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Back from the brink: How nonprofits bounce back from crippling funding cuts

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Nestled amongst the lush greenery of Langley, British Columbia, the Langley Senior Resources Society has spent the last 30 years offering services that help the elderly maintain their independence. Then, in 2009, the centre's contract for outreach programs – which included transportation assistance, home visits, information and referrals, telephone buddies and more – was abruptly terminated by the Fraser Health Authority.

Without the bulk of their funding, the outreach program was forced to cut staff and services.

“Our seniors were devastated,” remembers Janice McTaggart, the centre's outreach community liaison. “It was very difficult. The hardest thing was making those decisions to let programs go, and reassuring seniors that we would be looking for other funding to bring these things back.”

In today's economic climate, nonprofits are vulnerable to drastic changes in their funding and consequently, their program delivery. Governments change and priorities shift, leaving many organizations scrambling to pick up the pieces and regroup.

“It's really hard for organizations to go through this,” says Cathy Barr, senior vice president at Imagine Canada. “People think when a project gets cut, it's just the people on that project who are going to be affected. But that's not true, because project funding contributes to overhead too, and it even affects people who are not directly involved in those projects.”

Despite the potential volatility of funding dollars, it is possible for nonprofits to recover from financial trauma and bounce back. CharityVillage spoke with a number of organizations who were willing to share how they did it and how you can be ready if it happens to you.

How do nonprofits find themselves in a risky position in the first place?

According to Barr, most nonprofits can be categorized into three funding types: those that rely primarily on government funds, those that depend on grants from foundations and donations, and those that garner revenues from memberships and sales. Not surprisingly, it's the first type that is often most vulnerable to the caprices of government priorities.

“Sometimes you can't fight when a government just decides they want to move in a different direction,” she says. “There's not a lot you can do sometimes to change their minds. And usually by the time you hear about it, the decision has already been made.”

Barr knows this all too well, as Imagine Canada experienced a drastic funding cut in 2006 that resulted in the loss of half its staff. The cuts forced the organization to re-examine its priorities and take steps to prevent a debilitating shake-up from happening again.

Nora Sobolov has a long history as an executive in the nonprofit sector. One day, after receiving repeated phone calls from colleagues who were struggling with financing, she'd had enough. She began the Community Forward Fund, which offers loans and financing to nonprofits that helps liberate them from the unpredictability of funding.

“When we are constantly chasing project funding, we basically end up setting ourselves up into a situation where our finances are not very stable,” she says. “And if one project gets cut, it takes the lynchpin out from everything.”

Losing funds have a profound effect on an organization's morale and strategic focus, but it can also alter the way remaining staff spend their time. That's what McTaggart discovered, as she scrambled to find alternate sources of financing without much luck.

“The frustration is the time it takes to prepare proposals, get them out there and then not have a result,” she says. “We spend a lot of our time writing proposals, when we could be working with people.”

Digging out of the hole

Despite the crippling consequences of funding cuts, Canadian nonprofits have managed to regroup and devise new plans of action.

One of the primary ways organizations recover is by examining their funding model and pursuing diverse sources of income.

“I think everyone is facing the need to look for alternate financing,” Sobolov says. “Everyone is saying, 'Even if we haven't been cut today, those sources of grant funds are becoming a more scarce commodity. We need to figure out how to supplement what we're doing and expand our corporate sponsorship reach, or our donor base, or revenue generation'. Everybody is looking at those things.”

That's exactly what Imagine Canada did, shifting their structure and placing more emphasis on membership, donations and social enterprise programs. Even more importantly, Barr says the key to their success was revisiting their vision, mission and strategy, which they accomplished through a consultation process that produced a clear focus.

“When you're very dependent on one funder, the needs of that funder and their goals tend to start to drive the organization,” she says. “Sometimes, this sort of thing can be a positive if you treat it right, because it can be an opportunity for you to really rethink your mission and refocus your energies on what your mission should be going forward.”

