Warning Signs About the Fragility of Nonprofits in the Pandemic Era

With tens of millions of additional people turning to and relying on charitable nonprofits for services since the novel coronavirus exploded in the United States, all nonprofit stakeholders – nonprofit board and staff members, government policymakers, philanthropists, business leaders, and the general public – need to call time out to consider how charitable nonprofits are faring in these daunting times. When doing so, you will see bright warning lights flashing and hear loud warning claxons sounding the alarm.

Just add up the following stressors and ask: Where is the breaking point?

Since March …

• More than 10 million Americans have been infected by COVID-19, with infections now accelerating In every state, and that number could double, to 20 million, before year’s end.
• 4.2 million are still recovering – with all the attendant costs, financial and personal, for themselves and their families.
• 5.8 million reportedly have “recovered” – yet many remain burdened by resulting hefty financial costs (e.g., medical bills, lost wages).
• More than 242,000 Americans are dead – leaving behind grieving family members, many of whom are worried about lingering medical costs, funeral expenses, past lost wages, future lost wages, and more.
• More than 66 million Americans have filed for unemployment.
• 54 million people in the U.S. face food insecurity, including children.
• 40 million people face eviction, and renters will collectively owe $34 billion in back rent when the CDC’s temporary moratorium expires at the end of this year.
• Domestic violence has increased, as have mental illness, substance abuse, and suicides.
• And the feared second wave of the pandemic is surging. with numbers growing worse daily, with 42 states now in the red zone and an American dying every 107 seconds.
• Now, on top of the health crisis and related economic crisis, pile on natural disasters –  from a record number of named storms in hurricane season to record acreages lost to wildfires – that are imposing yet additional demands on nonprofits to meet human needs. Often, nonprofits themselves are victims of the devastation.

But it’s not just the crushing new burdens that, without advance notice, suddenly crashed onto nonprofits’ doorsteps. It’s also that many nonprofits have suffered from severe financial hits to the nonprofit sector’s three main revenue streams:  

• Earned income has plummeted for many nonprofits (e.g., fewer children at childcare providers means lower income; full or partial shutdowns at arts and cultural venues mean lower ticket sales at places where many costs are fixed).
• Earned income from governments hiring nonprofits via contracts to deliver services to the public has fallen, with too many governments ignoring their obligations to pay nonprofits that incurred the costs and performed the services pursuant to those written agreements. See, e.g., New York State Stiffs Nonprofits, David Howard King, Shelterforce (Oct. 26, 2020).
• Many nonprofits have not been able to fundraise at the same level, due to a mixture of cancelled or scaled back events, people holding their money closely for fear of what may be ahead for them, and donations being directed or redirected to pandemic- and disaster-related causes.

Each of these pain points of fiscal stress pumps up the pressure on nonprofits, which themselves have been trying to cope with the added physical strains and the psychological stress of the crises. At a certain point, individual nonprofits, and then chunks of nonprofit subsectors, are at risk of collapsing because of skyrocketing demands, increasing costs, and plummeting revenues.

Where is the breaking point? No one knows for sure, in part because too few are even asking that obvious question.

To date, there has not been a nationwide, comprehensive effort to collect fresh sector-wide data about the sustainability of charitable nonprofits, which collectively are the third-largest private employer in the country. While there were some small-scale national surveys earlier in the year, none of them presented a representative sample of the nonprofit community, had adequate response rates, or produced data that could be analyzed at both the national and state levels. To make informed decisions about resource allocation and other kinds of assistance, federal and state policymakers, philanthropy, and nonprofits themselves need timely, reliable data to direct resources to where they are most needed and to plan adequately for recovery.

Fortunately, some timely and valuable data do exist. More than thirty of our member state associations of nonprofits and other organizations have conducted sector-wide surveys of nonprofits in their states. We’ve posted them on this webpage: Data on How the Pandemic and Economic Crises Are Affecting Nonprofits (along with some select regional, subsector, and national reports). The findings are illuminating about the ability of nonprofits to continue providing vital services at this critical time. Here is a small sampling of survey responses from the past few months:

• Nearly 10 percent of Kentucky nonprofits reported they had closed or expected to close by the end of the year; two-thirds were uncertain of their organization’s future.
• Human services nonprofits in Pennsylvania reported that six months into the COVID crisis, they had suffered – on average – a shortfall of $1.1 million per organization ($879,300 in lost revenues and $220,600 in higher costs to deliver services safely). See also PA Nonprofit Survey Asks the Right Questions and Gets Frightening Answers, Nicole Zerillo and Ruth McCambridge, Nonprofit Quarterly (Oct. 28, 2020).
• Forty percent of North Carolina nonprofits indicated they were already experiencing increased demand for services, while nearly 60 percent anticipated increased demand for services over the next six months.
• More than 93 percent of Florida nonprofit organizations reported negative effects on their programs and services because of COVID-19, and almost 40 percent had seen an increased demand for their services.

These are only a few of the data points state associations have collected (and continue to collect) about the situations in their states. Collectively, these data are beginning to reveal the scale of the growing financial and organizational toll the pandemic is wreaking on nonprofits.

That’s why we extend special thanks to all the nonprofit leaders who have responded to surveys seeking information about how the pandemic and economic crises are affecting the capacity and viability of the nonprofit community. While we recognize that survey fatigue is close to Zoom fatigue these days, the data and stories you provide help our network to advocate at both the state and the federal levels for new resources at the scale they are needed. You can help us better tell the story of how nonprofits and the people we all serve are being affected by the pandemic by sharing your nonprofit's story with us.

Given how many people are depending on charitable nonprofits throughout the country, it is essential that government agencies, nonprofits, and private funders have accurate and up-to-date data that can pinpoint where the needs are greatest. Too much is at stake for federal, state, and local policymakers to ignore the flashing warning signs and clanging warning bells any longer.