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Mar 23rd, 2020

‘We had a Shoestring Budget in Good Times’: COVID-19’s Devastating Impact on the Nonprofit Sector

The results of surveying 450+ nonprofits show that the sector is facing an unprecedented threat. Unless philanthropy, government, and the private sector collectively support their short-term survival and long-term recovery, our nonprofit communities will see devastating consequences.


Jamie Badia

Even through times of health and economic prosperity, we at Catchafire hear from nonprofits every day who are operating under tight financial and human capital constraints, and rely on skills-based volunteers to expand their capacity. Last week, as the devastating effects of COVID-19 unfolded in the United States, our nonprofit community let us know that their operations and funding have been upended, and that they will need significant external support to keep their doors open.

Nonprofits serve the most vulnerable populations in society, providing essential services to children, the elderly, the homeless, victims of violence, and countless others. Nonprofits bring us joy and truth, enabling artists, musicians, writers, and performers to break down barriers and build empathy. Nonprofits employ 10% of the American workforce. And in the wake of the 2020 COVID-19 outbreak, nonprofits are on the brink.

As we mobilize special assistance for nonprofits impacted by COVID-19 in the form of alternative fundraising strategies, remote work best practices, and more, we’re joining forces with our partners and institutional funders to support and elevate nonprofits at a time when the world needs them most.

To help move the conversation forward, below are our findings from surveying a representative sample of our nonprofit community, and an update on how we’re pivoting to meet their evolving needs.

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Research Summary

We surveyed 450+ nonprofits to understand how COVID-19 is impacting their organizations. These nonprofits represented a diversity of cause areas, budgets, staff sizes, and regions within the United States. At a high level, we found that nonprofits are facing:

  1. Severe, sudden capital constraints. Nonprofits are facing a dramatic reduction in funding primarily due to canceled in-person fundraisers, loss of earned income revenue, and decrease in individual donations.
  2. Limitations on program delivery. Nonprofits are limited or in many cases, unable to offer programming due to social distancing mandates. They need the most support pivoting to digital strategies in order to fulfill on their missions & sustain operations through the pandemic and beyond.
  3. A need to take all fundraising digital. Nonprofits are pursuing alternative fundraising strategies, but fear it won’t be enough — so they’re calling on philanthropy to address resulting funding gaps from the COVID outbreak.
  4. An abrupt shift to remote work. Most nonprofit staff have switched to remote work or will do so shortly, and nearly half need help improving their virtual collaboration skills.

Logistics and Demographics

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We distributed the survey early on Tuesday, March 17th, at a time when 6,300 individuals in the US had been diagnosed with COVID-19 and the markets had just seen their worst day in over 30 years. We expect the impact on the nonprofit sector to worsen as the situation becomes more widespread.

Our 450+ survey respondents came from 35 US states, representing 23 different cause areas. Most nonprofits we surveyed reported having an annual operating budget of less than $500,000 a year, and anywhere from 1–25 staff members.

We distributed the survey early on Tuesday, March 17th, at a time when 6,300 individuals in the US had been diagnosed with COVID-19 and the markets had just seen their worst day in over 30 years. We expect the impact on the nonprofit sector to worsen as the situation becomes more widespread.

Our 450+ survey respondents came from 35 US states, representing 23 different cause areas. Most nonprofits we surveyed reported having an annual operating budget of less than $500,000 a year, and anywhere from 1–25 staff members.

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To protect the nonprofits who shared candid, open-ended responses with us, we will only be identifying individuals quoted throughout this article by their nonprofit’s cause area and region.

COVID-19’s Impact on Nonprofit Funding

“It’s scary. Since we work primarily in the communities we serve, many of the services and programs that we rely on for revenue cannot be carried out, individual donors are not returning calls… the COVID-19 pandemic could potentially be a death blow to our organization if we do not take action now.” — Environment Nonprofit in Wisconsin

We found that nonprofits are bracing themselves for a dramatic reduction in financial capital due to:

  • Canceled in-person fundraisers (74% reported). March through June is the most active season of the year for nonprofit fundraisers, and some survey respondents let us know that they rely on these events for as much as 50% of their operating budgets.
  • Loss of earned income revenue (52% reported). Nonprofits that provide fee-for-service programming in schools, health facilities, corporations, and more have been left without the steady streams of earned revenue that they typically rely on. Many organizations want to pivot to virtual programming, but need expert support to get up and running quickly.
  • Decrease in donations from individuals (40% reported). With the markets down and industries across the board facing losses, donors seem to be losing the capacity and willingness to give.
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Additionally, 18% of survey respondents reported that they’ve already experienced a reduction in grant funding, likely due to stalled grant cycles and delayed government payments. Through open ended responses, we also found that dozens of nonprofits were uncertain on the status of restricted funding they had previously received for programming they are no longer able to run during COVID-19.

