Understanding the economic difficulties of providing community support services

Andrews House Executive Director Melinda Corroto in Executive America

“The raising of extraordinarily large sums of money, given voluntarily and freely by millions of our fellow Americans, is a unique American tradition… Philanthropy, charity, giving voluntarily and freely… call it what you like, but it is truly a jewel of an American tradition.” President John F. Kennedy

Philanthropy is an amazing custom in America and the work of small, local non-profit organizations is reliant on this philanthropy. In towns, cities, and rural counties across America, many small nonprofits are enriching the lives of Americans in a multitude of ways. They range in scope and mission from medical clinics providing free services to low-income households to “free stores” providing free clothes and household items to our neighbors in need, as well as food pantries, homeless shelters, and free legal clinics, to name a few. In addition, local arts groups such as symphonies, arts festivals, historic movie theaters, and cultural centers are often small, local non-profit organizations.

The role small non-profits play in the ecosystem of American life is vital to the fabric of our society. This non-profit work is a beautiful and creative response to local needs building active, caring, robust, and compassionate communities.

As Executive Director of a small 501c3 non-profit community center in Ohio, just north of Columbus, I have experienced first-hand the challenges and rewards of this kind of work. My organization, like the origins of many small non-profits across America, is the result of a grass-roots effort to address a need in a community. Churches are wonderful at this, responding to these local needs. There are many congregations providing services such as soup kitchens, food pantries, community meals, sober housing, and homeless shelters, to name just a few examples.

And, like my organization, many non-profit organizations have formed and grown from faith-based roots such as these. Our community center was formed when people from local churches saw a need. Although we are supported by many churches, it was clear from the beginning that greater support from the community at large would be needed to ensure sustainability. The inclusive spirit of our mission sparked the entire community who became involved in raising money, renovating a building, and forming an ecumenical 501c3 non-profit with an independent board of directors. Our organization has thrived with this support for 27 years.

This is the way many small non-profits throughout our nation have started, organically and conceived by a few people with good hearts and great ideas to respond to a need in their community.

The collective impact of these small entities is illuminated in an interesting report of The National Council for Non-Profits:https://www.nonprofitimpactmatters.org/site/assets/files/1/nonprofit-impact-matters-sept-2019-1.pdf.

The title of this report “Nonprofit Impact Matters: How America’s Charitable Nonprofits Strengthen Communities and Improve Lives” pretty much sums it up.

As you might expect, the challenges for small non-profits have much to do with consistent funding. The changing landscape of church giving and philanthropy with new laws, an inconsistent economy, and a world-wide pandemic, have disrupted even quasi-normal patterns of giving in the past 5 years. In this environment, small non-profits must continually refine their operating models to deliver impactful social services while searching for more sustainable funding models. Growing a consistent base of supporters from all parts of a community, creating social enterprises, and creating impactful partnerships is essential to their survival.

Other challenges, such as small staffs, small budgets, and small scale of operations make it difficult to remain competitive in a competitive labor market. Providing competitive compensation and health care is difficult.

Additional challenges, for small non-profits that provide social services, is managing the growing need to provide a safety net for lower income households. This need had been growing before the pandemic, but now there is an ever-increasing population of middle-class families needing assistance with basic things such as food, housing, health care, transportation, and childcare.

For example, even an affluent and resource-rich county such as my own, has seen an increase for these services as our population grows. For the better part of 25 years Delaware County has been the “fastest growing county” in Ohio and even the U.S. It has variously been the “most affluent,” with higher-than-average median incomes, and “the healthiest county” in our state. It frequently has the lowest poverty rate in a state of eighty-eight counties, at just below 5%.

With all these positive superlatives, Delaware County and many of our residents have the perception that we do not have poverty and problems associated with it. However, our 5% poverty rate represents approximately 10,000 people living below the Federal Poverty Level (FPL).

In addition, more folks living 200% – 300% above the FPL are accessing programs such as food pantries, community meals, free medical services, rent and utility assistance programs, and free legal clinics. The difficulty of many middle-class families struggling to meet their basic needs was growing before the pandemic and has since. A tremendous spike in housing costs in our county combined with the double whammy of rising costs of everything has squeezed many households to the brink, many of whom have never used social services before.

As you can see, even the “best,” “healthiest,” and “most affluent communities,” have a tremendous and growing need for social services. Small, local non-profits have stepped up to support our neighbors who struggle, but it is not without growing pains for the organization. It can be challenging to manage an organization’s own capacity issues while responding to the increased need in the community for their services.

The precariousness and challenges of sustainability of small non-profits are described in this statement from the National Council of Non-Profits report, “…most non-profits are relatively small—97 % have budgets of less than $5 million annually, 92% operate with less than $1 million a year, and 88% spend less than $500,000 annually for their work. Thus, the ‘typical’ non-profit is community-based, serving local needs. It should be no surprise that relatively few non-profits have an endowment. Indeed, most non-profits have limited resources—about 50% have less than one month of cash reserves, (according to some data).”

My organization fits into this statistic with our tiny operating budget of $200,000 and staff of 1.75 employees. Fortunately, my organization has been positioned for success with strong partnerships and a long-term favorable lease for the building we use. We also have the good fortune of several generous gifts which our Board of Directors turned into a small but growing endowment. This gives my organization an amount of security and nimbleness that others do not have.

However, the challenges remain, as they do for most non-profits, in balancing our annual budgets every year. As mentioned before, each year becomes more difficult to depend on grants and consistent philanthropic giving. Our organization has created a diverse income model with good success including a mixture of many small individual donors, a multitude of churches, local businesses, small fees for services or rental space, in addition to fundraising events and grant writing.

As is true for the for-profit sector, some small non-profits will weather economic changes, be nimble, creative, remain relevant, and survive; others will not. But the importance of local non-profits as an integral part of local economies is clear in this declaration from The National Council for Non-Profits:
“… above and beyond the direct ways that nonprofits improve lives, these organizations fuel regional economies by boosting the labor market, paying for goods and services, services, and spurring economic activity in other real but less well-known ways.”

Fortunately, many local, regional, national, and international philanthropic individuals, businesses, organizations, and governments realize this and continue to support small non-profits.

With sustained support and partnerships, this endlessly creative and robust segment of our social fabric will continue to emerge, survive, and thrive, delivering needed services and enriching the lives of our local communities.

In the words of Benjamin Franklin, “It is prodigious the quantity of good that may be done by one man (or woman), if he will make a business of it.” I am hopeful this American tradition of philanthropy and supporting small non-profits will continue long into our future.

Melinda Corroto is the Executive Director of Andrews House – a multifaceted Ohio based community services center, http://www.andrewshouse.org.

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