In mid-October, the Urban Institute took a deep dive into trends in the relationship between governments and nonprofits, a critical partnership that delivers a huge number of services to people from coast to coast. 

As the report, which is based on data from 2021, 2022 and 2023, begins, “Understanding trends in government grants and contracts—the second largest source of funding for nonprofits, behind private fee-for-service revenue -- . . . helps nonprofit leaders and their stakeholders understand the critical role public funding plays in nonprofit operations. When the availability of public funding for nonprofits decreases, the communities nonprofits serve feel the effects.”

Here are some of the most significant findings, which cover federal as well as state and local government:

• “Nearly two in three nonprofits discussed obtaining grants or contracts with government officials in recent years.”

• “Many nonprofits that discussed government funding did not go on to seek or apply for it. This could mean that discussions with government officials about obtaining grants or contracts can dissuade nonprofits from seeking or applying for funding. Alternatively, it could suggest that the types of nonprofits that have these discussions are uncertain of their ability to complete the applications or receive funding, perhaps the reason they reach out in the first place.”

• “Arts, culture, and humanities nonprofits were more likely than human services and other nonprofits to seek or apply for government grants and/or contracts at any level of government. They were also more likely than health and other nonprofits to receive them. This may be because two major funders of arts, culture, and humanities organizations are government agencies: the National Endowment of the Arts and the National Endowment for the Humanities.”

• “Arts, culture, and humanities nonprofits . . . received a smaller average percentage of their revenue (20 percent) from government agencies than education (48 percent), health (43 percent), and human services (32 percent) nonprofits. This suggests that although arts, culture, and humanities nonprofits actively sought and received government grants and contracts, the grants and contracts they received were smaller.”

• Nonprofits that receive government funding were more likely than those that do not to participate in advocacy (60 versus 42 percent), public education (78 versus 63 percent), and voter engagement (23 versus 9 percent) in 2022–2023.

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