Over the past several months, we have heard time and again: We are all in this together. Truly, not a single person in our country has been unaffected by COVID-19. Whether you or someone you know is among those who have contracted the virus or among the millions of Americans whose businesses have been impacted as the economy declined, COVID-19 has created an unprecedented amount of need in the United States and across the globe. As we begin to slowly emerge from this dark hour, we are awakening to a diverse set of challenges on a scale that will require a coordinated collaboration among government, private sector and nonprofit entities to address the health and economic challenges of every community.
For nonprofit organizations tasked with providing direct, on-the-ground response, the challenge is three-fold: (1) meeting an elevated immediate need as COVID-19 continues to rob so many of their lives and livelihoods, (2) fundraising virtually in place of in-person events, and (3) accomplishing their missions amid new financial barriers. Philanthropic families of means are stepping up to help, providing short-term relief while also creating visionary giving plans to leave a legacy of impact.
Directing grants from donor-advised funds is one way families are supporting both immediate and long-term relief and recovery. This is not the first time we've seen a similar response. In fact, a recent study from researchers at the University of Pennsylvania and the University of Memphis found that donor-advised funds are especially resilient in times of recession, with both payout and flow rates increasing during economic downturns. We've seen this first-hand over the past few months with donors from Vanguard Charitable and other donor-advised funds responding generously to help alleviate the health and economic challenges that have resulted from COVID-19.
Times of crisis provide an opportunity for families to build their philanthropic legacy by providing both immediate and long-term support for COVID-19 relief and recovery. Below are four tips to keep in mind when planning your philanthropic crisis response.
1. Revisit your mission and philanthropic plan
If your family has a philanthropic mission, you have likely gone to great lengths to ensure it is rooted in causes dear to your hearts. While addressing crises like COVID-19 may not fit directly into a particular mission statement, it is worthwhile to talk with your family about how you might want to factor relief support into your short-term plan, and how you can do so without detracting from your long-term goals. Further, this conversation can present an opportunity for your family to discuss how to incorporate future disaster relief support into long-term philanthropy plans.
2. Leverage resources to identify direct relief causes in need of support
At times, it can be intimidating to decide which nonprofit is the best match for your family's mission and philanthropic legacy. While it can seem like a daunting task to identify a worthy partner, there are tools available to help. Resources like Charity Navigator and Candid are helpful tools to identify nonprofits that are supporting relief efforts and aligned with the family vision. These tools also promote transparency by disclosing where funds are being applied within the organization. Donor-advised fund sponsors like Vanguard Charitable vet any nonprofit prior to fulfilling grant recommendations. This step ensures donor funds are appropriately used and grants go to credible organizations.
3. Consider unrestricted grants
In the U.S., only 20% of dollars granted to nonprofits are unrestricted. Yet in many instances, unrestricted funding is the most beneficial, since it allows nonprofits to apply the funds where they are needed most. Consider this scenario: You are the purchasing manager at a car manufacturing company and were tasked with purchasing a part that is critical to ensuring the safety of the vehicle. However, when making the purchase, the vendor placed restrictions on how the part can be used, blocking it from being able to safeguard the vehicle. You certainly wouldn't make that purchase. When nonprofits receive restricted grants, they face a comparable dilemma. The donations are needed, but organizations are unable to use the funds to effect the greatest change.
This is even more important during times of crises when it becomes more difficult to predict where the most critical needs will be in the coming days, months and years. Just as you have the expertise to best run your family's business, nonprofit organizations have the expertise to best determine where to direct funds — giving them the opportunity to do so helps them operate better now and better prepare for the future. However, it is understandable that families want to ensure their grants are being used responsibly, and families and donors should understand how money is being spent and work with the donor-advised fund sponsor to ensure the organization has been vetted and is in good standing with the IRS.
4. Look beyond direct relief — all nonprofits need support right now
While it is critical to consider giving to nonprofits that are directly addressing COVID-19 relief, it is also important to remember that nonprofits of all sizes are not immune to the current economic challenges facing every sector. Consider developing a plan to benefit both COVID-19 relief and the charities you have always supported. With stay-at-home and social distancing orders in place, many fundraising events have been canceled or postponed, significantly impacting the amount of awareness and gifts many nonprofits receive.
If your family is looking to focus your philanthropy at a local level, consider directing grants to nonprofits that are able to designate funds to the areas of most critical and immediate need. If your family is most interested in convenient and flexible giving, donor-advised funds are an excellent option for seamless giving. And, because donor-advised fund sponsors vet organizations and ensure all grants go to organizations in good standing with the IRS, families can be sure their donations support legitimate causes.
Now is the time to take action
COVID-19 has posed a once-in-a-lifetime challenge. In order to overcome the health and economic devastation in this country, we all must act now. For donor-advised fund sponsors, it means working hand-in-hand with both donors and nonprofits to serve as an efficient, effective giving vehicle. For philanthropic-minded families, it means committing to conversations about how to make the most impact and further your heritage of giving. Together, we will emerge from this challenging time as a stronger, more resilient community.
Ann Gill is chief philanthropic officer at Vanguard Charitable (vanguardcharitable.org).