The following is a conversation between Dan Cardinali, President and CEO of Independent Sector, and Denver Frederick, Host of The Business of Giving.
Denver: When people seek timely and reliable information on the totality of the nonprofit world, they turn to the Independent Sector, and that’s what we’re going to do now with their CEO, Dan Cardinali. Welcome back to The Business of Giving, Dan!
Dan: Denver, it’s a delight to be with you. Thank you so much for the work that you do.
Denver: Thank you for doing this.
You know, I turn on the news on TV, and it’s filled with what’s being done for corporations and small businesses, and families and individuals, but hardly ever a word about nonprofits. I know you are helping to lead a sector-wide effort around this. Tell us what is happening, Dan.
Dan: So maybe I’ll create a little bit of a context because I think there’s a reason why the sector is often missed because people aren’t aware of its magnitude. So just to level-set for the audience, in our nation, we have just an amazing infrastructure of nonprofit organizations doing a myriad of things. There are about 1.6 million nonprofit organizations providing health care, educating children, taking care of our seniors. They’re also the think tanks in the universities, amazing environmental groups doing conservancy and taking care of animals. It’s just an amazing, robust sector.
And you can see, there are 1.6 million organizations that are staffed by 12 million of some of the nation’s most passionate professionals and powered by 77 million volunteers. It’s a formidable part of our nation’s fabric and makes up really the third largest sector of employment. So, it’s an economic engine. Every year, we know that about $430 million are donated to those organizations, and if you look at the economic impact, it’s in excess of a trillion dollars of fees and services that are charged, and also contributions made to the community.
So, it’s a force, but often, I think it’s taken for granted. People think of charities as run by volunteers and doing nice things in their communities. But we have massive institutions like The Red Cross and Feeding America who are providing really important frontline work; American Heart Association, United Way really are kind of the backbone for much of the healthcare providers and philanthropy in America.
We’ve been excited in this particular moment, not because of the COVID, but because I think Congress, certainly since I’ve been doing this for the last four years, has really turned to the nonprofit sector and said, “We recognize that the economic impact that’s hitting businesses large and small are also hitting nonprofit organizations. And what can we do?” So, a whole group of us– Independent Sector playing a collaborative leadership role–along with some of the big philanthropic and particularly, nonprofit organizations – Leadership 18 that’s housed at United Way, our colleagues at the Council on Foundations, along with the National Council on Nonprofits, and really many others – have collaborated on a vision that we see ourselves like the airline industry, needing real support at this time.
So, last night, the Senate voted on the stimulus bill, and I’m really happy to report that we had some real victories. What we’re going to see is that through the Small Business Association (SBA), the loan program – the $350 billion that you hear on the news – will also be made available to nonprofits. Nonprofits that have 500 or fewer staff will be able to have access to these loans that are forgivable. So they’re basically grants to keep their staff on the payroll, to help ensure that the workforce is strong and robust so when we are in a recovery mode, folks will be able to be right there providing the kinds of support they do to people all across the US.
The other thing that we were excited about is for the first time, Congress recognized that ensuring that this lifeblood of charitable giving was supported. And so they authorized the universal charitable deduction, which means that anybody that wants to donate to a nonprofit can get a charitable deduction above and beyond the deductions that they’re already getting, whether they’re taking the standard deduction or not, and that will be up to $300. Now, we don’t think that’s sufficient, but we do think it’s an important first start.
And there was one last thing that I want to make sure your listeners know. For the nonprofits that are receiving Medicaid, originally in the negotiations with Congress, they precluded any nonprofit who was receiving Medicaid reimbursements from having access to these small business loans. We, through this collective effort, Independent Sector along with our folks at Red Cross, United Way, Feeding America, and the Y, we were able to get that provision struck. So if you’re taking Medicaid, you’ll still have access to these small business loans.
So while this is not enough, we know that Congress is going to be continually looking at legislation to support the economy, and we at the Independent Sector, along with our colleagues, will be fighting the good fight to make sure that the sector is recognized and part of the stimulus.
Denver: Well, those are three very significant achievements, and I know how long and hard you had been working on that universal deduction.
Dan, how fragile were nonprofit organizations coming into this crisis?
Dan: It’s a great question, Denver, and I’m afraid that the news there is not good. I, along with a number of advisors from many of the organizations that I mentioned, we’re part of a group that put together a report called The Financial Health of the United States Nonprofit Sector back in January, 2018. That was sponsored by Oliver Wyman and Sea Change and GuideStar, who is now Candid., by the way.
This was when the economy was really kind of roaring along, and here’s the stats that could be a little bit sober for your listeners: About 7% to 8% of nonprofits in the US are technically insolvent. They don’t have enough resources; 30% faced liquidity issues with just minimum cash reserves, so any disruption in their business was going to cause them to be in crisis; and only 50% of nonprofits had less than one month of operating reserves.
So, we were already a fairly destabilized sector going into this crisis, and like everybody… there was a report today in The Washington Post that talked about the expectation that upwards of, I think, three million workers have applied for unemployment insurance. And the projections right now by some is that the unemployment rate will jump up just in the last three weeks to 5.5%, which is almost doubling, right?… So the nonprofit sector was already financially weakened, and we’re really quite concerned. And again, I just want to remind your listeners that these are the folks that are taking care of the most vulnerable in society, and many of these institutions were fairly vulnerable to start with.
So we at the Independent Sector want to remind America that we want to make sure our businesses are strong and robust, but we have to focus on our nonprofits as well because they are really holding the social safety net of our country together.
