Challenges and Priorities for Nonprofit Organizations · Crowdfunding platforms let nonprofits show...
Transcript of Challenges and Priorities for Nonprofit Organizations · Crowdfunding platforms let nonprofits show...
1 2018 OUTLOOK SURVEY REPORT
Challenges and Priorities for Nonprofit Organizations
2018 Outlook Survey Report
2 2018 OUTLOOK SURVEY REPORT
IntroductionThe Nonprofit Financial Priorities Benchmark 2018 Survey sponsored by Wipfli was conducted in
December 2017. Polling over 350 financial professionals and executives from the nonprofit sector
across the country, the survey explored the challenges facing this industry, as well as organizations’
priorities in 2018.
The financial performance of nonprofits in the U.S. must contend with stock market results,
government reform initiatives, and an uncertain political environment. Nonprofit growth is
another indicator of an organization’s impact and sustainability and will require priority by
executive leadership throughout 2018. The survey prompts organizations of all sizes to consider
how to effectively scale and continue delivering on their missions and to consider what financial
guidance decision makers might need to produce the best results for their nonprofit.
The following survey questions identify several key aspects necessary for growth and operational
efficiency recognized by nonprofits as needing their time and attention this year. Respondents also
describe the nature of running a nonprofit in this era of changing local, state, and federal government
regulations. Study highlights reflect these concerns and challenges:
• Survey participants rank government oversight (18.8%) and generating revenue (16.7%)
as their top overall challenges facing their organizations.
• Leading the list of priorities in 2018 are expanding fundraising and development (60%)
and implementing operational efficiencies (55.8%).
• The top financial challenges reported by respondents are development/growth/revenue/
cash flow (22.8%) and fundraising (13%).
3 2018 OUTLOOK SURVEY REPORT
Government Regulations
Growth/Generate Revenue
Funding/Donors
Staff/Volunteers
Technology/Software
Fundraising
Membership/Recruitment
Corporate Improvement(Building improvements, management transitions, expansions, closing)
Other
Budget
Education
Community Outreach/Public Relations
18.8%
7.5%
8.5%
11.3%
16.7%
5.1%
6.5%
7.5%
7.5%
3.8%
4.4%
2.4%
0% 10% 20% 30% 40%
1. Describe the top challenge your organization is facing in the upcoming year.
Government regulations and generating revenue top the list of the two biggest challenges facing
nonprofits in 2018. Most nonprofits are dealing with regulation and oversight of the federal and
state governments where they operate. The overriding uncertainty of the political climate has the
power to impact the revenue and operating environments of any number of fields of nonprofits.
Nonprofits, particularly those which receive government funding, need to assess the risk associated
with their revenue streams. Many of the services provided by nonprofits are funded at least somewhat
by local, state, or federal governments. In uncertain times, a contract does not always guarantee
prompt payment. In addition, with regulations and legislation change, the possibility remains that
organizations may not be able to bill for all services rendered or continue to receive the same level
of funding for services. These factors highlight the importance of nonprofits to building government
relationships and vibrant long-term advocacy and seeking alternative revenue sources.
Nonprofits are also looking ahead in trying to determine how recent tax reforms may impact their growth. Donors
may give less if their tax deductions are less valuable than in the prior year. While
nonprofits can point to a strong economy, they must
also consider the impact a major global event, such
as tensions with North Korea or a large natural disaster or tragedy like Las Vegas, may
have on deterring or spiking giving.
4 2018 OUTLOOK SURVEY REPORT
2. What are your top five financial priorities in the upcoming year?
Organizations are prioritizing fundraising and several aspects of operational efficiency for 2018.
Nonprofits are built around their missions and must be supported by the right revenue streams and
expense models, which together produce an integrated enterprise model. Recognizing the need to
reduce the overall cost of finance means nonprofits will have to work hard to boost the productivity
of core transaction processing. Automating routine transaction processing in accounts payable,
accounts receivable, and general accounting can contribute to lowering costs. In addition, experts
agree that simplifying the resource-planning environment and reducing disparate vendors and software
occurrences will help allow for effective standardization and automation of key business processes.
