Health of U.S. nonprofit sector mixed, study finds

Health of U.S. nonprofit sector mixed, study finds

The health of the U.S. nonprofit sector is mixed, with many organizations fighting to survive the economic impacts of the COVID-19 pandemic, a new report from Independent Sector finds. 

The inaugural edition of Health of the U.S. Nonprofit Sector (42 pages, PDF) aggregates survey and research data drawn from multiple sources in four categories  — financial resources, human capital, governance and trust, and public policy and advocacy — and explores actions the sector could take to improve the health of the sector over time. According to 2019 data, there are nearly 1.8 million nonprofits registered with the Internal Revenue Service, 72 percent of which are 501(c)(3) public charities, 7 percent of which are 501(c)(3) private foundations, and 21 percent of which are organizations with a different 501(c) status.

In the area of financial resources, data show that, as of 2018, 57 percent of all nonprofits and 65 percent of those serving low-income communities reported being unable to fully meet demand for their services and that, in 2017, 24 percent were operating with a deficit while only 23 percent of Black-led nonprofits had at least three months of operating cash on hand. Although total charitable giving in 2019 increased 2.4 percent on a year-over-year basis, giving remained below 2017 levels, with a 3 percent drop in the number of donors continuing a downward trend in that indicator. The report notes that more than four in five nonprofits anticipate their revenue will be lower in 2020 than what they projected coming into the year and cites an analysis by Candid which estimates that 7 percent of nonprofits could be forced to close due to the adverse impacts of the pandemic.

The report also notes that while the  nonprofit workforce grew 18.6 percent between 2007 and 2017, early data show that 8 percent of the sector's jobs, or nearly a million positions, have been lost during the pandemic — 31.8 percent of them in health care and 21.7 percent in educational services. In the area of governance and trust, the report notes that while nonprofit boards are becoming more diverse, white Americans are overrepresented among CEOs (87 percent), board chairs (83 percent), and board members (78 percent). And in terms of the many impacts of the pandemic, nonprofit leaders are especially concerned about delivering on their programmatic promises (92.3 percent) and securing the financial stability of their organizations (89.4 percent).

The report's recommendations for strengthening the sector include the provision of more flexible funding to nonprofits, advocacy on behalf of policies that encourage giving and grantmaking, improvements in the quality and depth of sector-wide equity metrics, the dissemination of toolkits and practices that can help nonprofits jump-start their equity work, and more funding for nonprofit regulators.

"Like the pandemic, the need to face racial inequities head onare causing categorical shifts in the sector's focus on racial equity," wrote Independent Sector president and CEO Dan Cardinali in a blog post. "Data presented in this report reflect the state of the equity movement's impact on our sector before the murder of George Floyd, Breonna Taylor, and others, which sparked nationwide civic action. While we have strived in this report to apply an equity lens against the data and analysis presented, it is not yet sufficient. Our intent is to ensure that equity is held at the center of our perspective on sector health, and this will require consistent and increasingly sophisticated equity analysis."

(Photo credit: GettyImages)

"Health of the U.S. Nonprofit Sector." Independent Sector report 10/08/2020. Dan Cardinali. "How Healthy is the Nonprofit Sector?." Independent Sector blog post 10/08/2020.