Nonprofit Revenue Diversification: Understanding Nonprofits’ Response to Economic Recessions

This study examined whether nonprofit organizations diversified their revenue portfolios after the Great Recession and whether nonprofit sectors impact the ability to diversify revenues at the organization level. When governments and private firms do not provide a public good, nonprofits step in to fill the gap (Weisbrod, 1988). Nonprofit organizations turn to several sources of financial support, including grants, government contracts, contributions, fees for services, and investment income. Recent research has questioned the long-standing prescription for nonprofit organizations to remain “lean” and keep administrative and fundraising expenses as low as possible. The IRS Statistics of Income (SOI) data files from 2008-2013 were analyzed using multiple regression. The results show that as GDP increased after the recession, nonprofit revenues became more diversified. More importantly, nonprofit activities have an even greater impact on revenue diversification. Future research can expand on this study by including more nonprofits in the study and analyzing additional tax years.