Nonprofit organizations deliver on a wide range of missions. However, what the public see does not provide the full picture of the challenges nonprofits face. There is a visible outcome but also an invisible side only seen by staff and volunteers.
If you have volunteered for a nonprofit, you know that behind the curtain are the office, the back room, and the storage facilities. These are the systems that make the organization run. The public may not be aware of the challenges revealed in the back room. These struggles are often hidden from the public in part because revealing these challenges may be detrimental to fundraising and recruiting volunteers.
Due to the economy and the Covid-19 pandemic, these challenges have increased this year. Fundraising may be falling short and dues-paying members may be falling off. There may be problems paying rent, paying decent wages, and bringing the technology up to speed.
In economic terms, the resources needed by organizations to function is called working capital. Some organizations have heavy logistical challenges that must be met to fulfill their missions. They need a lot of working capital.
One example is Rotary International. Their effort to eradicate polio worldwide requires a massive logistical effort. Thousands of polio vaccines must be stored and transported to remote areas of the world. It doesn’t do any good to buy a polio vaccine if you can’t transport it. That takes logistics and money – lots of money. Sure, this is an extreme example. But even small, local nonprofits face logistical and administrative challenges.
However, people are more likely to choose a nonprofit if they believe their donations go directly to the people the nonprofit serves and not to these administrative functions. There are websites that rank nonprofits by this parameter. While this may be true for global or national organizations, this is not necessarily true for small local charities. If the money raised by fundraising efforts and grants can only be used for restricted purposes – buying food, feeding animals, providing shelter, etc. – then the machine that makes all that happen is underfunded. They lack adequate working capital.
So, sometimes the biggest bang for your donation buck is to designate it for general purposes. According to Geofunders.org, earmarking donations to general operating support is a critical part of a nonprofit’s success. Nonprofits must be able to sustain their day-to-day operations so they must have funds that can be used for general operating use and not just “restricted” uses.
Inadequate general operating funds can result in underinvestment in wages. Valued and experienced employees may leave. Outdated equipment or challenging office environments will be hard on volunteers and may cause burn out. Projects will take longer to accomplish.
There needs to be a change of opinion about how people view overhead costs in nonprofits. Adequacy of working capital reflects the general health of an organization and its overall resilience and sustainability. Nonprofits leaders must show how adequate funding for administrative functions supports their mission. In some cases, they may need to reveal the true challenges they are facing behind that curtain.
So, when making decisions about your donations, consider earmarking funds for general operations. Also, consider in-kind donations such as your time and expertise. Help acquire equipment such as computers and software. Designate special funding for support staff during busy times. Consider helping with storage space or rent. All these examples are spent behind the curtain toward a non-profit’s working capital. With adequate general funds, nonprofits can ensure the administrative engine is well-tuned and this will help them fulfill their mission.
Harvey Gail is President of Spire Management, an association management, event planning, and consulting firm located in Salem, Oregon. www.SpireManagement.com, @HarvGail