The Shifting Landscape of the Nonprofit Sector: Community, Connection + Adaptation

One thing is abundantly clear, we are living in the middle of major economic and policy disruption affecting the nonprofit sector which ties directly into the philanthropic community. Everyday, I look at the news and learn about new policy changes impacting our sector and corresponding legal action. How do you make sense of it all without overreacting? I like to start with the facts.

What do we know to be true today?

  • Federal funding flowing to nonprofits is uncertain. Nonprofits across the sector are affected –  those that are addressing critical needs and catalyzing innovative solutions in public health, medical research, sustainability + climate, domestic violence and food insecurity, to name a few.
  • With this uncertainty, nonprofit executives are making hard choices and are eliminating positions and furloughing employees. Essential expertise on critical social and environmental issues is being sidelined.
  • While these funding decisions are made on a federal level, the effects play out in unique ways on a local level. For instance, some nonprofits have a pool of local partners who are less dependent on federal funding to help fill the gaps. Others may be able to pull on state and regional resources in the interim.
  • Nonprofit executives are resilient and adaptable; COVID strengthened this muscle. At the same time, these leaders are tired and burned out after years of adapting in the pandemic era.

The Nonprofit Economy and its Connection to Government Funding:

  • There are approximately 1.29M public charities in the US. Nonprofits employ 10% of the US work force and the sector spends $2 trillion annually. (Nonprofit Council)
  • Government funding makes up 30% of the funding in the nonprofit sector annually. The funding comes in forms of government contracts and grants from local, state and federal sources. (Candid) 68% of nonprofits received government grants or contracts.  (Nonprofit Council)
  • Philanthropy from individuals, foundations and corporations comprises about 15% of the revenue flowing into the nonprofit sector.
  • Percentage of nonprofit subsectors receiving the government grants and contracts (Urban Institute):
    • Arts, Culture, Humanities (84%)
    • Education (76%)
    • Human Services (73%)
    • Health (54%)
    • Other (51%)
  • According to the Dorothy A. Johnson Center for Philanthropy, the total value of private foundations and community foundations assets are $1.46 trillion. The federal government spends $6.75 trillion annually. “While philanthropy plays a vital role in supporting communities across the globe, the scale of federal funding is simply unmatchable. Even if all private and community foundations were to convert all their assets – even the furniture – into cash today and start spending, it wouldn’t come anywhere close to replacing public investments in healthcare, education, infrastructure, and social services. The money would last about 79 days.” 

Where does that leave the economy of the nonprofit sector? Philanthropy cannot go it alone to fulfill these vital services to our communities across the country. How does civil society adapt its economy?

What are we Seeing from the Philanthropic Community at this Moment?

  • Reaching out to their nonprofit partners asking how changes on a federal level are impacting their mission + programs and those of their community partners. 
  • Listening with empathy and thinking creatively with nonprofit executives and boards.
  • Offering to host gatherings for their grant partners to share information and problem solve together.
  • Choosing to respond with thoughtful support, not overreacting. Some foundations are making out of cycle, emergency grants to those nonprofits in particular peril.
  • Adjusting their strategies based on what they’re hearing from community partners.

Our Advice for Philanthropists is to Seek out Community

  • Call up your nonprofit partners. Understand how they are adapting and what their greatest needs are. Consider hosting an informal gathering where nonprofit executives can connect and brainstorm ideas.
  • Call up peer philanthropists and swap notes and ideas. What are they seeing and hearing? How are they responding?
  • Reach out to your elected officials at all levels of government and both sides of the aisle. What do they know about policy changes and how local communities are adapting? How can philanthropists use their resources to leverage adaptation at the local level and/or in their issue area?

Gathering in your community can be a powerful antidote to anxiety and uncertainty. When people come together and share ideas, empathy catalyzes new energy and ideas. When we exchange new ideas and inspire each other, we start to test out solutions and approaches to adapt in this new moment. 

I do not hold a crystal ball to predict the future of the nonprofit sector’s economy and adaptability, nor can I predict policy changes coming from Washington, DC. I hold fast to the power of community and connection and believe in our nonprofit and philanthropic leaders’ creative thinking and resilient nature.

About Grant Philanthropic Advisors:
We’re an independent, Charleston-based firm helping clients to focus and maximize their philanthropy—in turn, strengthening the fabric of our communities. Founded in 2019, we help donors move from responsive patterns of giving by assisting clients to identify values and become more strategic in their philanthropy. Our goal is to help donors to become more effective as change-makers.

We work with foundations (large and small staff teams), donor advised fund holders, multi generational families, individuals, philanthropy supporting organizations and corporations to design philanthropic strategies. We work with philanthropies that grant $1 million to $40 million annually. Our clients span the Southeast with a concentration in Charleston, Atlanta and Charlotte.

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