I'm not sure why, but in November 2011, I hit a wall, and it made me feel like I couldn't do anything right. I was putting in 80 hours a week at a church, yet it wasn't growing as quickly as I hoped. At home, I felt like I was failing because even when I was there, I wasn't truly "present." My absence essentially turned my wife into a single mother, and my kids were waking up and going to bed without seeing me. I felt like I was losing my mind and trapped in a self-made prison with a lock that I could open from the inside, so I decided to seek help from someone who would become my mentor. I don't think his first words were, "John, I know things look bleak, but you should never waste a crisis," but they surfaced pretty quickly during our conversation. Those words have stayed with me. Over the years, I've relied on them countless times. They've reminded me that yesterday's successes can lead to today's failures. My mentor was right to ask: "What do you do when you're faced with crossing a mountain range, and everyone has told you all you needed for the journey was a canoe?"
This message is about a new crisis that I don't want to let go to waste, and the only way to avoid that is by doing what I did nearly 15 years ago: seeking help. This approach has benefited me before, and I’m going to rely on it once more…
…but first, let me set the stage.
Open Heart Kitchen is a 501c3 nonprofit organization that is nonpartisan in law, fact, and purpose. It is an important distinction in the tax code and one that I and Open Heart Kitchen deeply believe in. In addition to not being partisan, Open Heart Kitchen does not attempt to be political. The general public may assign particular political positions to our services and resources, but any association with one political party or another is a product of personal perception. Our intent is not to be political. It is to be impactful.
Charitable organizations are a force multiplier for economic impact in the United States. As a sector charitable organizations account for over 12.8 million jobs, which is nearly 10% of the private-sector workforce. (U.S. Bureau of Labor Statistics, Aug. 16, 2024)
Don’t misunderstand the label “tax exempt”. While donors make tax exempt donations to charitable organizations, charitable nonprofits as a sector pay more than $65 billion each year in payroll, unrelated business income, and other taxes. (National Center for Charitable Statistics at the Urban Institute)
Sadly, as a nation, we have reached a point in our political dialogue where it is insufficient for people to be political; even programs, resources, and services must align with political sides. If addressing food insecurity, providing emergency shelter for those in crisis, and helping individuals break the cycle of poverty can be attributed to one political party over another, we are certain that the commentators, forecasters, and pollsters will discern that long before we do.
In the meantime, Open Heart Kitchen will continue to do what it has always done since its inception:
Ensure no one and no family has to doubt where their next meal is coming from
Root out inequities that create social vulnerabilities in our communities
Create opportunities for our guests and clients to define their futures based on our guiding principles of dignity, innovation, advocacy, and collaboration
It's unsurprising that our daily efforts require funding. All nonprofits nationwide, regardless of whether they have paid employees or depend solely on volunteers, incur overhead costs. Typically, nonprofits tackle the world's most enduring issues with around 25% overhead on a good day. If an organization suggests that top nonprofits operate with only 3-4% overhead, they either lack nonprofit experience or are misleading you.
Although the funding strategy for each nonprofit may vary, a commonality is the reliance on a combination of public and private funds to address community needs. Some nonprofits primarily depend on government grants, while others solely rely on private donations. There are also nonprofits, such as Open Heart Kitchen, that utilize a mix of both public and private funding sources. Delving deeper, you will discover that public funds can originate from local municipalities, counties, states, or the federal government. Often, the funds received by nonprofits are distributed at the local, county, and state levels but are actually federal dollars allocated by Congress.
No matter the funding mix of a nonprofit, there are pros and cons to relying heavily on government grants versus individual contributions. Government funding is advantageous because it is typically reliable and predictable. Details are predetermined, funding priorities are set, and contracts are signed. Both the government and the nonprofit fulfill their obligations, leading to improved lives. As long as funding priorities remain stable each year, government funding is among the best available. However, politicians change, administrations shift, and priorities can alter. If you have developed entire programs and employed staff based solely on government funding, you risk having to close programs and lay off employees when that funding disappears. This can be devastating for those depending on services, for laid-off employees, and for the community safety net supporting residents.
In contrast, organizations that primarily depend on private contributions—such as individual donors (both one-time and recurring), private foundations, workplace matching programs, and places of worship—face specific risks and benefits. The risk lies in the fact that donor attrition is inevitable, and there's rarely any notice when a $10k donor of the past 15 years decides to redirect their donations to another organization, making your financial outlook uncertain. Just as politicians and administrations can be unpredictable, so can individual donors. When asked how much is sufficient, any Development Director would respond with, "More than we have right now." Private foundations might change their focus, shut down, or reduce their donations to nothing over time. However, the benefit of relying heavily on private donations is the limitless opportunities it offers. You can secure funds quickly, and individual contributions typically come with fewer restrictions—regarding designations and time frames—compared to government funding.
