Foundations must invest in change

Foundations need to stop preaching about nonprofit capacity and start investing in it.

Quick to tell nonprofits to be more innovative and improve their internal operations, foundations are slow to invest the critical operating dollars nonprofits need.

Nonprofits are adapting themselves to a growing crisis in their capacity to survive: They are cutting costs and developing new sources of income in the face of growing competition and demand for critical services.

The good news is that a smaller share of nonprofits reported severe fiscal stress last year than three years earlier, according to a new survey by the Johns Hopkins Nonprofit Listening Post Project.

And while two-thirds of nonprofits reported reductions or no growth in their major source of support — government – the survey says fees and charges generated most of nonprofits’ replacement revenue, and more nonprofits reported increased services to the poor than reported reduced services.

The grim news is that one in three nonprofits still reported severe fiscal stress, one in three had to hike working hours, one in four reported longer wait times, one in four reported higher staff turnover, and one in four reported staff-training cuts.

Half or more of nonprofits also reported serious concerns about declining funding or increased costs, although the concerns were less widespread than three years earlier.

Nonprofits also reported growing concerns over human-resource issues, particularly board recruitment, staff recruitment and retention, and executive transition.

Scarcity should not be the mindset of the charitable marketplace.

Already fighting to fix immediate social problems and attack them at their roots, nonprofits now must fight to survive.

Foundations should be major partners in both fights, investing heavily to help nonprofits retool and strengthen their operations so they can be more effective in the larger fight to heal and repair our communities.

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Investment in nonprofit leadership needed

El Pueblo, the leading statewide advocacy group for Latinos in North Carolina, the state with the fastest-growing Latino population, will lose its executive director in September after less than two years in the job.

Zulayka Santiago, the group’s executive director, is leaving because the demands of the job leave her too little time for family and personal matters.

A loss for El Pueblo and the state, her departure also reflects a looming crisis in the nonprofit world.

In a study last year by CompassPoint Nonprofit Services in San Francisco and the Meyer Foundation in Washington, D.C., three in four nonprofit executive directors surveyed said they planned to leave their jobs within five years, and nearly one in 10 said they were in the process of leaving.

And executive directors, nearly three in four of whom said they did not receive adequate fundraising support from their boards, also said more general operating support and longer-term funding would help relieve sustainability pressures.

Nonprofits increasingly are demanding too much of their leaders and investing too little to help them begin to meet that demand.

Peter Morris, who chairs El Pueblo’s board and serves as medical and clinical services director for Wake County Human Services, says board, foundations and executive directors all need to change.

Boards need to do more to shoulder basic tasks like fundraising, while foundations need to invest more in nonprofits’ operations and in professional staff development.

And executive directors need to learn to share responsibility with their boards and staff.

The Z. Smith Reynolds Foundation in Winston-Salem, the largest general-purpose foundation in North Carolina with a statewide focus, currently is looking for an executive director.

Because of the role the foundation plays as a leading force for social change in the state, the new executive director will be expected to sacrifice his or her personal life and work virtually around the clock.

Nonprofit boards and their funders are in serious denial: They expect nonprofit executive directors to be superhuman but are not willing to provide the investment and hands-on support the executives need to survive and thrive.

It is long past time for boards and funders to change the way they do business by making that investment and providing that support.

Nonprofits need more overhead funding

Nonprofits and foundations are at odds over whether foundations provide enough funding for nonprofits’ overhead costs.

A new study says nearly seven in 10 foundations support nonprofits’ overhead expenses, with nearly half making grants for general operating support and nearly one-third awarding unrestricted grants.

But the study by the Center on Philanthropy at Indiana University and the Nonprofit Sector and Philanthropy Program at the Aspen Institute also says two in three nonprofits surveyed say they lack adequate funding for overhead, with three in four reporting they do not rely on foundation funding to pay for core operations.

That “tension” between foundations and nonprofits “lies in the short-term nature of much foundation funding and nonprofits’ resulting hesitancy to use foundation funding for recurring expenses such as overhead,” says Patrick Rooney, director of research at the Center on Philanthropy.

In a separate report earlier this year, saying they were failing to fund nonprofits’ operating needs, the National Committee for Responsive Philanthropy called on foundations to invest at least half their grants and grant dollars in “flexible core operating support grants.”

Overworked, underpaid and under constant pressure to raise money, operate effectively and make a difference, nonprofits need more funds to pay for expenses like rent, administrative salaries, technology and training.

Foundations need to loosen their purse strings, paying out more of their assets in grants and allocating more of those grants and grant dollars for operations.

And nonprofits need to do a better job showing their need for overhead funding and pushing foundations to provide it.