Nonprofits are flourishing despite all odds
Despite a year of global economic turmoil characterized by inflation and the looming possibility of a downturn, nonprofits not only achieved revenue growth but expanded their impact, according to BDO’s annual Nonprofit Standards benchmarking survey.
While more than three-quarters (76%) of organizations report an increase in revenue during the most recent fiscal year, inflation and economic uncertainty present serious threats to their financial health. While 72% of organizations report having more than 4 months of operating reserves on hand in 2022, this is down from 81% in 2021.
To mitigate the impacts of inflation, 65% are increasing wages and salaries, 54% are pursuing operational efficiencies, and 52% are increasing fundraising.
“The massive inflation we’ve seen in 2022, along with the possibility of an economic downturn, has put nonprofit leaders in an environment where quick and decisive action is needed to ensure vital programs and organizational infrastructure remains funded,” said Andrea Espinola Wilson, partner and co-leader of BDO’s Nonprofit & Education practice. “With nonprofit leaders expanding program offerings, increasing employee compensation and diversifying revenue streams, we’re clearly seeing an industry preparing to provide great service in what may be a time of increasing need.”
In the next 12 months, nonprofit leaders are pursuing a suite of strategies to diversify their revenue streams, including tapping new donors (64%), expanding program areas (38%), and diversifying their investment portfolios (25%).
Nonprofits focus on employees
Talent acquisition and retention are high on nonprofits’ list of priorities. Nonprofit leaders cite employee retention and morale (39%) as their top challenge outside of budget constraints, followed by meeting increased demand (22%) and increased competition for funding (12%). To amplify employee retention and recruitment, 78% are increasing employee compensation, 47% are updating employee benefits, 46% are updating or introducing employee training and development programs, and 43% are updating or introducing flexible work policies.
“One of the greatest challenges facing all employers in 2022 is the reality that good talent is hard to find and even harder to keep. As the cost of living soars, people employed by nonprofits, many of whom are otherwise happy with their jobs, are looking elsewhere for higher wages,” said Adam Cole, partner and co-leader of BDO’s Nonprofit and Education practice. “We’re seeing many nonprofit leaders step up to the challenge – matching the stronger wages, flexible hours, and continual training that many employees require with the sense of fulfillment unique to the nonprofit sector.”
Subsector reports zero in on specific industry challenges
The survey includes separate breakout reports including health and human services (HHS) organizations, higher education organizations, specific grantmakers, public charities, and organizations with less than $25 million in annual revenue. Insights can help industry leaders navigate today’s unique challenges and make data-backed decisions that support and enhance their organization’s special mission. The top findings from subsectors include:
- HHS organizations meet increased demand with even greater ambition. With 74% reporting an increase in revenue and 54% expanding the scope of their mission, HHS organizations are scaling up despite a challenging economic environment. Many cite staffing as the biggest compounding challenge to their success – with 58% listing staff retention and employee morale/organizational culture as a top issue.
- Higher education organizations prioritize enrollment and retention. Higher education organizations rely on student enrollment, as tuition comprises on average nearly 60% of institutional funding. Leaders’ top three priorities for the next 12 months are improving student retention and enrollment (81%), seeking new sources of revenue (74%), and improving staff retention and recruitment (55%).
- Grantmakers pivot to serve grantees’ evolving needs. More than three-quarters (77%) of grantmakers have expanded the scope of their mission in the past year, and of these, half did so to evolve with the changing needs of their grantees. Meeting increased levels of demand has risen to the top of grantmakers’ list of challenges outside of budget constraints.
- Public charities are communicating impact and transparency. Some funders are seeking more information to justify their contributions: 53% of public charities say donors requested more information about board and staff demographics in the past year.
- Midrange organizations face greater constraints amid financial challenges. Midrange and smaller nonprofits have fewer resources than their larger counterparts to navigate economic turmoil, and 74% rank the search for new sources of revenue as a top priority for the next 12 months.
ABOUT THE SURVEY
This year’s Nonprofit Standards benchmarking survey was fielded by Market Measurement, a market research consulting firm, in the summer of 2022. Now in its sixth year, this survey of more than 270 United States (U.S.) nonprofit leaders features extensive data on the key trends impacting nonprofit organizations and includes five subsector-specific breakout reports.
(Image by Shad0wfall from Pixabay )
