Reposted from 5/11/20 National Center for Business Journalism
By Laura Ingalls Fuqua
Demand spikes at food pantries. Revenue declines at hospitals. Layoffs hit universities and symphonies.
Reporters have no shortage of stories when it comes to localizing the financial impact of COVID-19 on nonprofits. But will those stories include the context that readers need to understand why it ultimately matters?
Here are a few factors to consider when writing about the nonprofit sector.
The nonprofit sector is the third-largest employer in the United States.
Some 12.3 million people work in the U.S. nonprofit sector, which trails only retail and accommodation/food services as an employer. Nonprofit employment equals that of the manufacturing sector nationally and nonprofits surpass manufacturing in 26 states.
This could be important context for a story about how nonprofits have struggled to compete for Paycheck Protection Program funds.
Over half of all nonprofit jobs are in the health care field.
The same data set indicates that over half of all nonprofit jobs are in health care. That includes hospitals and nursing homes, which face rising costs because of COVID-19.
These nonprofits often have business models weighted toward program fees from private sources, such as those related to elective surgeries and short-term nursing home stays. The pandemic threatens this revenue stream.
How will these nonprofits make up the shortfall while protecting their patients and residents? How would typical cost-cutting measures like furloughs and layoffs affect patient care?
Program fees from private sources make up nearly half (48 percent) of total nonprofit revenue.
Education, health, and human services are the next largest recipients of program fees, usually collected for in-person services. Health and human services are interesting because they address issues – such as employment, domestic abuse, and mental health – that are likely to worsen with COVID-19.
These groups also may lose grants and reimbursements from the government, another 32 percent of nonprofit revenue. For example, food pantries may not be able to enroll people in the federal Supplemental Nutrition Assistance Program, or SNAP, while maintaining social distancing.
Consult a nonprofit’s 990 tax form to see its funding sources and whether it has any reserves. It helps if you can look up the group by employment identification number, or EIN, as many nonprofits do business under a different name or acronym.
Donations by individuals dwarf the combined giving of corporations and foundations.
Like an investment portfolio, nonprofits with diversified funding weather economics ups and downs the best. And the most reliable donations year over year come from individuals.
Individuals make up 68 percent of all charitable giving. That number goes up to 77 percent if you count bequests. Foundations (18 percent) and corporations (5 percent) make up the rest, though they often restrict how nonprofits can spend the money. (Enlightened funders are now lifting some of those restrictions.)
A study of donor behavior indicates that individuals gave a similar percentage of their incomes to charity before and after the Great Recession, although the total donor pool shrank. You may find a story in whether that pattern repeats itself in this crisis. Nonprofits also are watching to see if donors will again shift their giving to human services charities.
Most nonprofits operate like small businesses.
Big nonprofits grab the headlines, but 92 percent of nonprofits serve their community with annual budgets of less than $1 million a year. Few of them have large endowments and about 50 percent have less than one month of cash reserves.
That’s why fiscally-responsible nonprofits are getting more creative about reaching their donors. And while few nonprofits will ever turn down in-kind gifts like canned food, what they need to keep the lights on is cash flow.
Staff members don’t have to stop and sort cash. It won’t spread the virus to at-risk populations. And in the case of food banks, they can feed many more people through bulk purchasing from suppliers than they can from a few donated items. In other words, nonprofits can achieve their missions as efficiently as possible.
With the right context, your story will help readers better understand the business of nonprofits and what’s at stake with COVID-19.