A hand reaching into a wallet and pulling out a single dollar bill.
Image credit: Allef Vinicius on Unsplash

Nonprofits remain a robust part of the US economy and a major source of employment. But the sector has shown signs of weakening in some areas, notably in fundraising.

Donor contributions to nonprofits fell by 10 percent.

Those are among the findings of the latest Health of the US Nonprofit Sector Annual Review by Independent Sector, a nonprofit membership organization that advocates for and tracks the health of the nonprofit and philanthropic sectors.

This latest report offers insights into the nonprofit sector and how it has or has not changed in the past two years or so, with the caveat that, in some cases, the latest data available was for 2022. Still, even if the report represents a snapshot in time, it is an interesting one, showing positive trends for the sector and continuing challenges.

Donor Dollars Fall Short

The report finds that donor contributions to nonprofits fell by 10 percent from 2020 to 2021, marking the second consecutive year that donor contributions fell (2).

That overall shortfall represents decreases from large and small donors; but the bulk of the decrease comes from donors giving below $500, who make up roughly 80 percent of all donations.

While donations decreased by 10 percent from 2021 to 2022, overall dollars to the nonprofit sector decreased by just under 2 percent for the same period, suggesting nonprofits were able to find alternative sources of funding. (The report does not indicate what those funding sources might have been.)

Workforce, Diversity, Race, and Gender

Overall, the nonprofit sector workforce grew about 4 percent from 2021 to 2022, the report finds—significantly more than the private business sector, which employs roughly 80 percent of the US workforce and grew by only 1.5 percent (3).

Twenty percent of nonprofit employees “struggle paycheck-to-paycheck.”

Among the report’s more interesting findings in terms of the nonprofit workforce: the percentage of Black employees in nonprofits grew by 22 percent, to about 14 percent of the overall nonprofit workforce; the percentage of Latinx employees grew by about 8 percent to a total 11 percent of the nonprofit workforce. Despite those increases, roughly 75 percent of the nonprofit workforce was White (4).

In terms of gender, the nonprofit sector remains predominantly female, making up two-thirds of the overall sector workforce, compared to about 47 percent of the overall US workforce (4).

The figures for nonprofit leadership resembled the overall workforce in some ways and differed in others. Females represented 55 percent of nonprofit CEOs compared to 66 percent of the workforce; Whites represented 80 percent of CEOs compared to 75. percent of the workforce (9).

The nonprofit sector continues to see greater educational attainment levels among its workforce than “any other sector,” the report notes. Nearly two-thirds of nonprofit employees over the age of 25 hold a bachelor’s degree or higher (5).

Advocacy and lobbying by nonprofits have declined substantially over the two decades.

The report also states that 20 percent of nonprofit employees “struggle paycheck-to-paycheck,” based on the ALICE (Asset Limited, Income Constrained, Employed) threshold of financial survival. This means that those employees “lived in households that could not afford the basics of housing, child care, food, transportation, health care, a smart phone plan, or taxes” (6).

Among the report’s findings with regard to diversity, equity, and inclusion (DEI), is that, in 2022, some 60 percent of nonprofits had a written DEI statement—while only 27 percent had a budget for DEI (9).

Public Policy and Advocacy

Among the more striking observations offered by the report is a comparison of lobbying and advocacy efforts by nonprofits between 2000 and 2022. Overall, the report states that advocacy and lobbying by nonprofits have declined substantially over the two decades.

For example, only 26 percent of nonprofits reported “never engaging in lobbying or advocacy” in 2000—that’s compared to 75 percent in 2022. The report shows similar trends when it comes to “working in a planning group with government,” “responding to requests for information from government,” and “releasing research to public or government” (11).

Another interesting finding, though one without a basis for comparison offered, is the degree to which nonprofits directly engage with voters around voting activity, with just 13 percent of nonprofits reporting that they “engaged voters” in 2022, including through voter education, get-out-the-vote efforts, and participating in ballot initiatives.

The findings suggest nonprofits are playing a diminished role in some facets of civil society, namely lobbying government and working with government on policies.

A Pervasive Lack of Data

Despite the nonprofit sector’s prominent role in US society and civic engagement, and as a major workforce employer, data describing this vital sector are hard to come by. The report’s authors write:

Despite the sector’s scale, its economic impact, and its power to drive systemic change, assessments of the sector’s health proved sporadic at best over the past two decades.…This lack of timely data leaves sector leaders, policymakers, and other stakeholders in the dark regarding how the nonprofit sector is faring (1).

The report calls for more robust and consistent collection of data to inform nonprofit leaders, policymakers, and researchers: “It is imperative that nonprofit leaders and policymakers track the economic condition of the nonprofit sector—on its own and in comparison to other sectors of the economy” (1).

More accurately tracking the nonprofit landscape offers the opportunity for “a complete understanding of how nonprofits are faring and what steps need to be taken to strengthen this important sector” (1).