A strong strategic focus was what the Literary Press Group of Canada needed after its tumultuous experience with funding cuts over the summer. In early June, the association lost its largest source of revenue from the department of Canadian Heritage, a move that forced LPG to lay off most of its staff. The organization decided to appeal the decision, and mobilized the public to write to their members of parliament. Within 16 days, the funding was restored. While this may seem like a dream for many nonprofits, LPG executive director Jack Illingworth says it did not solve all their issues.

“Having a decision like that reversed doesn't undo the harm at all. The damage was significant,” he says. “In our case, what we had was a group of businesses whose confidence in our funding model was fundamentally shaken, the majority of our staff had been laid off and rehired in a space of less than two weeks. It was really imperative that we have a fresh and sustainable vision for the future if we were going to keep going forward. We now have to make that plan a reality.”

McTaggart, at the Langley Senior Resources Society, employed a number of strategies to rebuild outreach programs for seniors. She sourced new funders and developed partnerships with other organizations. In fact, her organization was able to resurrect the nonprofit's transportation program in 2011 with a Vancouver Foundation grant. She says the most effective approach was raising their profile in the community, thanks to a revamped website and an ambassador program that sends volunteers to public spaces and events to trumpet the organization’s services.

“People just didn't know what we did, and that was an absolute eye opener for us,” she says. “We've really been working on getting out there and that's helping us in some ways, like with donations and also new partnerships.”

Regardless of the strategy nonprofits choose, recovery from a funding blow does not happen overnight. It can take months or even years to regain footing. It's a slow process, but one that can ultimately strengthen nonprofits and the entire sector.

Eight ways to come back from the brink (or prevent your organization from going there)

Diversify your funding. We hate to sound cliché, but we can't help it – don't put all your eggs in one basket. Search for new grant money, corporate sponsors, lenders like the Community Forward Fund, or explore a donor or membership base you haven't targeted in the past. There's no question this is difficult to do when you're bogged down with daily work, but it's worth having the conversation. Says Barr: “Find a way to put some resources and serious thinking towards that before you're forced to do it.”

Re-examine your vision and mission. It's common to feel lost when your organization is unstable. Take this opportunity to ask if you are achieving your organization's main objectives and following your strategic plan. You may need to revisit your goals along with your budget, and ensure you have the necessary internal mechanisms in place before you move forward.

Be open to change. Don't get stuck pining for the way your organization used to function before funding was yanked away. Focus on where your nonprofit is headed, and all the possible ways you can get there. Be proactive and make new connections or partnerships, and welcome new ideas.

Toot your own horn. No one will give you funding if they don't know you exist, or why your nonprofit is so valuable to the community. Promote and market what you do, tell your story and talk about your strengths.

Bite off only what you can chew. When your nonprofit is in jeopardy, well-meaning donors might want to 'save' you. But will that influx of funds be enough to sustain you in the future? “We're really careful about starting something that we may not be able to continue,” says McTaggart. “We think a lot about, 'What are we going to do when this funding runs out'?”

Find people to talk to. Join a task force or coalition of other nonprofits in your community. “People just feel so much better to know that other people are struggling and to know how they got out of it,” Sobolov says. “I think that we are in a situation now when more collaboration is going to have to happen to make things work.” Can you ask an MBA student at your local university to volunteer her skills? Don't forget about your remaining funders, as they are invested in what you do. They may be able to offer expertise or business advice.

Don't be too hard on yourself. Funding cuts and changes happen all the time, and sadly, sometimes there is nothing you can do to stop them. The best thing you can do is press forward and build a plan for the future.

Be patient. Rebuilding an organization takes time. “On the enterprise side, it takes between five and seven years for a small business to be profitable,” says Sobolov. “So it's not a quick fix, none of these things are.”

Sondi Bruner is a Vancouver-based freelance journalist, holistic nutritionist and food blogger. Find out more about her writing services at www.sondibruner.com, and explore vegetarian, gluten-free and dairy-free recipes on her food blog, The Copycat Cook.

Photos (from top) via iStock.com. All photos used with permission.

Please note: While we ensure that all links and email addresses are accurate at their publishing date, the quick-changing nature of the web means that some links to other websites and email addresses may no longer be accurate.

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