Early planning, prioritizing resources and jumping on opportunities are game changers when the economy goes south
By Rick Markley
Since late 2019 economic experts have been warning of an impending U.S. recession — they just weren’t sure when it would hit or what would trigger it. Well, COVID-19 seems to have answered those questions for us.
When the economy abruptly slammed on the breaks to slow the pandemic’s spread, volunteer fire departments that rely on fundraising felt the whiplash immediately. Social distancing and stay-at-home orders effectively killed many volunteer departments’ biggest fundraising events. Even as the lockdowns are relaxed across the country, the conditions to hold fundraising events are often onerous and sometimes not financially worth the effort. Couple that with the massive job losses and general unease about our near-term economy affecting the donor base, and volunteer fire departments are in a world of hurt.
This begs the larger question of should volunteer fire departments have to rely on fundraising to operate. The answer is a resounding “no.” And like our current funding crisis, identifying the problem is easy; sorting out the solution is a different matter completely. In many parts of the U.S., local media has done a great job of publicizing the financial plight of their volunteer departments. And some departments have found innovative ways around the lockdown restrictions.
But many volunteer and on-call fire departments were on financial thin ice before COVID-19 and it is going to take more than an innovative way to sell chicken dinners for them to survive if this downturn has any staying power.
To get at this, I looked at the nonprofit sector outside the fire service to see how it weathered the Great Recession, how it was preparing for this one and how fire departments can incorporate those lessons learned. Basically, experts advise nonprofit groups to have a real sense of where they are, stress test that status for bad scenarios, examine potential opportunities and take a hard look at services offered.
Every department needs an honest, no-B.S., on-paper assessment of their demands for services, services offered and available resources (cash, human and equipment). Make this assessment both current and forward-looking; one option is to have a 1-year, 5-year and 10-year plan based on that assessment with each plan updated and adjusted as needed annually. In this plan, be brutally honest about where the department stands now.
When considering human resources, it is not enough to list how many volunteers are on the roster. Know how many respond to most calls, some calls and few if any calls. Assess the department’s financial obligations. This includes things like operating expenses, insurance, debt, and projected facility and equipment maintenance and repair. The last one, maintenance and repair, is another area not to sugar coat your situation. If you’ve not been doing routine maintenance, for whatever reason, anticipate major repairs or replacements on the horizon.
Also, separate out your fixed costs, such as insurance and debt, with those that fluctuate based on use. Discover if those fluctuating costs move up or down with call volume or certain types of calls — such as per-call stipends or per-hour pay and vehicle fuel costs. And are there ways to trim the fixed costs without compromising the department’s future. For example, can loans be refinanced and can insurance coverage be adjusted?
Essentially, volunteer fire department leaders need to function as risk managers. In his article for the Nonprofit Risk Management Center, George Head wrote, “Risk management seeks to influence the direction of the surprise: to minimize unforeseen threats of loss (negative outcomes), while nurturing opportunities for gain (positive outcomes) whenever they arise. Risk management strives to increase the magnitude of positive outcomes, while reducing the severity of negative ones. Risk management focuses on making positive surprises more probable and negative surprises less likely. Finally, risk management works to reduce the variability of both positive and negative risks so that their outcomes can be more accurately anticipated, their financial consequences better budgeted, and each nonprofit’s future made more certain.”
One way volunteer fire departments can manage their risk is taking that known department assessment and stress testing it against probable and worst-case scenarios. Take your current costs to provide services, current anticipated income, current human resource level and reduce those by different percentages — then determine what services you can still provide under those stresses.
For example, if private donations and public funding drop by 25% due to the recession, and the number of active volunteers falls by 25%, how does that affect your ability to protect your community or respond to mutual-aid requests? Then flesh that out if both drop by 50%. Now try both with an increased call volume.
Think of the stress testing along the same lines as pre-incident planning. When you plan your department’s response to a factory or school, you plan for a variety of scenarios. Do the same for your department’s financial well-being. Answer how you’ll address the potential bad scenarios from “most likely to happen” to “most frightening if it happens.”
Go on the offensive
Like stick-and-ball sports, there’s both an offensive and defensive side to the surviving a recession game. Make sure your department is looking for ways to score on offense. If your department is in the enviable position of having a stockpile of money, hording all of it may not be in your best long-term interest.
Go back to that no-B.S., on-paper plan you did and look for upcoming expenditures you’ll have to make. Check pricing during the recession and compare that to what it was before the downturn. Is saving 20% by buying new apparatus tires now instead of 12 months down the road worth cutting into your savings? Spending a bit of your reserves now could save you over the long haul.
Likewise, experts advise economic downturns are a great time for volunteer-based organizations to recruit talented people. Recent college graduates unable to land a job, furloughed workers or those inspired by the efforts of first responders during the COVID-19 pandemic are prime candidates for volunteer and part-time firefighters. Keep your recruiting efforts up and running.
And look beyond filling the firefighter and EMT roles. As we know all too well, there’s a lot more that goes into running a volunteer department than dragging hose and taking BP. You may find that marketing manager, accountant or IT security pro now working from home who has free time since commuting ended. They may not want to do an 8-month FF I & II course or pack up and crawl around a burning house. However, they can do a great service for the department as civilian volunteers. And that means your people who love to drag hose and vent roofs can spend more time training for that and less time worrying about balancing the books or keeping hackers out of the email system.
Look for nontraditional fundraising source opportunities. Again, during the lockdown many volunteer departments turned to drive-through pick up for food-based fundraisers to replace the sit-down meal at the firehouse. Others have discovered direct-mail solicitation or online fundraising. Others still have sought grant-type funding from private endowments.
Whatever new or modified fundraising you do, the key, experts from Non-Profit Quarterly say, is to keep a steady, open line of communication with your donor public. Let them know you are still there. Let them share in your successes and challenges. And ask them to share in finding new funding streams. Those who can’t help now are more likely to give again when the economy picks back up if they know you’ve not forgotten about them.
And Non-Profit Quarterly’s data shows that during the Great Recession, donors in the middle-income range tended to give less if at all. However, those in the higher income brackets continued to give, some upped their donations. Reach out to those wealthier existing and potential donors with a personal appeal.
Do what you must
When all is said and done, you may discover that your department still cannot maintain its level of service given funding challenges. This is when you need to know exactly which services you must legally provide and which are optional. Running a BLS ambulance service or providing water rescue are examples of services you may have added at some point in the past. In an economic crunch, water rescue may be a drain on your resources to the point that it hinders your department’s ability to provide fire protection.
This is sensitive issue and cutting services should be a measure of last resort. Long-time respected fire service legal expert Curt Varone unpacks the issue here. If you feel cutting services is the only way to continue providing other critical services, spell this out very clearly to the governing body overseeing the jurisdiction’s purse strings. Spell out in concrete numbers the cost to keep the service, data on the value of the service (number of water rescues/dispatches over the past 5 years) and the cost of replacement. The cost of replacement should include not only the dollars to contract with an outside agency, but any anticipated response delays if that agency is coming from farther away.
Knowing when and why an economy tanks, as well as how long until it rebounds, will continue to vex economists. What is known is this — we’ve had them before, we have one now and we will have one again. Recessions, like the risks inherent in emergency response, can be mitigated with thoughtful, clear-eyed planning.