Every business in America is being significantly affected by the COVID-19 outbreak and related economic woes. For non-profits, the impact may be no less significant. One online CNN commentator recently warned it could be an “extinction-level event” for many community service organizations.

“The barren landscape of social distancing and the fact that we cannot convene actually has a huge ripple effect on the nonprofit sector,” said Mary Beth Collins, executive director of the University of Wisconsin Center for Community and Nonprofit Studies.

Economic downturns mean fewer resources for nonprofits even as demand may increase. 

“Very big swaths of our society are living now in a much less financially secure situation. So any organization that’s providing basic needs is simultaneously having to increase what they would need to offer to help,” said Collins.

Organizations striving to meet these needs are also facing the new realities of restricted contact.  

“The double whammy has hit them that they also cannot do the typical things they would do, like having a storefront office where people can come in and get advice, or go do house visits, or go deliver things easily, or open the doors of a food pantry,” says Collins.

That is the case for Virginia Harrison of LOV Inc in Madison. Harrison’s job title is “bridge builder” and she supports developmentally-disabled adults. She explains “the goal is for them to create real, lasting reciprocal relationships with folks out in the mainstream community.” 

Since that can no longer be done out in the community, Harrison’s clients are losing both the social connections and structure support can provide. One person she supported misses out on her regular Monday and Tuesday games of SKIP BO and UNO. “She’s so hungry for human connection all the time,” said Harrison.

These kind of hands on, face to face interactions between clients and LOV Inc staff seen here have been curtailed and replaced by virtual meetings online. (Courtesy Jeff Miller / UW-Madison)

Like so many others, LOV Inc has turned to technology and meeting in virtual spaces. “We had to go through some hoops to get that approved,” noted Harrison. While the organization rapidly switched over to connecting online, they took some risk by doing it before they could be assured the state Department of Health Services would approve the new methods. 

While virtual visits mean cost savings in mileage reimbursement, they are likely off-set by the costs of secure video that is up to HIPAA standards and other new technology. But other nonprofits are quickly being severely challenged financially.

“There are a lot of organizations that if they had their major fundraising event in this March, April, May period, even if it wasn’t their majority revenue source, it may be significant enough that it will cause them to look at their budgets and look at layoffs,” observed Collins.

Big Brothers, Big Sisters of Northwestern Wisconsin had to cancel its annual multi-night “Bowl for Kids’ Sake” fundraiser, as reported by WEAU in Eau Claire. CEO Wesley Econdido was quoted as saying the event raises over $220,000, “that is 30% of our annual operating budget.”

The key word is ‘operating.’ Funders have typically been much more interested in seeing their dollars go into specific programs and rarely write a check for the electric bill. That means organizations have to find ways to raise unrestricted funds to cover ongoing expenses. 

“We’ve made a dirty word out of overhead,” Collins said. “Even though, how the heck are you supposed to run this stuff if you can’t pay rent and you can’t have the right supplies and you can’t show up professionally?”

If there is one positive that may come out of the crisis, it is the acceleration of changes in the relationship between funders and community based organizations that Collins sees on the horizon.  

“What I’m hearing from the philanthropy world in Wisconsin is that funders are having really real conversations with their grantees that they weren’t necessarily having before,” she said.

Those real conversations may be what help organizations escape extinction. But they will not be easy. Collins points to the power dynamic that has typically existed between nonprofits and those that financially support them.  

“Funders are having really real conversations with their grantees that they weren’t necessarily having before,” said Mary Beth Collins, executive director of the University of Wisconsin Center for Community and Nonprofit Studies. (Courtesy: UW-Madison School of Human Ecology)

Before this emergency, Collins said, “It would be very rare for a grant funded organization to go talk to a group of funders openly about their true concerns about their financial viability, because it could interfere with that funder’s sense of confidence in continuing to fund them.”

But with the likely severe impact of a prolonged recession, a growing trend toward trust-based philanthropy might make it easier for nonprofits to do their work without having to tick the many boxes some funders demand.

Impact-reporting has been one requirement funders have insisted on in recent years but it can be an onerous task, especially for smaller nonprofits. “Where the sector went was ‘show us the evidence, show us the evidence that the thing that you’re doing is having an impact’” said Collins, which “forces people to try to quantify stuff that sometimes, in my opinion, you just can’t quantify.”

Collins recounted taking students on a tour of Walnut Way, a community development organization in Milwaukee. The group started simply with planting flowers in a vacant lot which eventually led to neighborhood revival. She remembers the executive director Antonio Butts saying: 

“Do you think a kid waking up and walking out the door in this neighborhood and seeing plants versus a parking lot with garbage and needles, that he wouldn’t go to the park? Do you think I can put that into a statistic?”

One funder that is exploring the trust-based approach is the Schlecht Family Foundation which supports social and environmental change in Dane County.  “Our philanthropy is an expression of our family values. I think leading with trust is just part of the way we operate as a family, and so it naturally leads in our grantee relationships,” executive director Stephanie Schlecht wrote in an email interview.

Among the values listed on the foundation’s website is “failure is part of the creative process.” That is sentiment unlikely to fly with institutions that insist on positive impacts being measured.

“Failure gets a bad reputation in philanthropy where there is perhaps more aversion to risk. Our founders are entrepreneurs, and so I think our family brings that spirit to bear in how we think about failing.” Schlecht added. 

While we are now living in a world where essential and non-essential functions are being delineated, there is special risk for those nonprofits not directly involved in social services.

Collins puts it this way, “If you were an organization that had a slightly more long game kind of mission that people believed in, it’s hard to go to a donor anytime in the next three or four months and say, ‘I’d love to talk to you more about the children’s theater programing that we’re doing.’”  

But any organization seeking funding should be ready to address what the current crisis is newly exposing–great inequities in our society. 

“Funders have also been really good in Wisconsin at finally getting to the point where their grantmaking requires that you show how it addresses an equity issue,” said Collins. “So with that awareness growing, funders in Wisconsin have done better.”

Ultimately, the crisis may also reveal the vital role nonprofits play in society. “This sector is constantly being told to do things for less, and I don’t think that should be the message from COVID-19,” Collins said.   

“If anything, we should come out of this period with a better perspective on appropriately supporting organizations and getting them out of the hand-to-mouth mode,” she said. “I think it’s fair to say that hearts and minds are going to be changed by this experience.”