Although most non-profits have been hurt by the coronavirus (COVID-19) pandemic, your organization’s specific challenges probably depend on your mission, constituency, and other factors. For example, social distancing rules have forced most arts organization to temporarily shut down and furlough employees. Many social services charities, on the other hand, have remained open and are struggling to meet surging demand for services.
What unites the non-profit sector right now is financial insecurity. Without reserves and a resilient revenue model, you may be unable to continue operations. Here is how your leadership needs to act to keep your organization afloat.
First, determine your non-profit’s cash position and how long you can continue operating if no new revenue comes in. If you have built an emergency reserve fund, you may be able to continue for six or more months. Unfortunately, most charities have much thinner cash cushions — perhaps only enough to cover a few weeks of bills.
Next assess (or reassess) future cash flows. Say, for example, that your mental health clinic uses a fee-for-services model, but your out-of-work clients can no longer afford the fees. Or perhaps your school raises 30 percent of its annual income with a gala that you have had to reschedule from April to October. You are probably looking at some big shortfalls.
Be careful not to underestimate cash needs — particularly if demand for services has increased. Assume that funding sources that were already shaky will evaporate and that usually reliable donors will not be able to come to your rescue due to competing demands and their own financial concerns.
Now look for alternative sources of financial support. If you have not already, see if your non-profit qualifies for a loan under the federal government’s new Paycheck Protection Program. Loans to non-profits with less than 500 employees can be forgiven so long as you keep people on the payroll and adhere to other guidelines.
Community foundations are another key source of emergency funding. More than 250 community foundations in all 50 states have created COVID-19 relief funds. Built for speed and flexibility, these funds have already announced $64 million in grants to local non-profits directly addressing the crisis. Many private foundations and government funders also have stepped up by removing grant restrictions. Get in touch with current grantmakers to see if they can help ease burdens and increase monetary support.
In addition, it is a good time to touch base with restricted gift donors. Explain that by removing restrictions, they enable your non-profit to deploy funds where they are most needed now. Finally, let all donors know that federal tax rules have been relaxed for certain charitable contributions.
It is impossible to predict how long and severe the COVID-19 crisis will be, so prepare your organization for a tough fight. Contact us for help assessing your financial position and for advice about the new tax provisions.