Everyone needs to help end ‘Nonprofit Starvation Cycle’

By the Board of the NoN profit C eN ter of the Berkshires a N d the NoN profit a dvisory Board

GREAT BARRINGTON — A strong nonprofit sector is vital to a healthy, vibrant, and economically mobile society.

Nonprofits operate in nearly every sector of the Berkshire economy: health, education, social services, arts and culture, the environment, recreation, housing, youth programs, and community development. They employ one in four workers in our region and double their economic impact through direct and indirect spending on goods and services.

The Berkshire community is generous and our many nonprofits benefit from people’s volunteer help, board service, and donations. Our supporters have a range of options for getting involved, and for supporting causes near and dear to their hearts. Per capita our small rural county has the second-highest number of nonprofits in the state and double the national average. That means that sometimes the number of requests for support can seem overwhelming. How much is really needed? Do my donations make a difference? Why do they ask again and again?

The fact is it costs a lot to run an effective nonprofit organization — really not that much less than a for-profit company. Nonprofits’ costs include salaries, rent, facility upkeep, utilities, insurance, and technology. But, according to the Council on Nonprofits there is a myth that nonprofits should have low “overhead” costs.

“These costs are essential to delivering on a nonprofit’s mission” the council states. “Understandably donors want to support a nonprofit’s mission, but many don’t understand that incurring administrative costs is not bad. Instead, those costs are essential for mission advancement.”

In a recent article in Chronicle of Philanthropy, researchers studied data from over 20,000 arts organizations over a period of 10 years and found that those that had spent 35 percent of their budget on overhead, such as staff salaries and technology, fared best in terms of attendance. The article noted that scholars have been warning for years that unrealistic expectation of funders to keep nonprofit overhead low (known as the “starvation cycle”) deprives organizations of the necessities for long term health and increased performance.

Investing in a nonprofit organization’s core infrastructure maximizes program delivery and enables it to reach more community members who need its services, according to The Aspen Institute report, “Stronger Nonprofits, Stronger Communities”, that was published in a Program on Philanthropy and Social Innovation in 2016. The report states that a lack of general operating support actually limits the effectiveness of nonprofits. The report notes that successful businesses typically spend 34 percent of their budget on “essential behind-the-scenes support” while nonprofits are expected to get by with half of that, or risk being viewed as inefficient, or poor stewards of donors’ generous contributions. The majority of our Berkshire nonprofits are small with few cash reserves. Maximizing the productive use of their scarce resources is essential for them to carrying out their missions effectively.

Salaries, in particular, are typically a nonprofit’s largest expense because, after all, it is staff members who teach the students, care for the patients, help workers get stable housing, providefree legal services, and put up the art exhibits and direct the plays. They do the bookkeeping and file the financial reports that ensure that you know the charity is operating honestly and ethically. However, because staff salaries are such large part of the budget, they are often squeezed when nonprofit budgets are tight.

Kristen van Ginhoven, artistic director of WAM Theatre in Lenox, summarizes the issue very well.

“For too long, the arts and nonprofits in general have existed by overworking and underpaying, but our donors do not know that,” van Ginhoven said. “A huge part of our advocacy work over the coming decade, if we hope to continue with our missions and impact sustainably and equitably, will be adjusting the mindset about how much running a nonprofit actually costs.”

What is also not well understood about charitable giving is that the majority of non-government funding comes from individuals. About 85 percent comes from both donations and bequests, with only about 15 percent from private and corporate foundations. Individual donors are also most ikely to provide the unrestricted operating support that give nonprofits the flexibility to direct funds where they need those dollars most, while most foundation grants and corporate sponsorships are restricted to specific programs or initiatives.

That is why our nonprofits come to us, their community members, for support. It is also why they may need to come to us at various times during the year to ensure that they have the funding to continue delivering the programs and services that the community relies on. Nonprofits value their relationships with their donors and they are more than willing to accommodate yourpreferences as to how and how often you hear from them. Don’t hesitate to contact them and ask.

“We’re in the business of creating and maintaining relationships so donors have an understanding of how their philanthropy is supporting a cause close to their heart,” said Shela Levante, cochair of the Berkshire County Development Alliance. “What I love most is the personal experience that occurs. Some donors only want an email update while others want to go on a site visit. It leaves a lot of room for flexibility and meaningful engagement.”

Nonprofits strengthen our community, educate young people, make our neighborhoods more resilient, give us joy and inspiration, keep us healthy, protect our lakes and mountains, preserveour history, and help ensure that no one who is struggling is left alone. Nonprofits do all of this only with your support.

Tom Bernard, the president and CEO of Berkshire United Way in Pittsfield, recognizes this.

“We steward precious resources carefully to ensure our work and the positive impacts we aspire to make in the community reflect our commitments to effectiveness, efficiency, and most of allequity as we listen to, learn from, and work in partnership with the people our organizations seek to serve,” he said.

The mission of the Nonprofit Center of the Berkshires is to facilitate growth for charitable organizations through shared resources, affordable services, and creative collaborations.