A Window into the State of Nonprofits Right Now

When the COVID-19 emergency was declared, everything changed with our funders, clients, volunteers, and community. Suddenly, there were no volunteers, an expanded client base, and anxious staff. Most of our clients lost their jobs when the stay-at-home orders were proclaimed.

We were amid a pandemic, and no one knew what to do — there wasn’t a pandemic response handbook. We were adapting service models to meet our community’s needs every day. We were in a disaster nobody ever envisioned and had to create the road map one step at a time. So were the funders.

Knowing that the Center for Effective Philanthropy (CEP) was listening to nonprofits was encouraging. CEP recognized the circumstances affecting funder-nonprofit relationships, and the need for shifting priorities, funder practices and requirements, and supporting the staff of the nonprofits who were experiencing burnout.

CEP’s new report, State of Nonprofits 2023:What Funders Need to Know documents those changes and reports the findings of what most of us experienced. I am just one nonprofit executive director, but as you read this, if you are a nonprofit ED, you may see yourself, your staff, and what your organization experienced. And if you are a funder, this is a chance to peer into the experience of nonprofit leaders right now.

Our relationships with clients, volunteers, funders, and all our programs changed, quickly and unexpectedly. It was about three weeks after we were in “disaster” mode that the relationships with funders began to change. I remember it so well: after three weeks of no contact, funders started to reach out.

Key Finding 1: “Many nonprofit leaders report an increase in trust from funders and are experiencing changed practices, such as streamlined applications and reporting, removal of restrictions, and receipt of multiyear funding from foundations. In addition, most nonprofits report an increase in dollar amounts given by at least some individual donors.

This finding sums up what we saw on the ground operating daily. We began to experience deeper, closer, and more trusting relationships with our foundation funders. In the past, the relationship felt like the foundation had the “power.” Yet, when those calls began, they asked for our help determining the best ways to address the community’s needs. It began to feel like we had forged a partnership to serve families in the community. It felt more equitable, and we had value to add to the funder-nonprofit relationship. Both ECHOS and the funders had something to offer each other.  

Previously, foundations didn’t want a lot of communication. They preferred long, formal written reports mid-grant and at the end of the grant. That was no longer the case. Now funders wanted to talk to us! They wanted more updates. Phone calls, quick email conversations, and texts became the norm. Our long-term funders wished to learn from nonprofits like ours about what we needed, what we were experiencing, and, more importantly, how they could help.

We experienced an increase in donations from both individuals and foundations. Money from funders we had never met before just “showed up.” Make no mistake, we were grateful for the support, the trust, and the partnerships forged during the pandemic. We continue to steward those relationships today.

Through stronger relationships and trust, the foundations changed grant practices and streamlined applications and reporting requirements. Because we were in constant communication, they didn’t have to “wonder” how we were doing or if we were doing the work.

But the extra funding meant there was more work to be done. More people to serve. More services to offer. More staff stress as a result. This leads me to second finding in CEP’s new report…

Key Finding 2 Issues related to staff — including burnout, filling staff positions, and retaining staff — are the top challenge facing nonprofit leaders.

This finding is right on the money. Nonprofits are experiencing employee shortages, staff burnout, and the big one, difficulty retaining good staff members. Frankly, staff issues are often talked about throughout the nonprofit sector due to all the changes we have seen in the past few years.

For us in particular, finding staff willing to work in an office, on the ground, face-to-face with families in need has been a struggle. When an opening occurs here at ECHOS, it has sometimes taken over six months to fill a case manager position.

So, how do we retain staff? By cultivating an atmosphere of transparency, encouraging staff to rely on their sense of humor, and intentionally communicating and interacting with staff regularly. Our team members are a critical part of implementing transitions and program changes. It gives them ownership and a feeling of pride in their work.

Some of the staff retention strategies we implement are: 

• Staff members organize quarterly team outings to restaurants and fun events and activities. We call them “self-care days.”
• Surprising staff members with paid time off they weren’t expecting.
• Most importantly, ensuring staff members are paid competitive salaries and hourly rates.

Despite these approaches, we still lost good team members in the past few years. Burnout and stress will do that in a disaster environment.

And replacing staff has been very difficult. I learned a long time ago to trust my staff’s opinions. All our staff members interview candidates. And everyone has a say in hiring. That works well for our group, even though finding the right person can take a while.

Key Finding 3 Despite a challenging economic context characterized by high inflation, most nonprofits experienced either a balanced budget or surplus in the most recently completed fiscal year, and the majority anticipate at least breaking even or having a surplus this fiscal year. 

Finally, we get to the third finding. This one is tougher to address. Over the past few years, additional funding has been available to serve our families because of COVID. Those monies are no longer available. COVID is over.

Will our budgets be balanced? Yes. Do we have a surplus? Yes, thanks to a board policy to ensure that we have several months of funds available in case of a rainy day. At the same time, though, our client’s needs continue to increase because of inflation and the continued impact of the pandemic, among other circumstances. This means more people need organizations and nonprofits like ECHOS.

In 2023, it feels as if we may be facing a financial cliff. So, yes, we are operating with a balanced budget today (some of our funds are deferred revenue from FY 2022). But I cannot predict what we will look like in 2024. That remains to be seen and is an unsettling thought — not only for me, but for many executive directors at nonprofits across the nation.

It is promising to read this survey and know that at ECHOS, we see that the key findings of the State of Nonprofits 2023 are consistent with our experiences over the past year.

Check back with the Nonprofit Voice Project over the next few years. We want to share our thoughts, experiences, and findings with partner foundations and the Center for Effective Philanthropy. All of us in the nonprofit sector will have more to say as time goes on.

Cathy Moore is the executive director of ECHOS. Find ECHOS on Instagram at @echoshouston or on Facebook at Epiphany Community Health Outreach Services.