Nonprofits scramble to cope
Charities collaborate as demand for services is up
AIDS, homelessness, poverty, mental disabilities, youth crime: Should the nonprofits addressing these serious social issues be deemed — like mega-banks and Wall Street finance firms — too big to fail?
That is the question facing several Maryland nonprofits, as nearly half face more demand for their services while another half used or lost at least a portion of their operative reserves in the first half of 2009, according to a November survey by the Center for Nonprofit Advancement in Washington, D.C.
A national survey shows 51 percent of 2,565 respondents reporting declines in contributions in the first nine months of 2009, citing fewer donors and smaller gifts, according to nonprofit monitor GuideStar.
Some nonprofits are coping with their funding gap with layoffs, freezes on salary increases and cutting services, but others are turning to collaborations and mergers to boost their services.
The Arc of Prince George's County and Melwood in Upper Marlboro, both organizations that support people with developmental disabilities, have long partnered their missions. This year, the Arc took the partnership even further, taking over Melwood's 23 group homes and increasing its total operation to 54 group homes. Melwood could no longer support the group home program through its resources, which have been heavily hit by fewer vehicle donations, usually a significant funding source.
The Arc, which increased its annual budget to $24 million this year from $22 million last year due to the acquisition, still had to consolidate five of its homes, start charging for lunch and day programs and stop contributing to employee retirement funds in the last quarter of 2009, said Mac Ramsey, executive director. The latter move, which other nonprofits are taking, saved the organization $100,000, he said.
Because 80 percent of The Arc's money comes from the state — which is facing a budget shortfall of close to $2 billion next fiscal year — Ramsey said he is particularly concerned about funding. He and other nonprofit officials have been touring Maryland, telling their clients' stories in hopes of encouraging people to pressure the government not to cut funding.
"The state of Maryland is in very, very bad shape. We have to stay vigilant," he said.
No longer going it alone
Elsewhere in the state, local Habitat for Humanity chapters are pooling their resources through a merger.
Arundel Habitat for Humanity and Chesapeake Habitat for Humanity formed Habitat for Humanity of the Chesapeake in July, providing volunteer-built homes to people in Baltimore city, Baltimore County and Anne Arundel County. The merger ups the organization's annual budget to $8.8 million and will support 35 homes this year, compared with 12 to 14 homes they were constructing individually, said Anne Rouse, director of resource development and marketing. The organization's goal is 100 homes each year.
"We didn't do it to streamline. We did it because we're now of efficient size and scale to attract new partners and make more of an impact," Rouse said, adding that the Halethorpe nonprofit has already been "blown away" by the response to its requests for partnerships. "We're not seeing a downward cycle in donations. But we can also specialize our divisions now and have a robust development staff."
Although many nonprofits are mulling mergers, Pollock said the process can be complicated, as nonprofits must consider each other's leadership culture as well as their respective missions, which many not be perfectly aligned. He said most mergers are essentially back-office collaborations, with nonprofits sharing infrastructure tied to operations that are not necessarily intrinsic to their missions.
Nonprofits explore links with for-profits
Pollock said nonprofit growth continues to outpace for-profit growth in both employee and wage numbers, leading to some nonprofits reaching out to partners in fields they did not previously consider.
For many, one of these new collaboration avenues has been for-profit businesses.
The Dwelling Place, which provides transitional housing and support services to Montgomery County, has been working with the Unique Thrift Store in Silver Spring since September 2008, receiving $6,000 in store gift certificates for its clients. Recipients have 30 days to spend the certificates, which range from $60 to $100, at the thrift store.
"We've benefited highly from the partnership, since it's not always feasible for our clients to shop at other thrift stores in the community. Unique is more like a shopping mall," said Sebiila Jacobs-Odin, program manager for the Dwelling Place.
"Our families don't stick out like a sore thumb like they might at other thrift stores. It helps with self-respect," said Miriam Gandell, executive director.
In turn, some of the Dwelling Place's clients have volunteered at Unique Thrift Store's fashion show, where the store shows off its wares and the people it serves. Unique Thrift Store donates $100,000 annually in gift certificates to Montgomery County organizations, serving 8,000 residents through its two stores and employing 400 people. Most of its clothing comes from donations.
Store spokeswoman Ellen Bogage said she is surprised at the steady stream of donations, as people sometimes hang onto clothes longer during harder times.
She said partnerships between nonprofits and businesses function are two-way streams, because the nonprofits get the financial help while businesses receive the nonprofits' better knowledge of the community. Unique Thrift Store has about 80 partners.
Whole Foods Market in Silver Spring is among the many Whole Foods stores that invite local nonprofits to showcase themselves at its 5% Days, when 5 percent of the store's sales that day is donated to local charities, said store spokeswoman Heather Foley.
"This is a global marketplace. We should definitely be working together. We're all one at the end of the day," Foley said.
Outsourcing can help
Not all nonprofits are focusing exclusively on partnerships in their searches for additional revenue.
Moveable Feast, a Baltimore nonprofit that provides weekly home-delivered meals to 150 people with life-threatening conditions such as AIDS, has increased its efforts to contract its delivery services to organizations with similar missions.
"Contracted services have helped us stay afloat," said Tom Bonderenko, executive director of Moveable Feast, which has a $2.3 million annual budget, up from $2.1 million last year. The organization relies on two annual fundraisers for most of its money.
Moveable Feast also cut back on salary increases to its 30 employees to avoid layoffs and shares a consultant with two other organizations.
Bonderenko said Moveable Feast's greatest advantage during the recession has been its focused mission, emphasizing that organizations with clear missions have an easier time pursuing funding.
"The public's heart goes out to people who don't have the basic things they need to survive," he said, adding that service organizations are faring better than nonprofits that focus on the arts right now.
Archway Station, a Cumberland nonprofit that supports people with psychological disabilities, is diversifying its revenue streams through expanding its services to include people with developmental disabilities.
The latter group is typically a more richly funded service area, said Lou Van Hollen, executive director. Archway, with a budget of $2.3 million, supports 200 people with mental illnesses and six people with developmental disabilities.
"This has been a slow erosion of funding. It's like you can't see the beach eroding, but it's being worn down year after year," Van Hollen said. "At best, our funds stay frozen."
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