Denver: So if you’re a donor or a grantee, what can you do right now to help nonprofit organizations?
Dan: It’s a great question. So, a couple things.
One, for the philanthropic community, I just want to commend our colleagues at the Council on Foundations for leading a really important charge around asking the philanthropic community to sign a pledge that really does a couple of things.
So, for those who are kind of institutional funders or sophisticated individual donors, this notion of loosening up any restrictions on grants. If you have a current grant with a nonprofit, or if you are an individual donor who is kind of trying to restrict that money for good reasons before this crisis hit, we just ask that you remove all restrictions and give that nonprofit the maximum freedom to do what is necessary for it to survive. Don’t be afraid to pay salaries at this point or overhead costs. Rent and lights are still…those bills are coming in, and it is the difference between that community-based institution being there today and tomorrow to do its work.
And then what I’ve said to folks who are just kind of donors, who want to do something, think of it this way…I use an 80/20 rule. If you’ve already been a donor to nonprofits that are important to you, there is a fairly uniform body slam that this pandemic has hit all nonprofits, so give to those folks in this unrestricted way. So if you are giving to X or Y organization, just double down and continue to do it. The good news is with the universal deduction, regardless of whether you’re taking the standard deduction or not, you’ll be able to get a tax benefit.
Secondly, think about those organizations in your community which are charged with really holding the health of the community for donors. So United Way, phenomenal organization, a hundred-plus year history of being the intersection between donors and grant nonprofits. Community foundations, incredible assets for America. They are experts in understanding what the needs of their community are and working with grantees in the most constructive way. You can give to those organizations, and I would give flexible dollars so the community foundations are able to be agile and be responsive as a particular circumstance of their community change.
Denver: And it’s probably also, if I can suggest, a good time for a donor to pick up the phone and speak to the CEO of a nonprofit organization and give them some reassurance because they’re all pretty nervous.
Dan: I would just double down on that. I think that there’s nothing more powerful than to receive a call from…even a volunteer who is not writing a check, but is the lifeblood of an organization, to just know that when the restrictions are lifted and allow us to volunteer in the way that we were before, that they will be there. They’ll be willing to drive that mission forward. We need encouragement these days.
I’m hoping coming out of this crisis, we have learned a lesson that we want our nonprofits’ civil society infrastructure to be really prepared, so when crises hit, they can step forward rather than be destabilized.
Denver: Dan, I know you have to be so fully occupied with the here and now, but have you had a chance to think for a moment of what the impact of this might be on the sector going forward and perhaps changing the nature of philanthropy in itself?
Dan: We’ve begun to think about this. So we know that right now, like business, we are thinking about survival, and we want to make sure that the greatest assets, which are our people and often the kind of physical places that are so important to communities to convene and receive services and to build community, are left intact. So, survival is the first order of business.
The second, I think, is: this is a wake-up call. As I mentioned to you earlier, back two years ago, we knew that the sector was financially quite compromised, and so as we come out of this, really taking a lesson about: what is it going to take for us to have a stronger nonprofit community in the US? So one thing that I would strongly advocate from those of us who volunteer or donate, whether institutionally or individually, is to really encourage nonprofits to be able to be honest about the real cost of what it takes to run one of these organizations.
So often, people say, “What’s your overhead rate? Is it 10%? If it’s above 12%, I’m sorry. You’re not doing good work.” Each nonprofit is at a different developmental cycle, and sometimes investing in good computer systems, or a kitchen that is state-of-the-art so it can produce really good food for the community that it serves, matters. And so, your overhead rates are going to depend on where you are developmentally in order to do your mission.
So I’m hoping, coming out of this crisis, we have learned a lesson that we want our nonprofits’ civil society infrastructure to be really prepared, so when crises hit, they can step forward rather than be destabilized.
Denver: The way you’re working now, Dan, is completely unimaginable even from two weeks ago – how you communicate, how you get things done, how you function, how you operate. Any workarounds that you would find to be quite effective and would recommend? And do you see actually the way you will operate into the future maybe change as a result of all this?
Dan: It’s a great question, Denver. One of the things that we have learned is that…we have an Action Center, so we’re enabling any and all nonprofits to get briefed on what the policy context is, and then when it’s appropriate to use their voice. We deeply believe that people living in communities, the general population, should let their voices be known for the things they care about in general, and then specifically for our purposes, keeping the nonprofit sector strong.
We have an Action Center on our website, and I would just encourage your listeners to be vigilant. Follow us on Twitter. We keep policy updates in almost real-time so that folks can stay informed. And when we call to action, we’re really asking folks to let their voices be heard. We have lots of ways you can do that, so you can follow what we’re doing or make your own points. And just in three or four days, we were able to mobilize close to 40,000 unique e-mails or phone calls into Congress. We think this was a really important vehicle that helped keep our issues top of mind and kept the things I mentioned earlier… around the access to the Small Business Association loans and the removal of the preclusion that any nonprofit receiving Medicaid… this was the community speaking.
And so, I would just encourage folks to do that now and for the next three or four months because we see that this is not going to go away. There are going to be multiple packages. And coming out of this, we hope that this is a real lesson for us to continue to build our muscle, to make sure we’re in the mix, not just as recipients of public policies, but are real co-developers with policymakers for the policies that are going to help, not just our nonprofit community, but really our whole country.
Denver: Absolutely. Well, thanks, Dan, for taking the time to do this. You’re doing incredible work, and we’re all grateful for you. Stay well.
Dan: Thanks, Denver. I look forward to our next conversation.
Denver: Thanks, Dan.
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