With more than 12.5 million employees and over 1.3 million organizations, the nonprofit sector is the third largest private-sector employer in the United States, after retail and manufacturing. Nonprofits touch the lives of one in five Americans, helping to feed, heal, shelter, educate, nurture, and inspire them.
Over the last month or so, however, COVID-19 has laid bare the reality of the nonprofit mantra "No Money – No Mission." In our current volatile environment, some nonprofits will thrive, some will be forced to close, and some — with the help of smart, speedy planning — will survive.
Nonprofits on the front lines of the coronavirus response, including nonprofit hospitals, social service providers, and food banks, need immediate funds to scale their operations. The good news is that many of these nonprofits will come out of the crisis stronger than ever.
Other nonprofits are at real risk. Smaller, local nonprofits that have meager or nonexistent reserves are already feeling the strain — especially museums, performing arts groups, botanical gardens, and other cultural organizations that depend on ticket sales and walk-in donations for revenue. Meanwhile, nonprofits that rely on galas, special dinners, and events such as walkathons, bikeathons, "mudfests," and other large-scale gatherings are in trouble.
Even before the emergence and spread of COVID-19, the situation for most nonprofits was fairly dire. In 2019, the vast majority (92 percent) of nonprofits in the U.S. had revenues of less than $1 million, while approximately half (50 percent) had operating reserves of less than a month. These small and often local nonprofits are especially vulnerable to the lockdowns and shelter-in-place orders that have been imposed by governors and mayors across the country — and the deep recession likely headed our way.
Faced with such uncertainty, nonprofits are putting their long-term fiscal plans on hold and shifting their focus to the short term. The imperative now is to manage cash flow, vendors, donors, and volunteers. Everything is in play — from restructuring to ensure the survival of the organization, to new collaborations and partnerships, to mergers.
Here are some additional considerations nonprofits should keep in mind as they scramble to deal with the impacts of COVID-19.
Explore all funding options, including those created by congressional action. Thanks to fast action by the federal government, a number of new funding opportunities have been created for nonprofits. The recently enacted CARES Act has several provisions for nonprofits, including small business loans that effectively become grants. The National Council of Nonprofits maintains a page with updated information and resources for nonprofits, including details on the CARES Act. Beyond federal government support, resources also are available at the state level and from many community foundations.
Reaching out to donors has never been more important. One step every nonprofit should take is to proactively reach out to their donors. Many high-net-worth individuals have a donor-advised fund (DAF) or are required to make minimum distributions from their IRA and are in a position to maintain or even increase their support. Nonprofits should waste no time in contacting their donors to see whether they have a DAF, and if so, whether they would be willing to release additional funds to help out during the crisis.
In addition, many foundations are rising to the COVID-19 challenge by providing immediate grants for short-term needs to their grantees, and a few, including the Mary Reynolds Babcock Foundation, are extending their grants for a year and and/or frontloading them. Other examples of companies and organizations stepping up new commitments include:
- Bank of America immediately after the World Health Organization pronounced COVID-19 a pandemic on March 11 pledged $100 million to communities impacted by the virus to increase medical response capacity, address mounting food insecurity, provide access to online learning, and otherwise assist vulnerable populations in the bank's local markets.
- JPMorgan Chase has committed $50 million to address the impacts of the pandemic globally, while Wells Fargo, through its company-sponsored foundation, has pledged $175 million to help customers, communities, and employees grapple with the impacts of COVID-19.
- Feeding America established a COVID-19 Response Fund to help U.S. food banks support communities impacted by the virus and recently received a pledge of $100 million from Amazon.com founder Jeff Bezos — the largest gift in the organization's history —to address rising food insecurity related to the COVID-19 public health emergency. Feeding America also is surveying its member food banks every two weeks to assess their needs.
On the operational level, nonprofits should be doing what they can to leverage technology and social media to manage stakeholders during this lockdown and shelter-in-place period. Virtual meetings for board, staff, and even donors via Zoom or Skype are an easy and affordable way to provide valuable face time. Some nonprofits, like the Rotterdam Philharmonic Orchestra, have even used YouTube as a platform for videos that have gone viral.
The U.S. nonprofit sector is nothing if not resilient and innovative. Just as most nonprofits survived the global financial crisis of 2008, most — with some ingenuity on their part and the continued support of their donors and partners — will come through the coronavirus crisis intact. It's in the best interest of each us to make sure they do.
Leslie Crutchfield is executive director of Business for Impact at Georgetown University's McDonough School of Business and Ernest "Chico" Rosemond is program director for Business for Impact's New Strategies program.