Money & Business

Analysis: The Risks Nonprofits Face From COVID-19

By / Jul 22, 2020 (Khongtham/iStock/Getty Images Plus)

A series of projections from the nonprofit information service Candid finds that COVID-19 makes nonprofit closures more likely in the near term, with some sectors more at risk than others. But resilience and agility could help change that equation.

It’s well known that nonprofits are struggling during the COVID-19 crisis. But a new analysis from Candid—a nonprofit information service founded last year in a merger of GuideStar and the Foundation Center—attempts to quantify the scope of the challenges they face.

A projection-based analysis of more than 315,000 U.S. nonprofits, with a focus on 501(c)(3) charitable nonprofits, found that in normal circumstances, 4 percent of those organizations (12,042) would close, but 11 percent (34,472) are at risk of closure due to COVID-19.

Those are median numbers. In the best-case scenario, the study says, 3 percent of nonprofits will shut their doors amid COVID-19; in the worst-case scenario, the total is closer to 38 percent.

“In many ways, we made choices that are conservative in our analysis, so if anything it is more likely we are undercounting,” Candid Executive Vice President Jacob Harold said in comments to The NonProfit Times.

The projections suggest that some types of nonprofits—particularly those focused on human services, education, the arts, and recreation—are most at risk.

“Individual nonprofits face unique financial circumstances,” Harold wrote in a blog post. “Some rely on earned revenue (e.g., ticket sales at an arts organization), others on donations (e.g., foundation grants to a policy institute). Most have a mix of revenue sources. Each organization brings its own asset base and expenses.”

Harold noted that, as a whole, the nonprofit sector is resilient and predicted that most organizations will survive the current crisis. But he urged nonprofit leaders to focus on strategies such as scenario planning and restructuring to navigate and eventually emerge intact from a difficult time.

“Moments of flux are moments of opportunity. There is the possibility of a miracle: an unprecedented surge of donor generosity or government intervention,” he wrote. “In the absence of that miracle, let us see this as a moment for innovation and agility.”

Ernie Smith

Ernie Smith is the social media journalist for Associations Now, a former newspaper guy, and a man who is dangerous when armed with a good pun. More »

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