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The business of nonprofits and surviving on shoestring budgets

Whether they realize it or not, every person benefits from the work of nonprofits in our county, almost every day.

Chances are you, your family and friends have appreciated the county’s many historic treasures, attended a library event, strolled through county parks or enjoyed a local arts performance.

Nonprofits play a vital role in making sure our community is thriving whether it’s through raising funds for our natural resources such as our beloved Chesapeake Bay or keeping our libraries, schools and museums flourishing.

These tax-exempt organizations — formed for charitable, artistic, scientific or educational purposes — often promote civic engagement, drive economic development and offer solutions for many during times of crisis. In short, they strengthen the fabric of our community.

However, many forget that nonprofits are also businesses. They have operational costs such as rent, staff salaries, supplies, storage, marketing, equipment and insurance.

To create a lasting and meaningful impact on the community, nonprofits have to invest in themselves just as for-profit businesses do, yet there is often a double standard in our way of thinking about them. For example, how many times have you heard, “I don’t give to [fill in the blank] because a lot of their funds go to operational costs?”

Nonprofits are often rewarded for how little they spend on operating costs, while it is accepted that for-profit companies spend billions on advertising, staff and business expenses.

Charities are expected to survive on a shoestring budget, investing everything back into the audience they serve. Yet, they must have strong financials to continue their work and receive funding, all while benefiting society.

As mission-driven organizations, they have to survive through donations, fundraisers, grants and the work of volunteers. But how can nonprofits serve others without a staff or without marketing so people are aware they exist?

If nonprofits don’t invest in themselves, like seeking and retaining high-quality employees, they run the risk of disappearing and unfortunately, the people they serve — all of us — will suffer the consequences.

According to the Urban Institute, there are more than 1.8 million nonprofit organizations in the U.S., including public charities, private foundations and other nonprofits. In Maryland alone, there are more than 32,000 nonprofits with one in 10 workers in the state employed by a nonprofit.

These organizations need professionally paid staff to help run them successfully. However, nonprofit salaries don’t compare to for-profit salaries; nonprofit staff members are expected to live on lower salaries and sacrifice the support of their families simply because they want to spend their careers in service.

Most nonprofit employees are dedicated, committed people who work for the greater good, regardless of pay. However, knowing they can receive better wages, more stability and other for-profit benefits can weigh heavy on those who have to support their families.

The pandemic hit nonprofits hard. Some didn’t survive. Fortunately, there has been some government funding.

To date, the Community Foundation of Anne Arundel County’s (CFAAC) Community Crisis Response Fund has awarded 327 rapid response grants totaling $2,729,692 to 150 unique nonprofits to support programs that provide food security, support for basic human needs, and assistance with housing insecurity and homelessness.

These crisis dollars helped, but relief funds are dwindling, and with the stock market down, inflation and a labor shortage, nonprofits are having to take a long, hard look at overhead and their endowments.

According to an article in The Chronical of Philanthropy, nearly half of nonprofits saw income decrease in 2022. This has forced organizations into thinking outside the box for new sources of revenue. In addition to fundraising, many are now offering training sessions and programs, however, they still have to staff those sessions and programs.

So, when you are looking to donate to a nonprofit, know that supporting their overhead costs is sustaining their work in the most meaningful way. Look at its mission, and if you believe in it, appreciate that your contribution is what allows them to effectively fulfill that mission.

At CFAAC, we count on our donors and endowment funds to support us so we can help those nonprofits who might be struggling. It’s our job as a community foundation to ensure that Anne Arundel County is a wonderful place to live, work and play for all, now and in the future. And it’s a job we take very seriously.

Mary Spencer is president and CEO of the Community Foundation of Anne Arundel County. The CFAACis a tax-exempt, 501(c)(3), publicly supported philanthropic organization with the long-term goal of building permanent funds that provide support to local nonprofit organizations through grants and special projects. Our mission is to inspire and promote giving in Anne Arundel County by connecting people who care with causes that matter. Established in 1998, CFAAC is one of the largest funders of nonprofit organizations in Anne Arundel County. CFAAC distributes $4 to $6 million annually.

This story was originally printed in the May 14, 2023 edition of the CAPITAL GAZETTE.


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