Michigan’s nonprofits fight for their financial future amid pandemic

"We have learned that now more than ever, there is a need to meet people where they are and provide holistic support, as well as ensure there are not lasting education effects at this time. That takes funding.” - Cindy Eggleton, Brilliant Detroit

How has the pandemic been affecting Michigan’s nonprofits, financially speaking?


Well, perhaps not surprisingly, the answer’s complicated.


“The funding landscape for this year has been as diverse as the nonprofit sector itself,” said Donna Murray-Brown, President and CEO of the Michigan Nonprofit Association.


This is to say, the kind of fiscal year you’re having as a nonprofit largely depends on both the services you offer and the nature of your funding distribution.


“For organizations that were able to make a strong case to their donors that they are addressing the health, social and economic challenges of COVID-19, philanthropy has continued to be very strong,” said Steve Ragan, Executive Vice President at Hope Network, a Michigan nonprofit that provides services to people with disabilities. “In fact, it has often been earned revenue, not philanthropy, that has been hit hardest. This is especially true for hospitals, universities, arts & culture nonprofits.”


This is because, of course, these organizations haven’t been able to offer the same level of care, in-person instruction, and cultural programming that usually provides a sizable part of their revenue.


“For those that depend on fees generated from in-person engagement, … the funding landscape has been devastating,” said Murray-Brown. “ … Some had relief from the PPP (Paycheck Protection Program), yet the funds have been expended, and they are feeling the stress because they need more resources.”


Meanwhile, many nonprofits that rely far more heavily on foundations have angled for increased flexibility with existing grants by expanding timelines, for instance, or shifting programmatic grants to become general operating grants. But even these solutions aren’t necessarily sustainable in the long term.


“If the economy doesn’t improve, the performance of endowments will adversely impact a foundation’s giving strategies for the following year, and the year after that,” said Murray-Brown.


Brilliant Detroit, which provides neighborhood-level programs focused on family support and early childhood education and health, “has a financial structure that has allowed us to retain support through this turbulent time, largely through multi-year gifts,” explained Cindy Eggleton, BD’s co-founder, and CEO, who also noted that funders’ priorities are now in-flux, as nonprofits jettison old-school models for delivering programming.


“ … Brilliant Detroit has been able to connect with some of the remaining funding at this time because our service delivery model can ensure that thousands of people across Detroit access high-quality resources and support. This is due to the trust we have built in thirteen neighborhoods across the city. All in all, we have learned that now more than ever, there is a need to meet people where they are and provide holistic support, as well as ensure there are not lasting education effects at this time. That takes funding.”


And while nonprofits are usually slow to change, COVID has acted as a full-court-press toward adaptation. Partnerships have been forged – BD, for example, has collaborated with Detroit Police Athletic League and the Boys and Girls Clubs of Southeastern Michigan – and programming and distribution models have shifted to meet communities’ most urgent needs.


“The food banks … used schools as the point for food distribution, when there was a need to determine the best way to get food to children,” said Murray-Brown. “Also, the Michigan Science Center found ways to bring the experience to the community, leveraging technology.”


BD, meanwhile, has pivoted toward digital inclusion efforts to ensure that Detroit’s families have the internet access and devices, in addition to online programs, the distribution of food and learn-at-home kits, and more.


All of which points to another part of the nonprofit fiscal puzzle this year: racial and social justice.


According to Ragan, “(an) issue that is going to have a huge impact on philanthropy and nonprofits is the racial and social justice divisions across our communities and nation, and our ability to address these. I think this challenge is also showing rifts and divisions among donors that are not normally common when responding to a crisis. For example, you need to exercise some caution when talking to donors. Some have very different attitudes about COVID-19, economic recovery, race, and social justice.”


Even so, Ragan credits nonprofits for upping their fundraising game in new and creative ways, including online auctions, live online events, promotion across social media, drive-in concerts, and home-delivered gourmet meals.


“It’s not unusual that smart organizations saw their net from special events increase, since they are less focused on the dinner … and more (focused) on donor engagement and impact,” Ragan said. “ … I think we will see more hybrid events with an in-person and online component when we return to ‘normalcy.’”


So it’s not all bad news. Nationally, the Association of Fundraising Professionals released a Fundraising Effectiveness Project report on giving in the first half of 2020, and charitable giving was up 7.5 percent over the same January-June period in 2019 – which was especially encouraging since FEP figures for January-March were, surprisingly, down six percent from 2019.


“I think that an increase in giving in the midst of a global pandemic speaks well of Americans,” said Michael Montgomery, the owner/principal consultant of Montgomery Consulting, Inc. and a teacher at both UM-Dearborn and EMU. “They see need and they want to help.”


The highest percentage of donor growth involves gifts of $250 or less, “a donor segment where agencies working to meet basic human needs typically do very well,” Montgomery said.


But the overwhelming, across-the-board need of all kinds of nonprofits means that the dollars that are out there, at all giving levels, are already being spread thin.


“The lack of a new COVID relief package from the federal government is also worrisome, as its absence will broaden, deepen, and lengthen the recession, as well as increasing demand for assistance from private charities,” said Montgomery. “ … Major givers watch the market closely, and it affects their willingness to take on major new charitable commitments. For now, we’re fine because the market has become disconnected from fundamentals. More than 30 million people are out of work, and yet the Dow hovers near record highs – that’s just plain crazy. At some point, that giddy optimism will end, and with it, the sense of wellbeing that many major donors need in order to keep giving.”


Plus, in Ragan’s view, Michigan nonprofits have been slower than those in other parts of the country to update their fundraising models.


“We should remember, though, special events or fundraisers should never be the largest or primary source of donations,” Ragan said. “It’s the most expensive and least efficient way to raise money. Hopefully, organizations that were overly dependent on fundraisers learned something from the past year.”


But 2020 has already been jam-packed with hard lessons, for organizations and individuals alike.


“Nonprofits as a sector are truly resilient, yet I am sure there will be some (organizations) that may need to close their doors,” she said. “My chief concern is, how many will we lose? How many communities will not have services or support because of the closures?”


Or, as Montgomery succinctly stated, “I think there is another shoe still to drop.”

This story is part of the Nonprofit Journal Project, an initiative inviting nonprofit leaders across Metro Detroit to contribute their thoughts via journal entries on how COVID-19 is impacting the nonprofit sector--and how they are innovating. This series is made possible with the generous support of our partners, the Michigan Nonprofit Association and Co.ACT.