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For COVID-impacted non profits and charities – what happens when the well runs dry?

In recent conversations with funders, many point to a worrisome scenario- that their year’s budgets have already been spent. As one said, ‘Our well has run dry’. What does this mean for all those charities and non profits that still require funding to continue to meet the growing demand and maintain their operational capabilities?

Part of a series ‘Conversations for Sector Transformation’ by Joanna Buczkowska-McCumber and Kristi Fairholm Mader

So far, Canada, it seems that we are weathering the COVID-19 crisis fairly well. There have been encouraging surprises like the economic power of staycations; the resilience of businesses and non profits to pivot and shift their models even during the worst of times; the funding that has been mobilized to address gaps; and the switch to a progressive recovery connected to the green economy.

The responses and determination to come back better is encouraging but we are not out of the woods yet, and this is especially evident in the charity and non profit sector. In recent conversations with funders many point to a worrisome scenario- that their year’s budgets have already been spent. As one said, ‘Our well has run dry’. What does this mean for all those charities and non profits that still require funding to continue to meet the growing demand and maintain their operational capabilities? 

The initial stage of the crisis created a climate of great uncertainty, but the hope was that this would be short-lived with a return to ‘normal’. Short term funding was provided to get through the crisis. Now we are seeing that the economic and social experiment of COVID is leading us towards a new normal. In time, COVID may recede, but the shifts that have come about as a result may not.

 As many have recognized and written about, the sector is seeing reductions to traditional fundraising as demand on services is increasing. Donations and events are down. Pay for performance contracts are being impacted. Government relief funding and wage subsidies have been difficult to access. And, the sector’s chronic underfunding has left many organizations with few assets or resources to help weather the crisis.  

The non profit sector runs on fumes, bolstered by the incredible innovation, passion and human power of volunteers and staff. And, historically, when the economy struggles, the sector has stepped up to take care of families, communities and vulnerable people, planet and animals. Collectively we must figure how we can support this essential sector that drives human good, for the long term.  And, if foundation and government wells are indeed running dry, what are the other resources that communities and organizations can tap into to build financially resilient models? Let’s think differently:

  • As with any crisis, some people and companies are getting very rich. This wealth allows them to pick up assets and wealth from those that are struggling, further shifting wealth upwards. Why are we OK with this? Tax a percentage of profits made during COVID to support social purpose businesses and non profits to launch, grow and scale. There are existing networks of business development supports, incubators and accelerators, and an emerging impact investment fund sector— they are ideal avenues to build capacity for community benefit. Here are just some of who are doing this work in BC: League of Innovators, Purpple, Scale Collaborative, Spring Activators

 

  • Help local governments and others to invest in local communities, for positive community impact. Currently, municipalities are significantly restricted in how they can invest, yet billions of dollars are invested on their behalf around the world. Incentivize and help bring capital home and put it to work, especially in small and rural communities where capital is hard to capture. Investment funds such as Rhiza Capital, McConnell Solutions Finance Accelerator are building models to help communities invest in their local economies- we just need to remove the barriers to such investment.  

 

  • ALL levels of government need to incorporate social and environmental impacts in ALL of its procurement. And not with lipservice but in a ‘if you don’t provide real social and environmental value you won’t get the contract’ way. This means putting good policies in place, educating vendors and suppliers, and valuing social and environmental benefits alongside price and quality. If we want a recovery that puts people, community and environments first, this has to be the standard practice.  Amazon should not be the beneficiary of local government spending while main street businesses die. Look to organizations like Buy Social Canada and Coastal Communities Social Procurement Initiative who are leading the way. 

 

  • Invest in community wealth and assets acquisition. Support trusts, charities, non profits and other democratically and community-focused entities to acquire and operate assets and build long term financial resilience. Support the building of community wealth as much as (and more?) as building private wealth. Business Legacies Initiative and L3 are exploring such models. 

 

  • Mobilize concessionary capital and repayable grants. Make it easy for foundations to invest their grants and endowments in mission and community by clarifying program related and mission related investment requirements and processes (CRA has a role to play here). Ask them to mobilize these other sources of capital and report out on their investment portfolio, just as they report out on granting. Some are already doing this, such as McConnell Foundation. All could. 

These are just a few of the many innovative ideas coming to the forefront; pushing to make the shift to a regenerative economy and society. Instead of considering these ideas as outliers, elevate the ideas and support the shift to the new normal. 

  1. Connect with the initiatives or organizations above to learn more and support their work. 
  2. If you have other ideas on creating a new normal that is regenerative, nominate projects to the Future of Good

Authors:

Kristi Fairholm Mader
Co-Founding Director, Scale Collaborative

Joanna Buczkowska-McCumber
Executive Director, League of Innovators
Board Chair, Scale Institute Society