Through data, stories, and advice collected from more than 1,100 nonprofit leaders, a new survey from the Nonprofit Finance Fund—in partnership with Ambit 360 Consulting and EVITARUS—offers fresh insights into the health and well-being of the nonprofit sector, laying out the challenges faced by nonprofits throughout the course of the COVID-19 pandemic.
In addition to examining the impacts of the pandemic, the survey sought to understand the impact of ongoing racial inequity on the nonprofit sector.
Here are 3 noteworthy findings:
Demand for services is rising–particularly for nonprofits led by BIPOC
The majority (71%) of survey respondents saw an increase in demands for service throughout the pandemic. From distributing food to newly jobless people to administering COVID-19 tests, providing childcare services, and filling in gaps in public health. Americans have relied on nonprofit services throughout the pandemic to meet their physical and mental health needs.
To that end, 86% of nonprofits expect demand for services to continue to rise in 2022, but only 53% think they will be able to meet it.
Notably—nonprofits led by Black, Indigenous, and People of Color (BIPOC) saw the most pronounced increase in demand, with 64% reporting a significant (more than 10%) increase, compared to just 47% of white-led organizations.
Adapting to increased demands means that nonprofit employees have to take on a larger workload: 57% of BIPOC-led organizations and 45% of white-led organizations say that their employees have to carry out duties outside of their job description “all or most of the time.”
“Because of systemic racism, funders need to take purposeful action to advance equity and invest in BIPOC-led nonprofits,” said Shakari Byerly, Partner and Principal Researcher at EVITARUS. “We ask a lot from nonprofits, and too often, workers carry the burden when governments and foundations don’t pay organizations fairly for the essential services they provide.”
While many nonprofits are in a stronger financial position now than they were pre-pandemic, the majority continue to face financial challenges
Between 2020 and 2022, local governments and foundations recognized that nonprofits were on the frontlines of the pandemic and quickly made unrestricted funds available to support essential services.
Subsequently, 57% of nonprofits report that since the beginning of the pandemic, foundation funders have been more flexible with how they allow organizations to use funds.
Unrestricted funding is critical for nonprofits because it lets them decide how to spend their funds to best support their work. However, survey results show that this type of funding is not always equitably distributed. In 2021, 41% of white-led nonprofit respondents received 50% or more of their funds as unrestricted, as compared to just 29% for BIPOC-led organizations.
“It is unclear if the improvements in financial health reported at this moment represent a short-term exception due to Paycheck Protection Loans (PPP) loans and other emergency funding, or an inflection point for a sector plagued by systemic funding hurdles and persistent inequities,” said Larry McGill, Founder and Principal of Ambit 360 Consulting. “Having seen trust-based funding work during the pandemic, it’s clear that part of the answer is not just increased funding but also loosening funding restrictions so nonprofits can decide for themselves how to spend money in their own communities.”
Racial inequities in nonprofit funding are persistent
As the demand for services skyrocketed, so did funding. 70% of respondents saw their overall funding rise from 2019 levels during the pandemic, and 71% of all respondents received one or more PPP.
However, survey results show that long-standing inequities that favor white-led organizations persist in the nonprofit funding system. Here’s what that looks like:
- BIPOC-led organizations were less likely to receive federal funding in 2021. Excluding PPP, just 32% of BIPOC-led organizations received federal funding—compared to 46% of white-led organizations.
- BIPOC-led organizations were also less likely to receive corporate donations. 58% of those surveyed reported receiving corporate donations, compared to 71% for white-led organizations.
- White-led organizations were significantly more likely to have revenue from investment income (33% vs. 16% for organizations led by BIPOC)
In response to these figures, Nonprofit Finance Fund (NFF) researchers authored a separate report outlining steps funders can take to advance more equitable funding practices.
- Give flexible funding (unrestricted funds, including general operating support)
- Understand and fund full costs (all of the financial resources it takes to run an effective organization long-term)
- Fund for general operations including technology, training, infrastructure, and hiring instead of specific projects
- Seek out organizations that are led by people with direct experience, and with personal ties to the communities, they are supporting.
- Pay particular attention to BIPOC-led, community-centered organizations that may have been excluded from traditional funding pathways.
- Fund organizations to have a surplus, and don’t penalize nonprofits if they have a reserve
- Be upfront with nonprofits about your ability to provide multi-year funding
ABOUT THE AUTHOR
Lia Tabackman is a freelance journalist, copywriter, and social media strategist based in Richmond, Virginia. Her writing has appeared in the Washington Post, CBS 6 News, the Los Angeles Times, and Arlington Magazine, among others. She writes weekly nonprofit-specific content for 501c.com.