Coping with the regulatory and legislative challenges posed by stricter data privacy rules and the changes to the federal tax code is the biggest hurdle facing nonprofits this year according to the BDO’s Third Annual Nonprofits Survey released last June.
Many nonprofits are in danger of succumbing to a “starvation cycle”, where high programmatic spending comes at the expense of other key areas like training and fundraising.
Here is an excerpt from the BDO report published in BusinessWire:
With an evolving regulatory landscape and increased macroeconomic uncertainty, it is more important than ever for nonprofits to operate with a business mindset, while continuing to put their mission first. Top takeaways include:
Organizations are at a growing risk of falling into the starvation cycle: underfunding necessary infrastructure—new technology, employee training and fundraising expenses—in favor of high programmatic spending. The majority of organizations surveyed (72 percent) allocated 80-100 percent of their spending to program-related activities in the past fiscal year. At the same time, nearly two-thirds (63 percent) of nonprofits maintain reserves equivalent to six months or less of operating costs. While the right level of operating reserves varies by organization size and sector, it’s important for nonprofits to establish an appropriate financial safety net.
Investment in technology is a priority, but not without a clear ROI. Nearly two-thirds of organizations surveyed are planning to invest in new technologies this year. However, with limited financial and human resources, nonprofit organizations are gravitating towards technology tools that allow them to do more with less, like management platforms or software, including those that assist with tasks like fundraising or social media (66 percent); data analytics (56 percent); and automation (33 percent).
Mission + Compensation = Employee Satisfaction. While compensation remains the most widely-cited employee satisfaction challenge for organizations, with 78 percent rating it a high or moderate challenge, compensation alone does not guarantee employee retention. Nearly one in four organizations ranked ‘disconnect from mission’ as a high or moderate issue for employees. This is particularly relevant for organizations that may be dealing with financial concerns—more than a third of organizations operating at a net loss rank mission disconnect as their top employee challenge.