Sun Sentinel Palm Beach Edition
Study: 1 in 3 nonprofits are in financial peril amid pandemic
NEW YORK — More than one-third of U.S. nonprofits are in jeopardy of closing within two years because of the financial harm inflicted by the viral pandemic, according to a study released Wednesday by the philanthropy research group Candid and the Center for Disaster Philanthropy.
The study’s findings underscore the perils for nonprofits and charities whose financial needs have escalated over the past year, well in excess of the donations that most have received from individuals and foundations. The researchers analyzed how roughly 300,000 nonprofits would fare under 20 scenarios of varying severity. The worstcase scenario led to the closings of 38% of the nonprofits. Even the scenarios seen as more realistic resulted in closures well into doubledigit percentages.
Officials of Candid, which includes the philanthropic information resources GuideStar and Foundation Center, and the Center for Disaster Philanthropy, which analyzes charitable giving during crises, said the most dire scenarios could be avoided if donations were to increase substantially — from the government as well as from private contributors.
“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,” said Jacob Harold, Candid’s executive vice president.
Among the most vulnerable nonprofits, the study said, are those involved in arts and entertainment, which depend on ticket sales for most of their revenue, cannot significantly their reduce expenses and don’t typically hold much cash.
Other studies have concluded that smaller arts and culture groups, in particular, are at serious risk. Californians for the Arts, for example, surveyed arts and culture nonprofits in the state and found that about 64% had shrunk their workforces. Roughly 25% of them had slashed 90% or more of their staffs. And a report last month from New York State Comptroller Thomas DiNapoli found that employment in New York City’s arts, entertainment and recreation sector tumbled 66% during 2020.
“It really has been devastating,” said Kristina Newman-Scott, president of BRIC, a Brooklyn arts institution best-known for its community TV channel and Celebrate Brooklyn! concert series. “We have a lot of empathy for our colleagues and friends in the arts space who, based on their model, see things that are just not going to be the same for them. They will be navigating a very different financial pathway.”
Harold, the Candid executive, said that while arts and entertainment groups may be at particular risk, nonprofits from all sectors are in danger. According to the study, the District of Columbia was expected to lose the most nonprofits per capita, followed by Vermont and North Dakota.
The most vulnerable nonprofits may try to reduce costs this year by narrowing their focus or by furloughing workers. Some may seek a merger or an acquisition to bolster their financial viability, Harold noted, although doing so would still mean that fewer nonprofits would survive.
“A lot of nonprofit boards were able to say, ‘Oh, this is going to end soon’ and ‘We’re fine for a year,’ ” Harold said. “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.”
The Candid/Center for Disaster Philanthropy study found that $20.2 billion was donated to combat COVID19 in 2020, with 44% of it coming from corporations. It was one of many notable shifts in philanthropy during the pandemic.