Impact of the COVID-19 Pandemic on Charitable Donations

Impact of the COVID-19 Pandemic on Charitable Donations

By Alex Kani

COVID-19 brought a huge wave of change to nearly every aspect of our daily lives, including how we approach charitable giving. As the world works through both the social and economic after-effects of COVID-19, philanthropy has not been spared, impacting the challenges nonprofits face and how organizations adapt. 

Charitable giving has only majorly fallen four times in the last 40 years. One of the most major drops happened in and right after COVID-19. Charitable giving fell by 13.4% (adjusting for inflation), which is huge. 

Changes in Donation Patterns

One of the most significant effects that the pandemic had on charitable donations was it caused a shift in donation patterns. Historically, charitable organizations can project expected donation receipts due to routine pledges and annual donation cycles. However, with all the economic changes in the past few years, many people lost their jobs and needed to reassess their financial priorities. As a result, some individuals who were regular donors to charitable organizations began to scale back and even suspend their donations altogether. On the other hand, the pandemic has inspired a surge of generosity among people trying to help others most affected by the crisis. This surge of generosity has served as a lifeline for various organizations who were struggling to meet the public’s demand before the pandemic. 

According to the Economics Observatory, the number of donations has actually decreased; however, the amount donated has remained around the same, if not increased. This may be due to large lump-sum contributions made by individuals or organizations whose philanthropic efforts might be event-driven or one-off, rather than cyclical pledges. Figures show that the vast majority of charities now have relied on older and wealthier donors. This shift has caused a change in the types of charities that both survived COVID-19 and will continue to be vital. 

Challenges Faced by Nonprofits

Nonprofit organizations, in the face of numerous challenges brought on by the pandemic, have shown remarkable resilience. Fundraising events, a vital source of revenue for many nonprofits, have had to be canceled or moved online, resulting in a loss of income. Yet, these organizations have adapted their service delivery models, often at significant cost, to meet the need for social distancing measures.

Furthermore, the increased demand for certain services, such as food banks and mental health professionals, has put a strain on the resources of many nonprofits. At the same time, the economic downturn has underscored the importance of government funding and corporate support for charitable causes. Government funding has suffered from budget cuts, and corporate giving for individual charities have also shrunk, due to having to divide their philanthropy across an ever-growing number of requests. The decreased support from government and multinational corporations has  compounded the financial pressures faced by these organizations, making it more crucial than ever for us to step up and support them.

For example, a mental health nonprofit called The Wellness Shack lost over $50,000 in a combination of government grants and donations in one year. The Wellness Shack is a mental health recovery center that offers a breadth of resources to its members free of charge. The pandemic triggered more people and caused a greater need for mental health resources right at a time when those resources were beginning to become more scarce. 

Thus, the pandemic forced more mental health nonprofits to turn to online technology, like creating support chat lines for people to talk to bots or others through the screen. While this is helpful, it cannot fill the gap left by organizations like The Wellness Shack, which thrived through human connection.  

Adapting to New Realities

In the face of these challenges, nonprofits showed both resilience and adaptability. Many organizations started to think outside the box by using virtual fundraising events, social media, and other online platforms to engage with donors when the connection was lacking. As a result, still today, years later, virtual fundraising events have become the new normal for many nonprofits. St. Jude Children’s Research Hospital is an example of an organization that successfully still uses virtual fundraising to generate a considerable portion of its overall revenue. St. Jude PLAY LIVE is a massive initiative that started when gamers/streamers signed up to play video games while urging their viewers to donate money to the hospital. The impact of this initiative is significant. In 2020 alone, St. Jude Play LIVE raised more than $3 million, a testament to the power of collective action.

Additionally, nonprofits have been forced to change and adapt to the evolving needs of their specific communities; for example, some organizations have shifted focus to help those affected by the pandemic. Feeding America, the largest hunger relief charity in America, noticed a massive need for food assistance, thus causing it to start a COVID-19-focused food relief fund. They did this in a three-prong approach: they increased their food distribution by partnering with more food banks, they launched a COVID-19 Response Fund aimed towards raising money specifically for acquiring necessary resources to supply to those struggling with COVID, and they target their support towards more vulnerable populations who were disproportionately affected by COVID-19, such as low-income families, seniors, and communities of color.

Another key development during COVID-19 was the formation of strategic partnerships among nonprofits. Recognizing the need to unite in the face of the pandemic to multiply the impact of both money and manpower, organizations pooled their resources, shared experiences, and collaborated to maximize their impact. This collective effort not only helped them survive the crisis but also enabled them to reach a wider audience in times of dire need.

Impact on Today 

According to Giving USA 2024: The Annual Report on Philanthropy for the Year 2023, a total of $557.16 billion was given to US charities in 2023. While the amount of money charities received grew by 1.9%, it did not outpace the inflation rate. If the amount of money charities received were adjusted in comparison to the growing inflation rate, giving is actually declining by 2.1%. 

COVID-19 was a crisis that hugely impacted charities, but as of 2023, the new growth rates indicate positive signs for charities. Total giving, as of now, has surpassed pre-pandemic levels, even if it is adjusted to factor in inflation. In fact, across the board in 2023, all sources of charitable giving grew but remained even or declined when adjusted for inflation. Here is a graph produced by the Lilly Family School of Philanthropy at IU Indianapolis. 

Regarding the types of organizations receiving these contributions, giving grew (in inflation-adjusted terms) in seven of the nine categories. Religion and international affairs were the two categories that saw a decline in giving. “Among the recipients of giving, we see the strongest growth among grantmaking organizations: giving to foundations and to public-society benefit organizations that include national donor-advised funds, “Giving to these areas is also well above pre-pandemic levels, indicating that the wealthy donors who tend to give to grantmaking organizations continue to invest in the future of the nonprofit sector,” said Wendy McGrady, Vice Chair of Giving USA Foundation and Executive Vice President and COO of The Curtis Group.

This means that the value of donations is being reduced because of inflation, which, in simpler terms, means that the same amount of money can do less now. Not only do some charities need more money because they arent receiving as much, but they also have higher operating costs because of inflation. In other words, inflation might be the new thing that charities need to figure out how to overcome. 

Conclusion

COVID-19 has significantly impacted charitable donations. It forced nonprofits to rethink their strategies and adapt to new fundraising challenges. While the pandemic did change donation patterns, it also prompted innovation and resilience. Organizations started to embrace virtual fundraising and began shifting their focus toward meeting the needs of their communities by forming partnerships with other organizations to amplify their impact strategically.

As we move forward, the lessons learned during the pandemic will continue to shape the nonprofit sector. Charitable organizations must be capable of adapting. The pandemic tested the limits of their outreach but also revealed the creativity and flexibility of their staff and, more importantly, the strength and dedication of the philanthropic community. Even though the pandemic may have disrupted dependable donation flows, innovations such as online fundraising will eventually help broaden the reach of charitable organizations. By facing challenges and adapting, this innovation will drive these organizations toward a brighter, more hopeful future.