Nonprofit Finance Fund Findings on The Racial Realities of the Nonprofit Economy

Every year, the Nonprofit Finance Fund puts out a report based on a survey. This year’s survey report, reflecting 1,168 nonprofit respondents, displays NFF’s new focus on racial equity. Its introduction summarizes how the ugly legacy of long-term funding practices on organizations run by and serving people of color played out during the 2020–21 period of COVID response. How did your organization experience and address these dynamics? What do we need to do next as a whole sector to redress historic inequities?

Nonprofit Finance Fund 2022 Survey

Every year, the Nonprofit Finance Fund puts out a report based on a survey. This year’s survey report, reflecting 1,168 nonprofit respondents, displays NFF’s new focus on racial equity. Its introduction wonderfully summarizes some of the pandemic funding/revenue dynamics referenced above.

Imagine our wonder to be able to relay in this moment that nonprofit survey respondents report being in a stronger financial position than they were pre-pandemic. At the same time, the majority of our survey respondents reported that they continue to face financial challenges: achieving long-term financial sustainability, covering the full costs of their operations, and raising unrestricted funding foremost among them. While we should celebrate nonprofits’ relative strength in the present, we must also take action to ensure these gains are preserved well into the future.

COVID-19 upended the traditional funding practices in the sector, and the changes were both welcome and needed. We hope the sector will learn from and build on this moment, rather than reverting to the practices of a broken funding/financing system to support nonprofits. But we wonder: Can nonprofits expect this level of flexible or unrestricted funding to continue?

But all things are not equal, as some of their most interesting findings reveal:

• In FY2021, 36% of nonprofits received more than half of their funding in unrestricted funds, including general operating support. Unrestricted funding is critical for most nonprofits; it lets them decide how to spend their funds to best support their work. Forty-one percent of white-led nonprofits received 50% or more unrestricted funds in FY2021 as compared to 26% of BIPOC-led organizations.  
• 66% of white-led organizations ended FY2021 with a surplus, as did 64% of AAPI- and Latinx-led organizations. 49% percent of Black-led organizations ended FY2021 with a surplus. 
• White-led nonprofits were also more likely to receive corporate donations in 2021—71% vs 58% for BIPOC-led nonprofits. They were also more likely to have revenue from sales (23% for white-led organizations; 11% for BIPOC-led organizations), from the federal government, excluding PPP (46% of white-led organizations; 32% of BIPOC-led organizations) and from investment income (33% white-led vs 16% BIPOC-led). 
• Achieving long-term financial sustainability is the most cited financial challenge across the sample. 82% of BIPOC-led organizations reported this as a top need, as did 69% of white-led organizations. 

The report then digs deeper into some of the difference between BIPOC-led nonprofits and those with white leadership, finding:

A greater number of BIPOC-led organizations saw an increase in service demand during the pandemic: 81% of BIPOC-led nonprofits, compared to 67% of white-led organizations. They are more likely to have leadership that represents the communities they serve: 57% of BIPOC CEOs/EDs have lived experience that is representative of one or more of the communities their organization serves, compared to 18% of white CEOs/EDs. Also, BIPOC-led organizations were more likely than white-led organizations to take public action about racial equity: for instance, 59% of BIPOC-led organizations publicly advocated for policies to advance racial equity in the communities they serve, compared to 41% of white-led organizations.

Takeaways: NFF’s survey surfaced the fact that nonprofits led by people of color carried a disproportionate burden over the pandemic period. They were also more active in addressing the deep, race-based, systemic problems that played such a large part in fueling the pandemic’s disproportionately pernicious effects on communities of color and are in more precarious financial positions today. Accordingly, funders should observe a “reparations” agenda aimed at achieving long-term equity.