Press Room

Fearing another year of shriveled budgets and sky-high need, Charlotte-Mecklenburg leaders are pressing nonprofits to collaborate, or even merge, to improve efficiency and stretch donor dollars.

Mecklenburg commissioners have convened a who's-who of government and philanthropic leaders to hammer out a master plan for meeting social needs efficiently and effectively.

The United Way of Central Carolinas, which saw last year's fundraising totals fall $14million short of 2007's, has been nudging a handful of its 90-plus member agencies to eliminate duplication.

And the Foundation for the Carolinas is completing a first-of-its-kind inventory of Charlotte's nonprofit sector - a project that could show charity leaders areas of overlap.

Everyday residents have zeroed in on the issue, too. Charity mergers were among the most popular recommendations offered to Mission Possible, a media coalition seeking solutions to Charlotte's nonprofit crisis.

Some nonprofits, including the Girl Scouts, the American Red Cross and local homeless shelters, already are either consolidating or studying such moves. Faced with budget troubles and cost-cutting national offices, they say they have little choice.

"This is where nonprofits need to go, especially small ones," says Pamela Jefsen, CEO of the Red Cross' Greater Carolinas chapter. "Donors trust us to be efficient with their money, so we consider this a moral imperative."

But not all feel such urgency. The United Way's three Charlotte-area Boy Scouts councils are not merging, even though their Mecklenburg council suffered the United Way's largest single program cut this year - $358,299 for an outreach initiative.

"Councils do merge," says Mecklenburg Boy Scouts official Tony Morton. "But it's not something right now that our national council or our boards have seen as a logical next step to try and dig out of this hole."

Local leaders want action. There are "absolutely" too many charities in Charlotte, says Jennifer Roberts, who chairs the county commission.

"Everybody needs to look at themselves and look around and say, 'Who do we need to collaborate with?'" she says. "Change is hard. But I think there's a lot more grease to the wheels than we've seen in a long time."

No one can make agencies join forces, however. And unlike the world of big-money corporate mergers, no one dangles lucrative stock options, improved profits or "golden parachutes" to lure charities to the table.

Nonprofit executives fear for their jobs, and their boards - often stocked with influential citizens - fight for the agencies to which they have built strong emotional and financial ties.

"The challenge with mergers and acquisitions is they scare the hell out of nonprofits," says Alex Cortez, co-author of a recent study on nonprofit mergers in North Carolina and several other states. "It brings to mind loss of brand and loss of control."

But many say things must change, if only because there isn't as much money to go around. The Foundation for the Carolinas estimates the larger nonprofits face cuts of roughly $171 million this budget year.

"Given where we are in our community, and where we are in our society, it does make sense for the nonprofit sector to look at ways it can restructure itself," County Manager Harry Jones says. "As a (donor), I'm going to want to know that an agency I'm giving money to is not duplicating."

Still, the complexity of the task and the wariness of some charities is raising an unavoidable question: Who, if anyone, can make it happen?

Donations have dropped

Nearly 4,000 nonprofits call the Charlotte region home, according to research from the foundation. Most are small, with budgets below $25,000. But the 769 biggest boasted revenue last year topping $1billion.

That figures to change. Area unemployment remains high, almost 12 percent. Donations to charities have dropped as people struggle to pay for food and mortgages. And lingering anger over last year's executive pay controversy continues to hurt giving to United Way.

San Francisco, facing similar budget problems, created a pool of money to underwrite legal and technical bills for mergers or cost-sharing plans. About 40 organizations have collected $350,000 in grants for 16 projects, says John Killacky, who is overseeing the effort for the San Francisco Foundation.

Still, that's a sliver of San Francisco's roughly 25,000 charities. Others have resisted collaboration.

"Unfortunately," Killacky says, "some of those organizations will die on the vine."

Doing more with less

Leaders fear the same thing could happen here if organizations can't figure out how to do more with less.

Before the economy tanked, Hope Haven - a shelter for people with substance abuse problems - relied on seven to 10 other agencies to help handle clients' complex web of needs. Now, county budget cuts have left it with just three or four, and some of those agencies won't help unless the client has Medicaid or Medicare to pay for services.

"That puts an extra burden on my staff," says Flay Lee, a Hope Haven official. "But we do it. We have to do it. We want them to get the best care."

Despite their desire for efficiency, the groups supplying most of the nonprofits' money usually stop short of forcing mergers or collaboration.

United Way officials say there's duplication among no more than a handful of their agencies, but they declined to name them.

The volunteer panels that dole out United Way money have been asking member agencies whether they've been involved in merger talks. Bill Anderson, head of the Communities In Schools dropout-prevention program, told them his organization hasn't.

"But our stand is, we're willing to talk to anybody, if the funders think we should be in talks with anybody," he says.

Mecklenburg County is making its feelings known. The county is giving nearly $6 million this budget year to dozens of nonprofits, down 6 percent from last year.

Jones asked county staff for names of county-supported charities that could consolidate, and they came back with four or five. The Council on Aging and the Senior Centers, two agencies serving the elderly, offered the most promise.

County officials have spent months midwifing the merger. The groups have expressed willingness to explore the idea, but both question whether the agencies might prove too different. The Senior Centers run sites where seniors get recreation, meals and fellowship. The Council on Aging lobbies for senior-friendly laws and policies.

"Apparently, some believe that merging is a 'silver bullet' for nonprofits," says Debora Mitchell Sparks, the council's director. "Merging is a valid consideration and worth studying in many instances, but I don't think it is realistic to believe that it is a 'one-size-fits-all' panacea."

Experts say some mergers save money, but others don't. Charity leaders say while mergers reduce administrative costs - one executive director's salary instead of two, for instance - they often produce more complex, costly organizations.

"If you decide to merge," says Trena Palmer, head of the Senior Centers, "it's because you're going to provide more and better services."

Jones, the county manager, says those who supply nonprofits with money - local governments, United Way and major foundations - should band together to decide community needs and worthy projects. He believes that would cut duplication.

That might work among government agencies, says United Way Executive Director Jane McIntyre, but not foundations and philanthropists.

"It's their money," she says. "It's important for funders to communicate, but they must remain independent, because giving is personal."

Seeking a master plan

The county commissioners have called together all elected leaders, as well as philanthropic and nonprofit officials, to craft a master plan for reducing duplication and meeting Charlotte's social needs.

So far the meetings have produced as many questions as answers.

How, commissioners chairperson Roberts asked, can charities, government agencies and grant-making foundations get on the same page when they have independent boards and sometimes competing priorities?

Does the solution lie in creating some new take-charge organization? Finding a better way to finance charitable work? Improved information sharing?

"This is a very complex situation," says Brian Collier, an official with the Foundation for the Carolinas who has participated in the meetings. "There isn't an easy response. Otherwise, it would have already been done."

One point of agreement: Full mergers aren't the only way to save money.

One of the most dramatic cost-cutting collaborations in Charlotte involves nine charities that share a building and a centralized back office that includes human resources, payroll and accounting.

They estimate they save $500,000 a year in rent by sharing the Children & Family Services Center Building in First Ward. They also bought employee health insurance as a group and saved their workers $400 per person annually on premiums.

Should more nonprofits be sharing back offices?

"Absolutely," says Peggy Eagen, director of the nonprofit that oversees the collaboration. "But sharing's tough. They teach us that in kindergarten, but some of us still struggle with it."