The coronavirus hit nonprofits hard, and organizations — especially those that do not offer programs that directly address pandemic-related needs — faced dire economic circumstances during 2020 and into 2021.
In response, foundations, government programs and individual donors increased their financial support or gave additional flexibility in how previously promised funds were used, according to Persevering Through Crisis: The State of Nonprofits, a report from Cambridge, Mass.-based The Center for Effective Philanthropy (CEP).
As a result, nonprofit leaders have scaled back some of the doom-and-gloom forecasting they offered in May 2020, when the CEP did its initial round of surveying on the pandemic. Back then, 46% believed the pandemic would have a “significant” impact on their organizations. By February 2021, that had dropped to 28%. Similarly, 33% in the recent survey said it had none to little negative impact, more than double the 15% indicating so in 2020.
What shifted their opinions? Funders funded. Nearly six in 10 reported increases in grants from government sources, and just over half said grants from foundations were up. Another 46% reported gifts from major donors had increased, a figure barely trailed by those saying gifts from individual donors who give below $7,500 were up. Lagging the field were gifts from individuals through donor-advised funds. Contributions from this source increased by only 36%.
Part of the reason funders increased their donations was nonprofits were more upfront about the direness of their circumstances. Nearly three-quarters (73%) of nonprofit leaders said they could be very candid with their major donors. This instinct was lessened when approaching staffed foundation funders: only 63% of nonprofit leaders said they had taken a more candid approach with these donors.
The additional largesse did not reach all nonprofits equally. Nonprofits led by women or which serve Asian, Middle Eastern or Pacific Island communities found their funders were less flexible – or even responsive – to their changing needs.
The nonprofit executives expressing these views are not smaller, marginalized organizations. The 163 responding nonprofit leaders surveyed in February 2021 for the CEP’s research represent organizations that have received at least one $5 million grant annually.
Ethnic focus and female leadership were not the only factors influencing how much support a nonprofit received. Arts and culture organizations had to scramble more for funds, while community and economic development organizations weathered the storm better.
Few nonprofits escaped the pandemic’s effects unscathed, however. Nearly nine in 10 (88%) altered program offerings, whether due to lack of funds or the need to socially distance. Just under six in 10 reduced programs or services.
Almost half responded to drops in funding by reducing operational costs, and 38% were forced to draw from financial reserves, roughly the same amount as those who cut staff hours, wages or benefits.
The CEP’s report was based on responses from 163 nonprofit leaders which were collected during February 2021. A full copy of the report can be obtained here: https://cep.org/portfolio/persevering-through-crisis-the-state-of-nonprofits/