Nonprofit organizations have a tool enabling them to see how their priorities and problems match up with the nearly 1.5 million nonprofit agencies of all kinds nationwide: the BDO Nonprofit Benchmarking Survey.
Tennessee itself has some 51,000 nonprofits, between them navigating the ever-turbulent waters of tax changes, fundraising, staffing and retention, and other ever-changing topics and problems with which they continuously grapple.This is the survey’s third year, compiled through a sampling cross-section based on organizational size and annual revenues. The 2019 survey’s top five issues for nonprofits are:
- Organizations risk falling into the starvation cycle.
- Technology is a priority, but nonprofits favor those with clear return on investment.
- Regulatory and legislative challenges are growing.
- Mission + compensation = employee satisfaction.
- Health and human services organizations face unique challenges.
Starvation cycle
The starvation cycle occurs when, to sustain programs, nonprofits cut back on technology improvements, employee training, benefits, infrastructure repairs or replacement, or other things that aren’t directly related to the people the nonprofit serves.
Just under 40% of survey respondents said fundraising will be their biggest challenge this year. BDO recommends (in general, because organizations differ) that nonprofits keep in reserve up to six months of operating funds.
ROI on technology investment
Nonprofits share this priority with the for-profit sector. Though some 75% of nonprofit top leaders plan to invest in new technologies, for nonprofits particularly there’s little margin for choices that don’t provide a quantifiable return.
Nonprofits typically have a smaller pool of technology staff or brains to identify the most advantageous technological additions. It often comes down to a choice: use volunteers, spend money on consultants, or try to take advantage of other nonprofits’ experience.
Regulatory and legislative challenges
While nonprofits are struggling to find new revenue sources and to allocate existing resources, law and regulatory changes prompt frequent shifts in direction, strategy and expenses.
At the federal level the Tax Cuts and Jobs Act of 2017, while making a number of changes that boosted some sectors of the economy, affected nonprofits by increasing the standard deduction, reducing the tax benefit of charitable contributions because fewer people will itemize.
Nearly 66% of nonprofit leaders surveyed said that maintaining contact with lawmakers and regulators will be more difficult for them in 2019
Mission, compensation, employee satisfaction
Effective employees make an organization work, and everyone wants to be paid well, but given that nonprofits exist substantially through the generosity of donors, it’s a struggle to annually ensure compensation and benefit packages that hold good people.
When employees are diverted to other tasks because of staffing, fundraising imperatives, operational needs, etc., employees can feel disconnected from the mission, and the mission — a desire to help others — is principally why they’re in nonprofit work.
Health and human service organizations
The survey showed that 31% of HHS organizations expanded services in the past year, up from 18% the previous year. This comes at a price: more staff and service costs.
If government funding is helping the boat float, any regulatory or legislative disruption will lead to a cascading series of events affecting employee compensation, fundraising, services, investment, ultimately leading to the starvation cycle.
Nonprofits do amazing work in every community. To the degree they can learn and benefit from the Benchmark Survey, and obtain financial counsel from people experienced in the field, they stand the best chance of sailing as smoothly as possible through turbulent waters.
Click here to view the complete BDO Nonprofit Benchmarking Survey.
This article was originally published in the Knoxville News Sentinel.