chronicle of Philanthropy: 6 Steps for Grant Makers to Take Now to Ensure Nonprofits Recover from Coronavirus Spread
- Center for Disaster Philanthropy: https://disasterphilanthropy.org/disaster/2019-ncov-coronavirus/
- COVID-19 Seven Things Philanthropy Can Do
- Council on Foundations: News & Updates on the Coronavirus Outbreak
- Philanthropy's Response to the Coronavirus Outbreak: https://philanthropynetwork.org/news/philanthropys-response-coronavirus-outbreak
- Culture Active in Disasters: cultureaidnyc.com
- National Coalition for Arts Preparedness and Emergency Response: ncaper.org
- Lawyers Alliance for New York COVID-19 resources: https://lawyersalliance.org/coronavirus-information
- New emergency medical grant for artists: https://www.rauschenbergfoundation.org/newsfeed/rauschenberg-emergency-grants
* MacIntosh, J., Millenson, D., Roberts, D., Morris, G. SeaChange Capital Partners and Oliver Wyman. (March 2016). Risk Management for Nonprofits. Retrieved from http://seachangecap.org/wp-content/uploads/2016/03/SeaChange-Oliver-Wyman-Risk-Report.pdf.
**Arts organizations are also concerned that charitable giving will suffer because the public doesn’t view the arts as a necessary public benefit during health and economic crises.