Where the economic impacts of COVID-19 are concerned, the conversation typically revolves around conventional businesses. Many have discussed patrons no longer going out to restaurants, employers enforcing remote work for employees, or the food delivery sector growing exponentially, just to name a few.
Often left out of the discussion is the effect on nonprofits. How have donations been impacted? What about the rates of volunteer work? In a survey by Independent Sector published in 2020, 83% of organizations experienced a decline in revenue since the beginning of the pandemic. Such a decline has resulted in 71% of organizations reporting a decline in services provided or their own operations.
A Reduced Workforce
To those not in the nonprofit sector or those unfamiliar with how these organizations tend to work, a nonprofit is often just thought of as a charity—a conduit through which giving can flow. Therefore, less revenue translates to fewer services for those in need.
This is true, in a way, but nonprofits serve a wide range of functions. An organization dedicated to advancing some policy goal, for example, may have very little interaction with the public aside from marketing campaigns.
Instead of thinking in terms of charitable giving, it is important to realize that a reduction in revenue causes a reduction in services due to a shrunken workforce. Here are some quick facts that came from the same survey cited above:
- The number of jobs in the nonprofit sector was reduced by 47% when comparing April 2020 to April 2019.
- 51% of organizations reported laying off employees as a result of the COVID-19 pandemic.
- 67% of nonprofits reported having to furlough employees since the beginning of the pandemic.
The individuals that make up a nonprofit are the engine driving its mission. Along with a reduced workforce, there has also been a decline in volunteers that many nonprofits rely on; this decline is due to the intermittent stay-at-home orders in a number of states and municipalities throughout 2020 and the general need to enforce social distancing policies.
Put bluntly, the pandemic has been devastating nonprofits’ abilities to achieve their goals. To make matters worse, 23% of the organizations surveyed reported increased demand for their services.
The CARES Act, passed by Congress and signed into law in 2020, supplied organizations (both for-profit and nonprofit) with forgivable loans under the Paycheck Protection Program (PPP). This program provided loans equaling 2.5x monthly payroll costs up to $10 million to be used toward payroll, rent and utilities, and interest on mortgages or other debt obligations.
The program stipulated that an organization must keep its staff on the payroll. In December 2020, a second draw from the PPP was allowed and funded by the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act.
These laws, while helpful, can only blunt the impact of the pandemic on the nonprofit sector. Applying for these programs and others, should they arrive in the future, requires financial services that many nonprofits are missing.
Are you working in the nonprofit sector? The team at Rubino & Company has the nonprofit accounting experience to help. Don’t hesitate to reach out!