The Foundation for the Carolinas, one of the largest community foundations in the country by assets, received a $2.3 million federal Paycheck Protection Program loan, which its leader says will help avoid layoffs at the nonprofit.
The foundation has $2.4 billion in assets and gives out hundreds of millions of dollars in charitable donations each year. Almost all of those assets are tied up with donors’ pledges to certain initiatives, leaving the foundation with comparatively little discretionary money.
The PPP was created to be a lifeline for small organizations struggling financially during the new coronavirus pandemic. But big firms like Ruth’s Chris Steak House generated controversy when they secured loans while many small businesses missed out.
With funds still limited, some publicly listed companies have started to return the money they already received, including Ruth’s Chris as well as one Charlotte firm.
Non-profits are often small businesses, too. The Foundation for the Carolinas, despite its huge asset figure, has only 135 employees. And with the canceling of events and galas that help many nonprofits make ends meet, many are struggling.
Revenue for the Foundation for the Carolinas operations, which comes from fees on its funds as well as events, is forecasted to be down 20% this year, according to President and CEO Michael Marsicano. The foundation’s initial projected revenue for its operations this year was $15.7 million.
PPP financing “will enable us to not have to let people go like we did in 2008, at a time when everyone is asking us for a huge amount of work,” Marsicano said in an interview Monday.
In the 2008 financial crisis, the foundation cut 10% of its staff. Marsicano expects to ask the PPP loan to be forgiven, which is a major provision of the stimulus program. But if revenue doesn’t drop as much as forecasted, he said the foundation will pay back some of the funds.
In 2018, the foundation gave 20,000 grants totaling $315 million to nonprofits. So far this year, it has already awarded 33,000 grants worth $144 million, on track for its most prolific year in history.
The foundation also partnered with United Way of Central Carolinas early in the pandemic to create a COVID-19 response fund to help area nonprofits, to which the city of Charlotte has given $1 million. A foundation subsidiary has also created a $50 million nationwide fund for families of health care workers and volunteers who died of COVID-19.
The PPP funds won’t cover the foundation’s shortfall in revenue, Marsicano said, leading to a deficit.
Marsicano, whose total compensation in 2018 was $843,589, said that the foundation’s board has not asked him to take a pay cut. If the foundation’s revenue outlook worsens, he said he will cut his salary, as well as other those of other executives, to avoid layoffs.
The Foundation for the Carolinas partially funds the salary of the Observer’s affordable housing reporter, through the program Report for America, but plays no role in the Observer’s journalism.
The foundation drew some criticism last year for managing funds of a donor who financed a network of anti-immigration groups.
With PPP funds quickly drawing down, even after Congress added another $310 billion to the original $349 billion program last month, criticism of well-off companies and nonprofits tapping the funds has come from politicians in both parties.
In creating the program, Congress and the Trump administration favored getting money to small businesses as quickly as possible with guidance that, initially, lacked much specificity.
That meant that firms which weren’t necessarily the target of the money, like some more financially secure public companies, thought they may be able to access it.
The Small Business Administration, which oversees the program, has not released information about who received PPP funding, but some of that funding is disclosed in public companies’ Securities and Exchange Commission filings. Many public companies that got the funds eventually returned them.
Charlotte-based Ballantyne Strong, a holding company for multiple businesses including a cinema screen manufacturer, got a $3.2 million PPP loan April 14, according to securities filings.
But new guidance from the SBA announced April 23 added “additional uncertainty” to the firm’s eligibility for loans, and “out of an abundance of caution” the company returned the loan, according to an April 24 filing. The 296-person firm has furloughed workers to make it through the pandemic.
cbdMD, a public Charlotte-based cannabidiol company, got a $1.46 million PPP loan, according to a securities filing. The company has 182 employees. Cannabidiol, or CBD, is a chemical extract of marijuana.
The program’s ticking clock and limited supply of money have raised questions about whether the neediest companies are the ones benefiting.
“I think everybody’s concerned that the first-come, first-served way (the PPP) was set up has some challenges to it,” Marsicano said. “But why would I not want to make sure that I could employ my people to help fund all the other folks in town?”