University of San Diego survey reveals nonprofits in financial trouble

SAN DIEGO (KUSI) – As California and the rest of the country have all but shut down during the COVID-19 pandemic, nonprofits have been hit particularly hard, a University of San Diego survey revealed Tuesday.

According to the Nonprofit Institute at the University of San Diego, many local charities are experiencing increased demands for food, shelter and other basic necessities, yet nonprofits have been hindered or cut off from responding due to issues of cash flow, managing volunteers and technological barriers.

“Nonprofit organizations are our community safety net, touching millions of lives every day,” said Emily Young, the institute’s executive director. “Yet, the unfolding public health and economic crisis is taking a major toll on the capacity of these organizations to help others. They need immediate economic assistance from government, philanthropy, and the community at large. We encourage everyone to do their part in donating to the organizations they hold dear.”

Nonprofit leaders at 428 organizations reported they face “immediate, critical challenges.” More than three-quarters of respondents reported a reduction of normal services or programs related to school closures, stay at home orders, and social distancing.

More than 20% of respondents reported they were unable to offer any programs at this time. If conditions do not improve, more than half report they are “very unlikely” or “somewhat unlikely” to be able to provide ongoing services eight weeks from now.

In an effort to continue offering services, many nonprofits are considering moving programs to online formats. However, technology access and moving programs online present challenges for nonprofits staff and their clients.

Among a list of growing concerns, nonprofit leaders rated the following as the most urgent challenges facing their organizations:

— Decline in donations

— Loss of fee for service revenue

— Having to lay off employees

— Delayed grant processing for program and/or general operating support

— Government grant contracts that cannot be reimbursed

The study also documented the immediate and short-term impacts of COVID-19 on nonprofit finances. Just over half of nonprofits reported they are “very likely” to make payroll in the next four weeks and that percentage declines to 35% eight weeks from now. Nearly 14% of nonprofit leaders said they are “very unlikely” to make payroll in the next four weeks. That percent increases to 24% in the next eight weeks.

Previous research conducted by institute confirmed the majority of nonprofits operate on reserves of two months or less. In this latest study, even fiscally strong nonprofits reported that they have already lost revenue streams due to cancellation of programs and events.

The study also found that essential service nonprofits such as those providing food, shelter, and health care remain open to serve the community, yet are challenged with securing supplies to maintain the health and safety of staff members, volunteers, and clients including cleaning supplies, personal protective equipment such as gloves and face masks, and paper goods.

In addition, nonprofits are facing workforce challenges as volunteers and employees are forced to stay home as a result of health concerns or childcare responsibilities.