Deep pockets or empty coffers? Functional expenses, contribution revenue and the ability of nonprofits to pivot during COVID-19

Abstract

PurposeWithin the context of the nonprofit resiliency framework, the authors use nonprofit functional expenses and contribution revenue to explore how the COVID-19 pandemic affected the ability of nonprofits in different subsectors to carry out their mission, as well as their ability to “pivot” fundraising strategies to integrate social media and digital engagement.Design/methodology/approach The authors use IRS form 990 return data for organizations with a year-end return that includes at least six months of COVID-19 impact (“Wave 1 Effects” period) and also have a prior-year return (“Business as Usual” period). The authors use Wilcoxon signed rank tests to examine whether there are differences in our variables of interest between the two periods.FindingsWhile the majority of nonprofits in most subsectors experienced a significant decrease in program spending, fundraising spending and fundraising efficiency ratios between the two time periods, the authors found variation in the change in contribution revenue and fundraising ratio between the two periods between subsectors. The authors also find that the percentage of nonprofits able to “pivot” their fundraising strategies varies by subsector between 13.33 and 31.23%.Originality/valueThis paper provides new information regarding the pandemic's initial effect on nonprofit program and fundraising spending, the related contribution revenue and the ability of nonprofits to “pivot” fundraising to remote strategies. The authors propose a more robust fundraising efficiency measure and a new measure indicating a nonprofit's “ability to pivot” their fundraising strategy. The authors encourage future researchers to conduct further longitudinal studies to understand how these effects may continue or change.