While nonprofits have contributed significantly to U.S. society and economy in the face of the COVID-19 pandemic, the health of the sector is uneven in both impact and recovery, a new report from Independent Sector finds.

Based on aggregated survey and research data from multiple sources in four categories — financial resources, human capital, governance and trust, and public policy and advocacy — the second edition of the Health of the U.S. Nonprofit Sector (43 pages, PDF) found that the impact of the COVID-19 pandemic varied by subsector and organization size, with arts organizations and those that rely on fees for service hit especially hard. Yet, even as 40 percent of nonprofits saw declines in total revenue and all subsectors except social services saw drops in gross output, the sector contributed 5.9 percent of GDP in 2020 — up 0.4 percentage points from 2019. And while 57 percent of nonprofits cut overall expenses, 64 percent suspended services, 44 percent reduced the number of programs or services, and 47 percent reported serving fewer people in 2020, Independent Sector's Trust in Civil Society survey found that, as of early 2021, 57 percent of surveyed Americans had received nonprofit services and 84 percent expressed confidence in the ability of nonprofits to strengthen American society, up 3 percentage points from 2020.

According to the report, the sector's advocacy efforts in 2020 helped secure notable federal resources that served as financial lifelines to nonprofits, particularly through the Paycheck Protection Program, payroll tax credits, and temporary universal charitable deduction. In addition, a study by Nonprofit VOTE found that voter engagement efforts helped reach underrepresented communities and narrow participation gaps.

The report outlines recommendations in each category to strengthen the sector, including prioritizing flexible funding, developing a shared understanding of equitable financing, promoting evidence-based practices to close workforce diversity and equity gaps, building capacity of virtual volunteering, improving the quality and depth of metrics for equity and "healthy" governance, improving digital access and literacy, and establishing public policy advocacy as a core competency of nonprofit management and governance.

"We have much to do to build the nation we, as changemakers, dream of becoming," wrote Independent Sector president and CEO Dan Cardinali in the report's foreword. "What can galvanize us to greater positive action? It's that the everlasting human qualities of resilience, kindness, and collaborating for collective progress do not fade easily. They are within our grasp every day, giving all of us hope and confidence. The health of our nation is the sum of the richness and diversity of our members and sectors working together, elevating dignity, honoring our differences, and building for the common good."

(Photo credit: Los Angeles Regional Food Bank)