Although there are often reasons why a nonprofit may focus more on public or private funding, a general guideline is to diversify your funding sources as much as reasonably possible. This approach provides a buffer and helps navigate changes in the market and shifting priorities.
The recent freeze in federal funding to nonprofits working on behalf of cities, counties, states, and the federal government has brought this issue to the forefront for the nation. This affects not only nonprofit leaders but also the millions of Americans who depend on services provided by nonprofits funded through federal government contracts.
The announcement of the funding freeze left me and fellow nonprofit leaders, who depend on federal funds to provide essential social services, completely stunned. Within an hour, I was discussing several items with my team, including the following -
How much of our money have we spent trusting that our federal contract funds would be reimbursed?
Should we pause our staffing plans?
How many members of Congress know that federal funds are typically not given at the beginning of a contract and that nonprofits front the money for the program and then invoice the federal government for reimbursement? If OHK spends $300,000 on its Senior Meal Program and the reimbursements are frozen, then we, like many other nonprofits, start worrying about cash flow problems.
Cash flow problems and the potential failure of future federal funds not coming through cause nonprofit leaders to ask hard questions like: In the event that we are left holding the bag for $________, will we need to divert resources from one program to another? For example, with the inclement weather and freezing temperatures, we may need to reduce our Senior Meal numbers so we can reallocate those dollars to support our overnight shelter for our unhoused community so they don’t die. (I wish this were hyperbole)
If the freeze persists, we may need to end programs altogether or, instead of offering services for free, begin adding layers of income eligibility to qualify for our services.
When we end programs, we will inevitably need to lay off staff. Do we lay off an entire department? Do we hang onto a shell of the program, lay off 50% of a department, and repeat that across our organization?
If we’re fortunate enough to have scraped and clawed back a reserve fund for moments like these, how many times can we go to it before it’s depleted, and for how long?
When our reserve is depleted, then larger companies will likely not consider us for future grants because larger companies require nonprofits to prove fiscal sustainability, i.e., reserves, before they will make sizable investments in nonprofits. (By the way, if we don’t have enough in reserve, larger companies won’t support us. If we have “too much”, then individuals won’t support us because they think we’re rolling in the dough.)
And these are just a handful of the anxieties and fears we can measure. There’s an internal dimension that is difficult to measure in our clients and our staff who have to manage their emotions around possible program closures and staff layoffs. The “not knowing” is emotionally paralyzing and guests calling in to ask if a program they rely on is going away is all too much. These are the traumatic wounds that form on the inside outside of public sight.
Now that I’ve made you as anxious as me, what can you do to help the people who rely on our programs and the staff who deliver them?
To begin with, you can assist Open Heart Kitchen in creating a stronger federal funding freeze barrier. I know it sounds odd. It’s a phrase I’ve never used before, but here we are. And not to overlook the main point, Open Heart Kitchen depends on over $500,000 in federal funding to provide its programs and services. If we end up covering more than $500,000 in services and payroll, you can imagine the effect this will have on our capacity to finance our programs and compensate our staff.
Over the years, Open Heart Kitchen has successfully established a reserve fund. Although we didn't anticipate this specific situation when creating it, the reserve fund is exactly intended for times like these. Despite having a diversified funding mix and gradually building the reserve, it won't sustain us for long if we face an extended federal funding freeze.
Remember the advantage of individual contributions I mentioned earlier because of their adaptability? They're perfect for situations like this. Simply put, the more you donate to support us now, the better we can expand our programs to reach more people and build a larger reserve to protect against possible future federal funding freezes. I can't assure you that these freezes will remain an issue, but honestly, I don't want to wait to find out.
We are a very robust and healthy nonprofit, yet this recent funding freeze has highlighted the necessity for us to become even stronger and better equipped for future crises.
In addition to our contracts with city, county, state, and federal governments, our most crucial contract is with you. This is often an unspoken agreement: we commit to creating pathways out of poverty for individuals if you, the Tri-Valley citizens, support us generously. This delicate social contract remains intact only if we all uphold this sacred pledge and promise to each other.
After three decades of dedication, Open Heart Kitchen takes pride in being a lasting presence in the community, frequently acting as a support system for our most vulnerable neighbors. The intersection of donors, service providers, and those who depend on these services is central to the vitality and well-being of our communities.
We appreciate your support in helping us keep growing. Thank you for aiding us in strengthening our foundation as a local Tri-Valley nonprofit. Your assistance is invaluable in helping us navigate through the current challenges and any that lie ahead.
In community,
John Bost, Executive Director
Open Heart Kitchen
Photo by Markus Winkler: https://www.pexels.com/photo/white-paper-on-a-vintage-typewriter-4057659/