Human Service Organizations’ Participation in the Paycheck Protection Program: A Cross-Sector Comparison

ABSTRACT

The Paycheck Protection Program (PPP) was passed during the COVID-19 pandemic to assist small and medium-sized organizations. However, only a fraction of eligible nonprofits applied for and received loans. Using a contract failure lens, we posit that nonprofits are more likely to have higher per-employee loan amounts and use funds for payroll than for-profits. Analyzing a sample of 174,496 first-draw loans across human service sub-fields, results suggest differences by size, particularly among single-employee organizations, and by nonprofit and for-profit recipients. Single-employee organizations represent nearly half of HSO recipients, suggesting an unintended consequence of prioritizing short processing times over more scrutiny.

PRACTICE POINTS

• During times of crisis, policy makers should consider oversight along with speed during policy implementation to discourage and detect self-motivated behavior.

• Organizations who successfully used adaptive tactics during the crisis included large organizations with more than 200 paid staff and nonprofit ownership structure.

• Managers of large nonprofit organizations in competitive subfields demonstrated resilience to competition and commercialization pressures by focusing on employee retention.

KEYWORDS:

• For-profits
• human service organizations
• loans
• nonprofits
• organizational size
• paycheck protection program

Acknowledgments

We would like to thank the Nonprofit Institute at the University of San Diego for awarding a Kasperick research grant in support of this research. We would also like to acknowledge the contribution of Francisco Salinas, a former graduate research assistant and Masters student at the University of San Diego, for his assistance with data cleaning.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Supplementary material

Supplemental data for this article can be accessed online at https://doi.org/10.1080/23303131.2023.2282592

Notes

¹ Gronbjerg and Smith (2021) define a field as, “ … a network of social relations that creates a social arena with specific logics and beliefs in which agents seek to obtain desirable resources by use of economic, cultural, social, and symbolic power.” (p5).

² Gronbjerg and Smith (2021) estimate this for the state of Indiana, but argue that the patterns are similar to other locations.

³ Indeed, the funding process may shift back to competitive bids based on performance and cost-efficiencies. This may be more likely particularly in light of the investigations of fraud uncovered post-pandemic (SBA Office of the Inspector General, 2022).

⁴ This follows Gronbjerg and Smith (2021) who use NAICS codes (624) to delineate the human service field.

⁵ While NAICS sector 62 “Health Care and Social Assistance” is further disaggregated into 18 four-digit codes and even further into five and six digit codes, only 13 six-digit sub-industry codes are represented in our data. For parsimony, we aggregated these 13 sub-industries into eight four-digit codes. See online supplementary Appendix 4, Table A4, for detailed description of the eight four-digit and 13 six-digit codes represented in our data with illustrative organizational examples.

⁶ We estimated a model with borrower state as a control (results not shown but available upon request) to check the consistency of our results due to the possibility of regional differences in costs of doing business (e.g., wages in California and New York may be higher than Kansas). Results of our second outcome were consistent with respect to coefficient sign and statistical significance. We acknowledge that other variation in wages may exist (i.e., higher wages paid in the for-profit sector), and that including a state control is an imperfect solution, but we were limited with what is available in the dataset to adjust for wage and cost of living differences.

Additional information

Funding

This work was supported by the Kasperick Foundation.