Like all industries, the nonprofit sector is trying to put the pandemic behind them. During and immediately after the height of the pandemic government subsidies buoyed up many nonprofits through programs like the Paycheck Protection Program (PPP), Higher Education Emergency Relief Fund (HEERF), Employee Retention Credit (ERC), and Shuttered Venue Operators Grant (SVOG). When asked about their organization’s financial position as the pandemic began to wane in the fall of 2022, 49% reported being somewhat or very concerned about their financial condition. In a recent follow-up survey, however, overall satisfaction in the past three months has increased considerably (by 64%), while those who are somewhat or very concerned has remained nearly the same (48.71%).
Even as financial concerns ease, new challenges have cropped up because of the pandemic.
- During the height of the pandemic nonprofits lost many of their employees and, as operations return to more normal levels, there is now a labor shortage across the sector.
- Nonprofit administrative costs are experiencing dramatic inflation, donations have not yet returned to pre-pandemic levels, and government subsidies are running out across all programs. Nonprofits are feeling the squeeze but, unlike other industries, are unable to raise prices to cover the shortfall. Increasing fees for services and programs is not an option for those that serve low-income populations. “We are seeing a slight downturn in giving as government pandemic relief has dried up and inflation is having a strong effect on individual givers and our own operational costs,” one nonprofit executive commented. Others worried about donor fatigue amidst economic turbulence. In most cases, this means nonprofit organizations must absorb the loss or reduce programs and services. Nonprofits’ three greatest concerns currently are:
- Administrative/operational costs
- Costs of delivering services/programs
- Transportation/energy costs
The pandemic created major disruptions to the international supply chain. The highly complex network has buckled under increasing demands and constricted capacity. The three key challenges are availability, labor shortages, and global bottlenecks. Nearly all industries, including the nonprofit sector, are suffering from each of these.
- One example that dramatically effected the nonprofit sector was the now famous shortage of infant baby formula that occurred during the pandemic. Nonprofits who work with families struggled for a year to provide mothers in their care with essential supplies.
- Habitat for Humanity was challenged by the escalating cost of building materials throughout the pandemic and even now the typical donated home is costing them $30,000 more.
Worker Supply Shortage and Cost Escalation
Nonprofits have traditionally asked employees to sacrifice fair compensation in exchange for the privilege of doing charitable work. The pandemic put an end to that. The 2022 State of the Nonprofit Industry Report revealed that 77% of nonprofits were planning to increase pay and benefits for all workers. The added costs, however, have created financial stress, and nonprofit leaders have had to reduce hours or eliminate positions to adjust for the increased compensation. One nonprofit executive said, “Rising costs of talent is one of our biggest issues.”
Nonprofits report that they are responding to this financial stress by becoming more innovative and accountable. They realize that their traditional nonprofit management methods are no longer sufficient to maintain the stability of their missions. They are searching for and eagerly learning new ways to recruit and train employees, to procure required supplies, and to plan for future outcomes. In other words, the pandemic lesson learned by the nonprofit sector is - “It is time for a change”.