COVID-19 Could Cause 11% of Nonprofits to Cease Operations
July 19, 2020 — If the coronavirus crisis lasts three years, 11% of nonprofit organizations across the country could cease operations, 7% more than ordinarily would close up shop for a variety of reasons during the same time, according to newly completed analysis.
In the worst case, 38% of 501(c)(3) organizations would shut their doors.
The most optimistic scenario shows 3% shutting down, as they benefit from" immense" generosity, cost-cutting measures, and an increase in government investment over a short crisis lasting no more than a year.
The projections, released Wednesday, were developed by Candid, an information resource for global and U.S. philanthropies in New York City. They were based on examining 315,698 nonprofits with annual revenue of $50,000 or more.
"Nonprofit organizations have agency in this moment, the ability to choose how they respond to the obstacles in front of them. Moments of flux are moments of opportunity. There is the possibility of a miracle: an unprecedented surge of donor generosity or government intervention," noted Jacob Harold, executive vice president of Candid. "In the absence of that miracle, let us see this as a moment for innovation and agility."
He said that most nonprofits "are positioned to weather this storm," and that while some degree of turnover is heathy to maintain a vibrant sector, the people served by nonprofits that shut their doors "face practical consequences that cannot be abstracted away."
Since the pandemic started to hit the United States in earnest in March, 75% of nonprofits have reported reduced earned revenue, 50% reduced contributions, and 27% reduced government revenue, according to a Nonprofit Finance Fund survey. The Center for Civil Society at Johns Hopkins estimated that 1.6 million nonprofit jobs were lost in the U.S. from February through May of this year.
The analysis developed by Candid shows different sub-sectors suffering to different degrees. Under the "realistic" scenario, which projects an 11% closure rate across the board:
12.3% of human service organizations would close due to the coronavirus crisis, 9.1% more than normal
10.7% of arts, culture, and humanities organizations would cease operations, 7.2% more than normal
9.7% of education organizations would shutter, 6.4% more than normal
"In response to the crises of 2020, we have seen extraordinary generosity, starting with $11.4 billion to address the COVID-19 crisis and $7.6 billion toward racial equity," Harold said, adding that a Fidelity Charitable survey reported that 25% of donors say they’ll give more.
"On the surface, this might seem a contradiction: nonprofits say donors are giving less but donors announce that they’re giving more," he added. "But we believe these numbers simply show these crises are affecting organizations in different ways.'
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