Social Impact Insights
Our blog provides insights for social impact professionals in business and nonprofits. We offer advice on making the greatest impact in your organization by giving clear real-world advice on important topics of today.
Closing a nonprofit organization is usually the last thing that comes to mind when considering potential futures for an organization you’ve dedicated so much passion and time towards. It is natural for companies to run their course whether from successfully completing their mission or from a variety of issues that may arise like financial instability or loss of resources. In fact, an article by Candid evaluating various scenarios showed that 4 percent of nonprofits would close in the absence of a crisis. Our country is currently going through a unique crisis, one that has occurred only once in the past century. Battling the coronavirus pandemic has been difficult for everyone. Even with government aid and public willingness to support nonprofits, organizations may still be facing a variety of challenges. Evaluating your nonprofit’s status during a global pandemic with an honest approach is a brave action to take. Here is what goes into consideration when it comes to closing a nonprofit:
What to Evaluate When Looking at the Life of Your Nonprofit
There are a number of reasons for dissolving a nonprofit organization. These all tie into whether or not you’re able to continue running a nonprofit.
Other organizations that rely on donations are also feeling the stress of the pandemic trickle through. Members of the community have been struggling to make ends meet during the pandemic. There have been many instances of lay-offs and furloughs since last March. Families are also having to deal with loss of income from being unable to work due to medical problems or quarantining. “Nearly two in five American households say they’re making less money since the start of the pandemic.” This limits the amount of charitable donations that people are able to make.
While emergency funding through grants and loans are an option, relying on these for extended periods of time is not a solid strategy for the health of your nonprofit. Look over your available funds and income sources and if you see continued issues, it might be time to consider closing.
The coronavirus pandemic, along with public unrest stemming from social justice issues, has also boosted specific nonprofits to the forefront of peoples’ minds. Those making charitable contributions are dedicating their resources to those working on the frontlines, COVID-19 related nonprofits, and, in the wake of the Black Lives Matter movement, nonprofits that work to promote social justice. This leaves others like those focused on arts and education, for example, struggling with unexpected competitors. At certain times, there may not be enough bandwidth in the system to support as many nonprofits.
Throughout the crisis, Johns Hopkins University found that over 1.6 million nonprofit workers have lost their jobs. With many nonprofits being under-resourced even before the pandemic began, holding on to staff during difficult times may not be possible. Less staff may lead to the inability to carry out your organization’s work and limit your work towards your mission.
Nonprofits are also facing a new problem when it comes to volunteer numbers. The pandemic has prevented people from being in close contact with one another which means organizations that rely on the help of in-person volunteers may feel the strain more than before. Sacrificing the work of an organization in favor for the safety of people is never a bad choice.
Sometimes, people just become too burned out. This is understandable when it comes to running an organization you are passionate about. The past year has taken its toll on people in unimaginable ways. A lack of energy to dedicate to an organization may also be an important resource to take into account when considering closing your nonprofit.
Actions to Take When Closing a Nonprofit
There are a number of steps to take in the event of a nonprofit closure. One of the key points to remember is to keep your staff and your clients at the center of your actions. This means keeping people informed and approaching the situation with patience and empathy. Many people have dedicated time, energy, hopes, and even their hearts in your organization. Take the time to walk them through this process and offer support where you are able.
These are important actions to take when going about closing a nonprofit organization. Each organization’s dissolution plan will differ according to their structure and needs, but here is a basic outline of an effective closure strategy.
It is also important not to forget federal and state entities in your notification process. You will need to file a formal intent to close with the state as well as submit final tax documentation to the IRS within a few months of closing.
Clients may suddenly have a gap that needs to be filled. Refund fees for unused services, refer clients to similar organizations in the area, or offer what help you are able to in the final days of your organization.