The COVID-19 pandemic: a challenge for US nonprofits' financial stability

Abstract

Purpose

Nonprofit organizations rely on earned income, government funding, charitable donations and investment income to support numerous programs and services for the public good. During times of crisis, such as the COVID-19 pandemic, some nonprofits become even more critical to provide for those in need, but the funding streams to support activities may be even more stressed. The purpose of this article is to understand how COVID-19 might affect the financial stability of nonprofits in the US.

Design/methodology/approach

The article reviews historical financing patterns for US nonprofits and then uses reports and secondary data to understand how COVID-19 might change nonprofit financing in the US.

Findings

Earned revenues, the largest source of revenues for nonprofits historically, are down significantly as venues remain closed or at reduced capacity. Federal government grants and contracts have not been aimed specifically at the nonprofit sector and state and local budgets are stressed, suggesting government funding may be at risk. Charitable contributions from large foundations, corporations, and individual givers have increased, with some added flexibility, but this may not be a viable source for many smaller or community-based organizations. Nonprofit leaders may need to find new ways to collaborate to overcome the pandemic and researchers should seek to understand the impacts on different types of nonprofits and their revenues.

Originality/value

The value of this article lies in understanding COVID-19's early financial impacts on nonprofits to suggest research and operating paths for academics and practitioners.

Citation

Johnson, A.F., Rauhaus, B.M. and Webb-Farley, K. (2021), "The COVID-19 pandemic: a challenge for US nonprofits' financial stability", Journal of Public Budgeting, Accounting & Financial Management, Vol. 33 No. 1, pp. 33-46. https://doi.org/10.1108/JPBAFM-06-2020-0076