How to Best Support Nonprofits through Uncertainty

How can funders help and support those who are working most directly with and for the populations we care most about? Read “Supporting Our Unsung Heroes in a Moment of Crisis” a series by CEP President Phil Buchanan for timely perspectives and advice.

The coronavirus (COVID-19) pandemic is complicating an already complex funding landscape for nonprofits. While the need for nonprofits’ programs and services is increasing—exponentially for some—nonprofits are having to cancel events, and donors and foundations are losing money in a volatile stock market.

At the Center for Effective Philanthropy (CEP), we believe that the nonprofit perspective on issues that affect the sector provides crucial insight into how funders can have greater impact. In November of 2019, we surveyed nonprofit CEOs from our Grantee Voice panel—a national sample of CEOs from nonprofit grant-seeking organizations that receive at least one grant from foundations giving $5 million or more annually—to learn how they are thinking about and responding to a variety of anticipated changes and challenges. All of these issues are even more relevant as the coronavirus pandemic—and its economic implications—intensifies.

CEP published what we learned from this survey last month in a report titled The Funding Landscape: Nonprofit Perspectives on Current Issues in Philanthropy. Some key highlights of the report include:

The impact of recent tax code changes: The majority of nonprofit CEOs (58 percent) believe that the Tax Cuts and Jobs Act has led to decreased individual giving to their organizations.

Anticipated changes in nonprofits’ revenue: About half of nonprofit CEOs anticipate that their organization’s overall revenue will be higher in the current and next fiscal years, while the other half anticipate flat or declining revenues. If overall revenue does decline, they say their organizations would need to take a variety of steps in response, which could include reducing programs or services, freezing hiring, freezing wages, and laying off employees, among other things.

Concerns about a recession: Most nonprofit CEOs (90 percent) are concerned about a recession, but some are more prepared than others to handle it. Nearly two-thirds say a recession would increase the need or demand for their organization’s programs or services, but only one-third have a plan for how they would handle a recession. Further, only 4 percent of nonprofit CEOs say their organization’s foundation funders have talked with them about how a recession would change their support, while 89 percent of those who have not had these conversations say they would like to.

The pros and cons of donor-advised funds (DAFs): CEOs have mixed feelings about DAFs. On the one hand, they appreciate that DAFs lessen the administrative burden. At the same time, they desire deeper relationships with donors, shorter delays in receiving funding, and greater transparency.

The prevalence and use of gift acceptance policies: About half of nonprofits have a gift acceptance policy, and over one-third report having declined a gift. Nonprofits have declined gifts with too many strings attached, gifts that would have been a liability or hard to liquidate (such as real estate, cars, stocks, etc.), and gifts from donors whose mission or values conflicted with the organization’s.

Given the current pandemic and economic crisis, nonprofit CEOs’ concerns about decreasing giving, declining revenue, and a recession are likely more severe now than they were four months ago when we surveyed them. How can you best support these leaders through this crisis? Here are some ideas to consider:

Build strong relationships with the nonprofits you support. In a recent CEP study, Crucial Donors: How Major Individual Givers Can Best Support Nonprofits, nonprofit leaders said they would focus more on building better, more personal relationships with major donors. But, according to The Funding Landscape, as more donors are giving through DAFs, nonprofit CEOs are finding it harder to build relationships with individual donors. This challenge is only exacerbated by the need for social distancing and the disruption of nonprofit programs and regular activities.

How can you, as family philanthropists, build strong relationships with the nonprofits you support? CEP research has shown that you can most effectively build strong relationships with nonprofits by understanding their organizations and the context in which they work, and by being transparent. In the wake of COVID-19, it’s even more critical for funders to connect with their grantees, listen to their needs, and be transparent about their grantmaking.

Ask nonprofits what they need. In Crucial Donors, nonprofit leaders told us that major donors need to understand their organizations and the context in which they work better than they currently do — and that a key way to build this understanding is to ask nonprofit leaders what they need. In the current moment, nonprofits are facing uncertainty due to tax code changes, projected flat or declining revenues, a possible recession, and now a pandemic. It’s easy to assume you know what nonprofits need in the face of this uncertainty, but CEP research has shown that funders are not as in touch with nonprofits’ needs as they think they are. Don’t assume you know what nonprofits need; ask them.

Be transparent with nonprofits about the likelihood that you will give in the future. We learned in Crucial Donors that, while 88 percent of nonprofit leaders say it is very or extremely important for major donors to be transparent about the likelihood that they will give in the future, only 25 percent say most or all of their organizations’ major donors are transparent about this. Given that nonprofits want funders to talk with them about how a recession would change their support, being transparent about your giving plans would be especially helpful in the current context.

The moment we find ourselves in is a particularly challenging one for nonprofits. By building strong relationships with those you support, asking them what they need (and then providing it if you can), and being transparent about your future giving, you can help nonprofits effectively navigate the current funding landscape.