COVID-19’s Impact on Nonprofit Operations

“During good times it is difficult to oversee a non-profit on a shoestring budget with minimal administrative staff. As ED during this crisis, I have been working to responsibly lead my staff and programs without having set contingency plans in place. I feel a great deal of responsibility without much support from the organization which is looking to me for direction.” — Community & Economic Development Nonprofit in New Jersey

Our findings show that nonprofits are severely limited in their ability to fulfill on their missions at this time due to:

  • Canceled in-person events (86% reported). Beyond fundraisers, nonprofits have been unable to hold traditional community events that they rely on to spread mission awareness.
  • Reduced/canceled programming (79% reported). Nonprofits across all cause areas have reduced or altogether canceled programming, leaving contractors that typically carry out this work unemployed and without pay for the time being.
  • Increased demand for services (27% reported). The majority of nonprofits we surveyed in human services, health, education, and housing & homelessness reported seeing an increased need for their services, despite being limited or unable to run their in-person programming.
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Additionally, 78% of respondents reported that their staff is now working remotely, or will be shortly — an abrupt challenge for nonprofits who don’t already have virtual collaboration systems in place.

Virtual Support Needs for Nonprofits

Our survey respondents let us know that during these unprecedented times, they’re looking for support in the following areas:

  • Alternative, digital fundraising strategies (72% reported). With in-person fundraising events canceled, nonprofits are seeking advice on how to use digital channels and crowdfunding to close gaps.
  • Remote work best practices and affordable teleconferencing tools (48% reported). Given that 79% of nonprofits are now working remotely or will be shortly, they’re seeking the expertise of professionals who have worked this way for years, and are looking to set up collaboration tools like Slack, Zoom, and Google Suite to make it easier.
  • Email marketing, messaging, and social media (34% reported). Now more than ever, nonprofits need to stay in communication with their communities, and they’re looking for operational and strategic guidance on how to make their mission stand out.
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Given our specialty in virtual, skills-based volunteer engagement, we’ve already updated our Project Menu and Volunteer Opportunities page to make it easier for nonprofits to connect with skilled professionals in these time-sensitive areas.

Beyond the traditional 1:1 engagements that we facilitate, survey respondents reported that they’re seeking the following additional resources, which we have already begun to provide:

  • Webinars on timely topics, such as alternative fundraising or virtual collaboration (57% requested). We’re hosting a 1-hour course on virtual work for our nonprofit members Thursday, March 26th and Friday, March 27th. Follow this link to sign up.
  • A virtual nonprofit community to share resources and support one another (51% requested). Late last week, we opened the Catchafire Nonprofits Slack workspace that has quickly grown to 100 members. We’ll be rolling it out to the rest of our nonprofit community this week. Please email us at [email protected] if you’d like to join (we kindly ask our friends at grantmaking foundations to refrain from joining, to protect our nonprofits’ privacy).
  • Specific Catchafire project recommendations targeted towards the shifting landscape (51% requested). We’re currently adjusting our Quick-Start Assessment for nonprofits so that users can indicate what specific issues they’re facing due to COVID-19, and our system will provide immediate suggestions.

We will continue to update this section of the report to indicate how we are adjusting our platform and programming to the evolving needs of nonprofits during COVID-19.

Conclusion

Despite the challenges we know we’ll face in the months to come, we believe it’s our duty to shine light on the incredible gifts that the nonprofit sector gives us.

We’ve always been uniquely situated between the growing needs of nonprofits and the proactive nature of constituents who want to use their skills for good. We’re humbled to support the 8,000+ nonprofits and 43 funders who, based on these survey results, we anticipate will have a growing need for immediate and long term assistance.

We are ready to provide nonprofits impacted by COVID-19 with the tools and talent they need to make it through this crisis and recover in the months to come. If you’re a grantmaker and would like to learn more about equipping your grantee organizations with immediate operational support, please contact us here or email us at [email protected]

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