Giving Compass' Take:

• As the risk to nonprofits increases during COVID-19, Jeff Williams summarizes a report on the financial status of small and large organizations.

• What would the closing of nonprofits mean for the communities they serve? What are you doing to minimize the risk to nonprofits during COVID-19?

• Learn more about how you can help nonprofits alleviate financial barriers during the pandemic.

Nationally, non-hospital and non-university charitable nonprofits filing the IRS 990 have on hand a median of 2.2 months of cash and 4.5 months of cash + savings (savings accounts and other short-term investments considered cash equivalents).

However, the median analysis also means — by definition — that half of U.S. IRS 990-filing nonprofits likely started 2020 with less than 2.2 months of cash on hand.

The larger the nonprofit by revenue, the less cash (or cash + savings) on hand — sometimes falling to dangerous levels. Small nonprofits ($10,000 to $499,999 in annual revenue), for instance, have a median of 2.8 to 8.6 months of cash on hand, a figure that rises to 4.9 to 29.5 months on hand when including cash equivalents.

But for larger nonprofits with $5 million or more in annual revenue, the median falls dramatically to 3+ weeks for the $5 million to $9.9 million revenue category, and one week for the $50 million or more category. When cash equivalents are included, figures improve to 2.1 months for the $5 million to $9.9 million group, and 1.4 months for the $50 million or more group.

Most likely, the difference between smaller and larger nonprofit cash on hand is because larger nonprofits have access to investments, lines of credit, and other financial instruments that stand in for cash (or cash + savings) in a traditional deposit account.

The sector is right to worry about low-cash nonprofits. Nationwide, the organizations with less than one month cash on hand employ roughly two-thirds of the sector’s employees. Those same organizations pay $251 billion each year in salaries and benefits. Until these nonprofits are operational again, national employment will be at risk.

Read the full article about the risk to nonprofits by Jeff William at Johnson Center.