Policy and Practice | June 2021

agencies frequently pass these con- straints on to CBOs in the form of underpaid, restrictive contracts. Forced to fill the gap with philan- thropic dollars, CBOs typically turn to private funders. Yet these donors have their own constraints that contribute to the nonprofit poverty cycle, including limiting how and when CBOs can use grant funds; not covering administrative costs; and limiting funding for operations. Even when public agencies and private funders drive innovations that stream- line their operations and make it easier for customers and contractors to work with them, it is often from a “more with less” resource manage- ment approach. Yet for millions of Americans, human services CBOs are a neces- sary lifeline. Fueled by an enormous sense of responsibility to meet the needs of their communities and their staff, many CBO leaders make do with insufficient cash reserves, limited capacity, and little to no financial means to drive innovation. Businesses in the nonprofit sector require the same management of revenues, operating expenditures, and cashflow as for-profit companies. Yet the perception is that a non- profit’s budget should not include an allocation of funding for its baseline operations. CBOs must spend signifi- cant staff time laboriously reporting on every dollar spent for each program they serve, as opposed to continuously rethinking how they might increase their impact through upstream solutions, their services, and return on investment. For-profit corporations and businesses would not tolerate, yet alone survive, oper- ating this way. With the onset of the pandemic, the number of families needing support has risen exponentially. But the pandemic was not the onset of the inherent problems with current financial policies and practices within the human services ecosystem. Rather, COVID-19 triggered greater transparency into the challenges and consequences that arise when funding Through the Lens of the Pandemic

Before the pandemic, more than 40 percent of human services CBOs lacked liquidity to meet their short- term obligations and 30 percent had cash reserves covering less than one month of expenses. Since the pandemic, that situation has only worsened. A report just released from Independent Sector, shows how many nonprofits are struggling to survive, with 7 percent of nonprofits estimated to close due to the pandemic and one million nonprofit jobs lost. As CBOs face increased demand for services, strengthening CBO financial capacity is critical. Public agencies are often a primary contractor to CBOs. 2 Burdened by financial constraints and the need to manage inflexible policies, regula- tions, and funding streams, public

About This Series

This is the fifth in a series of six

structures are inequitable, under- funded, and not outcomes-centered to deliver services that bolster commu- nity health and well-being. In Rochester, Minnesota, for example, in response to supporting the COVID Food Assistance Program (CFAP), Channel One Regional Food Bank 3 sought partnerships with Family Services Rochester and others to ensure that food boxes are picked up and distributed within a 14-county region. With no guarantee of increased payment for their increased volume of services and cost, Channel One has applied for additional financial support Generative Partnerships ; Essay 3, Why Regulatory Modernization Is Essential to a Nimble and Adaptive Human Services System ; and Essay 4, Service Delivery: Why the Human Services Sector Must Shift to Measuring True Outcomes , are available in the August and December 2020 issues and February and April 2021 issues, respectively. essays focusing on the adaptive and disruptive challenges that the COVID-19 pandemic brings and the steps we can take as a nation to rethink our systems in the wake of this crisis. The goal of the series is to serve as a call to action and roadmap for leaders in government, health and human services, and the philanthropic sector to address the challenges our nation faces and move toward a system that will respond not only to this challenge but the ones to come. Essay 1, How the COVID-19 Pandemic Can Lead toWidespread Changes in Our Health and Human Services Systems; Essay 2, Achieving High Impact in Health and Human Services: The Importance of

Katy Lederer is a sales and marketing executive at the Alliance for Strong Families and Communities.

Barbara Armstrong is a development director at the Alliance for Strong Families and Communities.

Phil Basso is a former organiza- tional effectiveness consultant with the American Public Human Services Association.

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