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Nonprofits in trouble: One-third of organizations may not survive pandemic, recession

Barrington Smith, food donations coordinator, left, and volunteer Patrick Mcnerney sort cans designated to be shipped to local partners at the Capital Area Food Bank in March.
Barrington Smith, food donations coordinator, left, and volunteer Patrick Mcnerney sort cans designated to be shipped to local partners at the Capital Area Food Bank in March. (Craig Hudson/For the Washington Post)
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The twin crises of pandemic and recession are straining the region’s philanthropies and could force as many as a third of nonprofits to close or merge before the economy recovers, according to top executives in the sector.

Area donors responded generously at the onset of the disease and financial slump, as foundations, corporations and individuals increased their giving.

But the explosion in the need for food, rental assistance and other charity quickly outstripped available resources. The Greater Washington Community Foundation, the region’s largest funder, collected more than $8 million starting in March for its Covid-19 Emergency Response Fund — only to see requests for aid exceed $60 million.

Now private donors, facing their own financial problems, are turning cautious just as federal aid risks drying up because of political gridlock in Congress and the White House.

The pressure on the philanthropic sector adds to the region’s difficulties because nonprofits provide important social and cultural services not supplied by government and business.

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“Human service organizations, shelter and food programs are stretched because there’s just greater demand for those services as people become unemployed and families have need,” said Glen O’Gilvie, chief executive of the Center for Nonprofit Advancement. “Any attempt at recovery without nonprofits will only put our low-income residents at even greater risk.”

Said Rosie Allen-Herring, president of United Way of the National Capital Area: “Funding continues to be difficult. . . . Unfortunately, many of our nonprofits will not be able to sustain themselves in this time.”

Most vulnerable are small nonprofits whose services are seen, rightly or wrongly, as less essential. Funders are now focused more on helping families eat and pay the rent, and less on supporting programs in, say, the arts and education.

If all that weren’t enough, philanthropists are also dealing with a growing recognition that they have failed to overcome racial inequities in both their leadership and patterns of giving. The concern has deepened with the nationwide protests after the killing of George Floyd in police custody.

“I think what we saw in the confluence of crises in the last few months is the failure of our systems, especially as they handle communities of color,” Meyer Foundation President Nicky Goren said. “This is a moment of reckoning, where we really need to take a hard look.”

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A report last year by the Washington Regional Association of Grantmakers found that less than 3 percent of overall giving in the area went to organizations headed by Black or Latino people, or other people of color. O’Gilvie’s group is launching a Center for Race, Equity, Justice and Inclusion to address the disparities.

One nonprofit at risk of closing is Vikara Village in Rockville, Md., which offers yoga and art programs for victims of trauma. It has shut down most of its activities since losing a contract with a hospital and a planned project with a middle school. The organization has also been notified that it will not receive grants it was expecting and has laid off all five of its paid instructors.

“On March 13, we had to shut down in-person programming, and we have not been able to resume, which cut our revenue to zero,” founder Hannah Davis said. “We were left to scramble with zero dollars.”

Asked if Vikara Village might have to close, Davis said: “Realistically, it makes me very sad, but that has come across my mind. . . . I think we need to reevaluate in December.”

Gabriel Martinez Cabrera, executive director of the Literacy Council of Montgomery County, or LCMC, is concerned about losing foundation support. About 2,500 adults each year learn English or get employment certificates with LCMC, and it has been costly to switch classes to digital platforms.

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“It’s a little bit scary on the foundation side,” Martinez Cabrera said. “A lot of these foundations, their budgets are tied to the stock market. When that started plummeting, are they going to start tightening their belts?”

Kim Jones, executive director of the Nonprofit Village, which helps groups in the region expand capacity, said in some cases mergers and closures would reduce duplication of effort.

“We do think there’s going to be a big drop-off” in the number of nonprofits, Jones said. “A year from now, we think the landscape will look very different.”

The Washington region is hardly alone. A July report by Deloitte’s Monitor Institute said early estimates of contraction in the U.S. nonprofit sector range from 10 percent to 40 percent. The report also said the need for nonprofit services will “dwarf”available resources.

When demands on its coronavirus fund vastly exceeded donations, the Greater Washington Community Foundation had to make difficult choices. Its grants, ranging from $10,000 to $50,000, went to 200 nonprofits out of 1,600 requests.

“We really had to screen for organizations that were providing immediate relief to the most vulnerable communities,” President Tonia Wellons said.

“In the first two, three months of covid, we were incredibly surprised by the uptick in philanthropic contributions,” she said. “What I worry about . . . is whether they’re going to be able to sustain that, both at an individual and a corporate level.”

United Way has had a similar experience. Its emergency fund collected more than $2 million, only to receive requests totaling $5 million.

Initially, the region’s biggest need was for food for households where people had lost their jobs. The Capital Area Food Bank said increase in demand for food at its distribution sites ranges from 30 percent to 400 percent.

While food remains a major concern, nonprofits now are also seeing a surge in need for help avoiding eviction.

United Communities Against Poverty in Prince George’s County has seen an increase in visits to its emergency food bank from about 50 customers a week to 250. When a moratorium was recently lifted on evictions, the requests began for housing assistance.

“Once Monday hit, evictions just started popping,” President Rasheeda Jamison-Harriott said last week. “Our phones have been ringing off the hook.”

She said her 57-year-old organization will weather the crisis better than some others.

“We are able to survive because of our age and reputation in the community,” Jamison-Harriott said. “For my smaller, sister nonprofits, who are new and don’t have the history of serving, they are going to have an extremely hard time.”