Nonprofit Pre-Existing Conditions
Although the COVID-19 pandemic caused considerable damage to nonprofits and businesses across the nation, many organizations felt even more damage because they were already afflicted by “pre-existing conditions.” These conditions are issues that affected an organization before the pandemic and left them in a more vulnerable place when the economy shut down and continued to struggle. Every nonprofit is different and relies on different funding structures, and likewise, the pre-existing conditions that afflict them can range in their severity. Whether it comprises of small losses over several years or a large financial blow just months before the pandemic, these pre-existing conditions are issues that situated organizations to fail when the pandemic hit. Recognizing and correcting a pre-existing condition as quickly as possible positions organizations to be in proper financial shape at all times for an always uncertain future.
What is a Nonprofit Pre-Existing Condition?
While it may seem somewhat vague, a pre-existing condition for a nonprofit can be a number of ailments that predate a crisis. In fact, the three vulnerabilities outlined in the upcoming November blogs could themselves be classified as pre-existing conditions, but in order to examine these complicating factors closely, they are broken into three discreet topics in the following three weeks. The easiest to recognize, and certainly dangerous, pre-existing condition is a deficit. Nonprofits that are operating at a deficit leave themselves seriously vulnerable to catastrophe when extreme circumstances strike (i.e. a pandemic and economic recession). Many nonprofits in the United States operate on thin margins without significant savings or assets to rely on if catastrophe strikes. Because the nature of nonprofit work often demands this type of financial situation in order to maximize mission impact, operating at a deficit and drawing on an already limited cache of savings, leaves many organizations without the ability to face even a short time closure from the pandemic, let alone a closure of several months.
The savings a nonprofit possesses should not continually be tapped in order to smooth over a recurring deficit, but rather an organization should find the issue and work to resolve it, whether that means restructuring fundraising or lowering internal expenses. When operating at a deficit the risk for failure is increased. Lowering service capacity, and therefore spending, in order to remove a deficit is often a difficult decision. Many organizations choose to attempt to catch their fundraising or other revenue up to their spending and manage to operate at a deficit for a certain amount of time. The drive to serve more individuals is deeply rooted in the nature of nonprofit work, but it is essential that nonprofit leaders take a step back and consider the long-term effects of their decisions in order to remain financially healthy. This patience and devotion to financial stability ensures that nonprofits fulfill their mission of not only serving at the moment but being responsible community organizations that do not risk their entire service network for shortsighted goals.
Pre-Existing Conditions in the Real World
In this week’s Thursday blog post we will explore a case study that exemplifies how a pre-existing condition can rapidly drain resources, significantly compounding the effects of the pandemic and shutdown. This Thursday’s blog examines the Y.M.C.A. of Metropolitan Chicago and how three branches of Y.M.C.A.s, clearly draining resources while operating at a deficit, damaged the greater Y.M.C.A. of Metropolitan Chicago’s financial health. While few of an organization’s locations may be able to operate at a deficit for several years without considerable stress, doing so leaves them seriously vulnerable to devastating financial damage when a catastrophic event hits. Be sure to check out the case study this Thursday.
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