Report: 28% of NPO Leaders Concerned About Finances

Nearly three in 10 leaders at nonprofits are either “somewhat” or “very” concerned about the organization’s financial state, according to the 2021 Annual Report State of the Nonprofit Sector from Springfield, Mo.-based BKD, a CPA and advisory firm. Another 26% were unsure of their prospects, while 8.5% reported being somewhat pleased. 

More than one-third – 37% – of respondents said they were “very pleased” about their current financial condition.

Overall, more than 71% reported revenue drops, with nearly 62% responding the decreases had been more than 25%. Some 8% responded they had not experienced changes in revenue, and 21% — likely in sectors that have seen increases in funding due to the coronavirus — reported increases. Report authors also noted that online learning and virtual class participation has skyrocketed, benefitting academic institutions.

The most devastating income drops were felt among organizations that rely on foot traffic, such as museums or performing arts venues. Those that have opened have done so with limited audience capacity. Just more than 61% of arts, culture and humanities-focused nonprofits experienced income drops; among those, one-third saw income fall between 51% and 10%.

Nonprofits that rely on in-person events such as athletic events, dinners or galas have also seen revenue disruption, due both to the loss of participation fees and corporate sponsorships. Most digital experience, the report authors noted, have not brought in revenue similar to that of in-person events.

A look at revenue streams bore out the impact of a lack of live events. More than six in 10 – 62% — of respondents said fees for programs, services and goods had dropped, along with 59% reporting decreases in revenue from special events and fundraisers.

The biggest increases were seen in the health and human services sectors. In both instances, nearly nine in 10 reported higher revenue, with half of the respondents in each sector saying revenue had jumped by at least 51%.

Within the report, one anonymous executive director was quoted saying “Funding from the CARES Act has kept many of us afloat. But we know that those funds are going to run out. What then?”

Some have cut expenses. Nearly 47% have reduced operational expenses, while another 13 percent have held them steady. But more than 40% have increased expenses, likely reflecting verticals that have seen the need for — and funding of — their services increase during the pandemic.

Whether increasing or decreasing their offerings, 89% have altered program and service delivery, with 29% planning to eliminate at least some of their offerings. At the same time, more than 62% report need for their programs and services as having significantly or somewhat increased, while less than one-0quarter – 23% – responded there has been a decrease for their offerings.

Nonprofit leaders aren’t counting on a swift rebound to their organizations’ fortunes. When the survey was conducted late in the third quarter/early in the fourth quarter of 2020, only 13% expected a recovery within five months, while 16 percent said it would take between half a year and a year. Four in 10 estimated they would need between a year and a year and a half, while 14% estimated a lag of 18 months to two years. Nearly 17 percent may be counted among the truly pessimistic, those believing recovery won’t come for at least two years.

BKD based its report on 319 completed surveys from executives at nonprofit organizations. More than two-thirds were 501(c)(3) organizations. Just over one in five were education nonprofits and a similar amount focused on education. Human services made up 18% of respondents, arts, culture and the humanities organizations comprised just under 14%, and public and societal benefit organizations made up 8.5%. The rest were drawn from religious, environmental and animal, members, international and unclassified nonprofits. The surveys were conducted between Sept. 23 and Oct. 23, 2020.