Pandemic pinching nonprofit resources

While contributions continue to come in, the loss of income from programming has many nonprofits, and their clients, fighting to stay afloat.
Feature State Of Nonprofit Sector Panel

Earlier this week, BKD CPAs & Advisors released its 2021 State of the Nonprofit Sector Report. The nonprofit wellness study was conducted to identify how nonprofit organizations are responding and surviving amid the COVID-19 global pandemic. The study highlights how many nonprofits are coping under added pressure, both financially and operationally, and the findings show that while a majority of nonprofits have increased their services, future cutbacks are a distinct possibility if declining revenue continues.

The study also points to some sobering, if unsurprising, challenges facing the nonprofit sector nationally. Among the study’s key findings:

  • 89% altered their delivery of programs and services;
  • 70% experienced a decrease in net income;
  • 61% experienced a decline in fees for programs and services; and
  • 29% plan to eliminate current programs or services.

The survey comprised 18 questions or scenarios, including general questions about organization location, size, area of focus, and questions about the COVID-19 crisis. BKD received responses from 319 organizations between Sept. 23 and Oct.23, 2020.

Reflective of the nonprofit sector composition, more than two-thirds (67.61%) of respondents were 501(c)(3) organizations, the study notes. The three largest subsectors represented were education (21%), health (20.4%), and human services (17.9%).

When asked how they feel about their organization’s current financial position, more than one-quarter (28.2%) were somewhat or very concerned. As one executive director commented, “We’ve been in a bubble. Funding from the CARES Act has kept many of us afloat. But we know that those funds are going to run out. What then?”

The decline in revenue is also alarming, according to study. More than 70% of respondents lost revenue in 2020. About one-fourth decreased between 26%–50%, and around one-tenth decreased anywhere from 51%–100% of total revenue.

The hardest hit income streams were fees for programs, services, and goods (62% of nonprofits saw a decrease) and revenue from special events/fundraisers (with 59.2% showing a decrease). Fees from membership organizations and planned giving were the least affected of all revenue sources.

In some cases, revenue during the pandemic has actually increased, which the study posits could be a result of changes driven by the health crisis. For example, while seated classes at colleges and universities experienced dramatic declines, online learning and virtual classes grew exponentially.

Arts, culture, and humanities experienced the greatest income decreases (61.4% of all respondents experienced declines; about one-third decreased between 51%–100%), while the areas of health (overall increase of 88.9%; half experienced 51%–100% increase) and human services (overall increase of 87%; half experienced 51%–100% increase) saw the biggest income increases.

When asked how long they felt it would take their organization to recover financially from the crisis, a majority (71%) indicated it would take at least a year. A smaller percentage (30.8%) believe it will take from 1.5 years to more than three years for them to stabilize.

The study states the numbers are clear — “more than 80% [of respondents] report a negative impact, and about half believe the impact on individuals and communities is significant. Only 5.3% of the organizations surveyed say the crisis has not had a noticeable impact, and nearly 10% report a slight positive impact.”

“The goal of this study is to highlight how organizations are adapting to the pandemic and what effect it’s having on their ability to provide programs and services,” says BKD Senior Managing Consultant Dan Prater, “[so] essential funders, elected officials, and community leaders understand the current condition of nonprofit organizations as they consider the scale of necessary intervention.”

Local impact

Bob Sorge, president and CEO of Madison Community Foundation, says his organization has weathered the pandemic well thus far. As an institution that funds nonprofits, MCF’s resources come from investments and contributed income, both of which were strong in 2020.

That trend for healthy contributed income holds for local nonprofits as well, according to MCF’s conversations with its partners, says Sorge, but program income has been weak or nonexistent because of the pandemic.

“MCF’s key challenge has been to use our resources as effectively and efficiently to help as many nonprofits as possible to bridge that gap in programming revenue,” Sorge explains. To that end, the organization has provided several grants.

“One of the strongest — and certainly a bright spot — is that we hired Scholz Nonprofit Law to work with local nonprofits in the first round of federal stimulus funding, both the PPP and EIDL programs, Sorge says. “Two hundred ninety-eight people from 170 organizations worked with Scholz, securing in excess of $27 million in resources. We are currently funding Scholz to work with organizations to access resources from the second round of federal stimulus funding and are particularly focused on helping the Latino and Black Chambers of Commerce, and their members, to secure funding.”

