The Pandemic & Philanthropy

What Have We Learned and Where Do We Go From Here?

Summary of paper by Robert Sharpe, (bio) Founder and CEO, Encore (January 2021)

Full Report [PDF] | Executive Summary [PDF] |  Advisor Version [PDF]

Robert Sharpe’s white paper The Pandemic & Philanthropy: What Have We Learned and Where Do We Go from Here? is based on input from charitable organizations across the country and professional advisors for nonprofits and philanthropists. It is a helpful resource for nonprofit leaders attempting to understand how COVID-19 has and will affect their funding efforts.

Sharpe outlines 5 primary factors that define the impact of COVID-19 on sources of funding for the nonprofit sector: 1) the nature of a nonprofit’s mission, 2) its geographic location, 3) its sources of funding, 4) its ability to use alternative funding sources, and 5) the strength of its leadership team.  Here are some highlights:

1. NATURE OF MISSION

Organizations whose missions address the human and economic consequences of COVID-19 have generally fared better during the pandemic. Those whose missions may not necessarily be broadly thought “essential,” have found success in some cases using appeals with messages targeted to their constituencies such as “Imagine a world without X.” Nonprofits that had already been financially strained by other factors before COVID-19 have seen their challenges exacerbated.

2. GEOGRAPHIC LOCATION

Because the impact of the virus in terms of numbers of cases and mortality has been experienced unevenly across the country, nonprofits that raise funds locally or regionally in areas where the impact of COVID-19 has been less severe have in some cases not faced the same reduction in funding that’s been experienced by others in harder-hit areas of the country.

3. FUNDING SOURCES

Organizations and institutions receive revenue in different percentages from a wide range of sources: individual giving, foundations and corporations, endowments, government grants and contracts, program-related revenue, loans, and asset liquidation. The pandemic has had an uneven effect on these sources of funding.

• Donors over 55 have generally experienced fewer reductions in available funds from which to make gifts, while many younger donors have taken a hit to their income sources and consequently be giving less.
• Indications are the wealthiest individuals have continued their giving but in some cases have shifted or increased support to organizations harder hit by the pandemic.
• Regardless of age and wealth, thoughtful stewardship efforts have been the key to many organizations minimizing the impact of COVID-19 on their fundraising.
• Foundation support appears less affected by COVID-19 due to the federally mandated 5% annual payout requirement and the fact that investment markets reached record levels despite the pandemic.
• Endowment assets experienced record growth in recent years and generated additional income that has not yet been significantly reduced by COVID-19. Many foundations have pledged to remove restrictions on previous grants, allowing the funds to be used at the discretion of the nonprofits.
• Airlines, restaurants, businesses in the hospitality industry, and certain others have been disproportionately hurt by COVID-19, and those honoring current charitable commitments may not renew them at the same level. (Other industries like Brooks Brothers have been clobbered.)
• Government grants and contracts are being examined as the tax base in many jurisdictions is being eroded by effects of the pandemic. Grants for essential services, however, may be augmented by additional federal relief packages.
• Borrowing in times of historically low interest rates presents a viable alternative for some charities seeking to address the cash-flow impact of COVID-19.
• Some nonprofits have begun to raise cash by liquidating real estate and other assets not critical to their mission.
• Nonprofits that depend on revenue from ticket sales, tuition, and gift shops have been under significant stress as these funding sources have been heavily impacted by social distancing and closures.
• Special events that involve the congregation of large groups of people in close quarters have been placed on hold by social distancing requirements and shelter-in-place orders as a result of COVID-19. Organizations that rely heavily on revenue from such events that could not be replaced on line or by other means have experienced severe reductions in income resulting in program cuts and layoffs.
• Nonprofits fundraising through direct mail, telethons, and online meetings with board members and major donors have generally fared better than those that raise money from concerts, galas, tournaments, and the like.

4. ACCESS TO ALTERNATIVE FUNDING SOURCES

Nonprofits offering donors ways to make non-cash gifts such as securities, real estate, retirement assets, and charitable trusts have been better able to stay afloat during the pandemic. Low interest rates, inflation, and changes in tax laws have made these giving options more attractive.

5. MANAGEMENT

Organizations led by highly motivated executive teams willing to think outside the box have fared better than others because they found creative solutions that address their weaknesses and play to their strengths instead retreating into survival mode or shutting down completely.

Despite the challenges that COVID-19 has presented, the philanthropic sector in the U.S. has always rallied to continue its long-term positive impact on society. The data suggests that it will continue to do so.