1 in 3 nonprofits in danger of closing due to pandemic: study
The financial strain caused by the coronavirus pandemic has put more than 1 in 3 U.S. nonprofits in danger of closing within the next two years, according to a philanthropy study released Wednesday.
The report, developed by research group Candid and the Center for Disaster Philanthropy, said that in a worst-case scenario, prolonged crises could lead to upwards of 38 percent of 300,000 nonprofits — more than 119,000 — closing their doors.
The report examined a total of 20 different scenarios. It found that in the absence of a prolonged crisis in the next two years, just about 4 percent of nonprofits (12,042) would close. The median outcome of all the scenarios was 11 percent (34,472) closing.
The report found that in 2020, more than $20 billion was contributed to COVID-19 relief efforts by corporations, foundations, public charities and high net-worth individuals.
Despite these contributions, nonprofits have been strained as more people rely on their services during the pandemic and the organizations struggle to keep up with operating expenses.
Candid and the Center for Disaster Philanthropy, which analyzes charitable contributions during crises, said in the report that massive closures could be avoided if both the government and private actors substantially increased their donations.
Jacob Harold, Candid’s executive vice president, told The Associated Press, “If you are a donor who cares about an organization that is rooted in place and relies on revenue from in-person services, now is the time, probably, to give more.”
Wednesday’s report noted that by December 2020, more than 930,000 jobs had been lost among U.S. nonprofits during the pandemic.
Among the organizations hardest hit were those in the arts and entertainment sector, with nearly 37 percent of workers at these nonprofits losing their jobs.
Education nonprofits have also been disproportionately impacted, losing about 15 percent of their workforce, or 300,000 jobs.
According to estimates from the Center for Disaster Philanthropy, it would take about 1 1/2 years to return to pre-pandemic levels of employment among nonprofits.
Harold told the AP that while nonprofits may attempt to implement cost-cutting measures to save money and survive the financial crisis, these efforts may be too late for some organizations.
“A lot of nonprofit boards were able to say, ‘Oh, this is going to end soon’ and ‘We’re fine for a year,’” he explained. “But they might not be fine for two years. So if they dragged their feet last year, they may find themselves really having to scramble this year to make the structural changes now.”
Wednesday’s study comes after President Biden last week announced policy changes to the Paycheck Protection Program (PPP), including instituting a 14-day period through March 9 allowing only companies and nonprofits with fewer than 20 employees to apply for assistance through the PPP.