According to Rowan Childs, founder and executive director of the literacy nonprofit Madison Reading Project, her organization needed to rework how it did business with its partners, how staff and volunteers interacted, and how it could do business in its space.

“We were already looking for more space for our books and people when COVID hit,” explains Childs. “We could not have more than three people in our office with social-distancing rules. Like many, that took away much of our personal connections and interactions among staff, volunteers, and partners. We managed through 2020 in our old space and this February we moved into a new space four times the size.”

Childs say there has also been the question of how Madison Reading Project can bring in and provide thousands of books to children stuck at home with very little reading material during a pandemic? “This was front and center of our mission, and we knew kids were in dire need for reading materials, books, anything with being trapped at home. We had a huge increase of requests from teachers, social workers, whole school districts, and community centers asking for material to get to children and families.”

In response, MRP changed how it received book donations for three months to a fundraising model intended to allow the organization to purchase new, specific books that staff knew children would love. That worked well, Childs says, and MRP continued to replicate that process throughout the year.

“As much as there were dark days for us to get through, there were many silver linings,” notes Childs. “We had hoped to slowly increase new book purchasing, but instead our book purchases doubled last year with a great appreciation and impact to children. We bought 40,000 books in 2020 instead of 20,000. This was with help from our amazing team, donors, supporters, and volunteers.

“We also came up with a variety of methods to get books to our partners by reusing our book bus,” she continues. “While kids cannot climb aboard right now, being mobile is huge. We can select and curate books for partners at the center and bring them right to their front steps. For two partners, we even did home deliveries over the summer. We also provided virtual shopping appointments during the summer when we offered free books to new educators.”

The pandemic also has put a strain on the United Way of Dane County and its nonprofit partners, according to UWDC President and CEO Renee Moe. “Our 211 helpline calls were up 400% at the onset of COVID-19, and they remain at two times the normal call volume today. Workers across Dane County are struggling to afford food, rent, and utilities due to reduction of hours and job loss, and we’re seeing increased calls for mental health and addiction recovery services. It should be noted that we know there are many job openings right now; however while virtual school, child care, and other challenges such as illness are present, adding hours or taking on new positions have their own set of stresses. This increase in need has led to a quicker drain on the funds that are typically available through our nonprofit partners as service demand skyrockets, so we continue to call on the community to come together and give, so that we can help our partners continue to serve working families into this year and beyond.”

According to Moe, nonprofits are demonstrating extraordinary innovation in service delivery and increased intensity in working with stressed families and too few resources. “Our essential nonprofit staff are tackling each difficult day with grace and determination, meeting local workers and families with compassion and nimble problem-solving. As a community, it’s important to remember that when families are destabilized, that has significant implications for community safety and well-being. This isn’t about handouts, it’s about stretching strained budgets to get through really tough times.”

Moe notes UWDC is also doing a fair amount of planning around recovery, thinking about educating local children and training for new economy jobs with the knowledge that many lost jobs won’t be coming back. The organization is also paying attention to the disproportionate impact the pandemic has on Black and brown community members.

“I’ve been truly inspired by our community’s ability to come together in this time of crisis,” says Moe. “When the pandemic began, we launched the Dane County COVID-19 Emergency and Long-Term Recovery Fund with the Boys & Girls Club of Dane County and Selfless Ambition. More than 1,000 donors and corporate partners invested more than $2 million to provide financial relief for families and individuals affected by this virus. That is amazing.”

Moe reports individual and new business participation increased in the most recent community campaign, offsetting nearly $400,000 in special event losses. “Our volunteer Campaign Cabinet, led by chair Paul Kundert of UW Credit Union, expects to achieve our campaign goal. Businesses stepped up in new and innovative ways to help — virtual volunteering, providing in-kind contributions like PPE and school supplies, and by sharing their community support on social media to inspire others to give and be part of our community response.

“And they used all of these activities to keep virtual teams engaged, connected, and focused on the companies’ values,” adds Moe. “To me this proves that, while we’ve got a long way to go toward recovery, we will get through this together.”

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