Organizations within the nonprofit sector have not weathered the COVID-19 storm equally. Organizations reliant on ticket sales, conferences, admissions, and other earned revenue (i.e., program service revenue) have fared far worse than nonprofits reliant on grants and donations.
Newly-available Form 990s from December 2020 and later show that COVID-19 has disproportionately hurt museums, symphonies, performing arts organizations, historical centers, and other arts, cultures, and humanities organizations, along with trade associations, professional associations, chambers of commerce, and other business-focused organizations. Conversely, environmental advocacy organizations, environmental education centers, developmentally disabled centers, foster care providers, emergency assistance providers, and other human services providers have grown during the COVID-19 pandemic, with growth rates equal to or greater than 2018-2019.
COVID-19 has hit arts, culture, and humanities organizations particularly hard. These organizations, like historical societies, museums, and performing arts centers, are largely reliant on admissions fees and performance revenues, and were not able to open their doors throughout much of 2020 and 2021. Analyzing 1,853 of these organizations that have filled out recent Form 990s, we see that even though program service revenues are down, grants and donations are up. This increase was not enough to overcome the drop in program service revenues, though, leading to an overall revenue decline of about eight percent. For example, the Boulder Museum of Contemporary Art had a 7.4% decrease in revenue during 2020. Even though grants and donations increased from $662k to $700k, program services declined from $164k to $145k, fundraising event proceeds declined from $92k to $49k, and rental income declined from $44k to $9k
Environmental organizations, including natural resource conservation, environmental education, and anti-pollution organizations, have survived COVID-19 relatively well, with an increase in grants and contributions compensating for losses from program service revenues and other revenues sources. On average, these environmental nonprofits earn about 75% of their revenue from grants and contributions, compared to only 15% from program services. Harnessing the surge in foundation grants and individual donations this past year, environmental organizations achieved similar growth to 2017 and 2018, at about five percent. For example, Fabscrap, a textile recycling and reuse organization in New York City, grew revenues from $625k in 2019 to $674k in 2020. Even though program service revenue decreased from $554k to $510k, grants and contributions increased from $70k to $163k.
Emergency assistance providers, developmentally disabled centers, foster care systems, and other human services organizations grew overall during the pandemic, at a similar rate to 2017, 2018, and 2019. Potentially in response to a greater need for their services, grants and donations to human services nonprofits grew over 25%. With about 55% of total revenues for these human service organizations coming from grants and contributions and 40% coming from program services, the massive increase in grants and contributions during 2020 overpowered a nine percent decrease in program service revenues. For example, Child Bridge, which funds and supports foster and adoptive families in Montana, grew revenues from $2.0 million in 2019 to $2.9 million in 2020, with grants and contributions increasing from $1.9 million to $2.8 million, from private grants, individual donations, and government grants.
Trade associations, community development corporations, and other similar organizations were hit hard by COVID-19. These organizations earn almost 50% of their revenues from program services — annual meetings, educational programs, membership services, etc. — and are less reliant on grants and donations. Even though grants and contributions did go up slightly compared to 2019, program service revenues dropped almost 20%. While this drop is not as drastic as for arts, culture, and humanities organizations (perhaps because many trade and professional associations pivoted to online educational events), this drop in program service revenues was enough to bring overall revenues down nine percent for business organizations. For example, the National Association of Elevator Safety Authorities, which establishes safety standards for elevators and related equipment, dropped from $1.5 million in revenue in 2019 to $1.3 million in 2020, largely driven by less revenue from training courses, certifications, regional safety events, and workshops.
With 2020 and 2021 Form 990s finally coming in, we can see how different parts of the nonprofit sector have fared through the COVID-19 pandemic. The surge in grants and donations this past year thankfully compensated for the loss in other types of revenues for many organizations. However, only when performances, events, exhibitions, and meetings are in full swing again will the immediate impact of the pandemic be over for the nonprofit sector.
So are these initial results representative of all organizations? Somewhat, although other organizations likely fared slightly better. As of January 2022, this analysis is based on only about 10% of the organizations in these segments, because the remaining 90% haven't made their Form 990s available, or their full fiscal years after COVID-19 haven't finished. The organizations in this sample — which have filed their recent Form 990s — are slightly smaller (median revenue of $290,738 versus $474,170 overall), less reliant on program services (13% versus 28% of total revenues), and more reliant on grants and contributions (67% versus 51% of total revenues). Given that program service revenue took a hit during the pandemic, while grants and contributions went up, we would expect the remaining 90% of organizations to be worse off financially than those in this study, because the remaining 90% are likely more reliant on program service revenue than those that have filled out their 2020 Form 990s so far.
Cause IQ digitizes and cleans electronic and paper / scanned Form 990s for over 1.8 million IRS-registered tax-exempt organizations. For this study, we looked at 9,205 nonprofits with Form 990 data available for fiscal years of December 2020 and later. We didn't look at earlier FY2020 data (e.g., fiscal years ending September 2020) because those didn't capture the entirety of the pandemic during 2020. We put a minimum revenue threshold of $100,000 in total revenues, because smaller organizations often have different structures and characteristics than larger organizations.
We used the beginning letter of an organization's NTEE code to group them into these subsectors. "Arts, culture, and humanities" are "A" NTEE codes, "Environmental nonprofits" are "C" NTEE codes, "Human service organizations" are "P" NTEE codes, and "Business associations" are "S" NTEE codes. While some organizations within the NTEE codes do not fit the general descriptor, we wanted to making the study more accessible, hence the broad descriptors. Cause IQ determines NTEE codes using both internal machine learning algorithms and official IRS classifications of organizations.
Article originally published on September 30, 2021.