55.8%
29.3%
38.9%
39.3%
43.1%
Expand fundraising and development
Implement operational efficiencies
Reduce operational costs
Rethink revenue model andincome generation strategies Improve program results and metrics
Improve business process automation
Develop dashboards, KPIs, and trends analysis reports
Improve cash flow
Manage reserves and investments
Automate fiscal controls and systems
Improve accuracy of financial reporting
Access financing to grow operations
Implement new financial management systems
Access financing to maintain operations
Other
Don't know/None
Staff development
Member recruitment
New payroll system
Implement project management systems
25.8%
15.5%
16.2%
19.6%
25.5%
11%
3.8%
7.9%
9.6%
2.1%
1.4%
1%
.7%
60%
.3%0% 10% 20% 30% 40% 50% 60%
5 2018 OUTLOOK SURVEY REPORT
3. Describe your top financial challenge.
Growth is a constant focus for nonprofit leadership. A 2016 Stanford Social Innovation Review
found three common attributes among nonprofits that were able to efficiently transition from idea
to a $2 million budget: strong teamwork, an effective outcome evaluation system, and access to
capital. These are aspects nonprofits can focus on to develop a performance-driven culture.
Fundraising efforts will also require a new focus by nonprofits in the upcoming year. According to
experts, new donors are taking many forms. Many are putting assets into donor-advised funds at
a record pace, some are completely new to charitable giving and are reacting to the political
environment, others are tech savvy and drawn to nonprofits that appeal for support as “investments.”
Development/Growth/Revenue/Cash Flow
Fundraising
Other
Funding/Donors
Government Regulations/Uncertainties
Budget/Forecasts
Operational Costs
Reporting
None/Don’t Know
Membership
Reserves
Competition
Infrastructure/Operational Improvements/Changes
Too Much Time on Finances/Books
Automation
System Upgrades/Conversion
Accounting System Efficiencies
New Financial Management System
Financially Secure/Sustainability
New Timekeeping System
22.8%
7.4%
9.1%
11.9%
13%
5.6%
3.2%
3.9%
3.9%
5.3%
2.8%
2%
2.1%
2.5%
1.8%
0% 10% 20% 30% 40%
1.4%
.7%
.7%
.7%
.3%
6 2018 OUTLOOK SURVEY REPORT
4. Which accounting system does your organization currently use?
Approximately a quarter of nonprofits surveyed use QuickBooks for their accounting and bookkeeping
needs. QuickBooks is a do-it-yourself accounting software used mostly by small businesses and nonprofits.
For smaller organizations, this is an economical solution to help them manage their nonprofit finances.
Nonprofits must deal with business process differences such as grants vs. endowments vs. contributions,
as well as donor intent and grant restriction mandates. They are also responsible for meeting the reporting
needs of multiple stakeholders including board of directors, donors, and local, state, or federal governments.
Nonprofit accounting requires quite a bit from its system. Cloud-based systems can offer better visibility,
reporting, and dashboard while reducing operational costs.
25.5%
9.7%
11%
12%
13.1%
QuickBooks
Other
Blackbaud Financial Edge
MIP
None/Don’t know
Dynamics GP
Dynamics SL
Intacct
Fund EZ
GMS
Oracle
Banner
Deltek
Internal
MS Excel
Skyward
Lawson
8.2%
2.1%
2.8%
2.8%
5.6%
1.7%
1%
1%
1.4%
.7%
.7%
.7%
0% 10% 20% 30% 40%
7 2018 OUTLOOK SURVEY REPORT
5. What best describes your organization’s revenue?
Close to 40% of nonprofit respondents are with small organizations. While all nonprofits
work in the same political and economic environment, these indicators signaled uncertainty
in some respects, yet tended to deliver growth in 2017 for both small and large nonprofits.
38.7%
9.6%
11%
20.6%
20.1%
Under $5 million
$5 million to $9.99 million
$10 million to $24.99 million
$25 million to $49.99 million
Over $50 million
0% 10% 20% 30% 40%
8 2018 OUTLOOK SURVEY REPORT
6. What best describes your organization’s type?
Most nonprofits operate as a 501(c)(3). Incorporating in this manner provides organizations
with legitimacy and status. It allows them to capture foundation and government funds that
would otherwise not be available to their organization. Incorporation can also help ensure that
organizations are accountable to their mission and bylaws.
501 (c)(1)
501 (c)(2)
501 (c)(3)
501 (c)(4)
501 (c)(5)
501 (c)(6)
501 (c)(7
501 (c)(8)
Government
Education
Other
81.1%
.6%
1.2%
6.6%
1.7%
.3%
.9%
3.2%
.3%
.9%
3.2%0% 10% 20% 30% 40% 50% 60% 70% 80%
9 2018 OUTLOOK SURVEY REPORT
7. Which best describes your organization’s number of FT employees?
The survey reveals that respondents report staffing challenges as an immediate concern in 2018.
Similar findings from the Nonprofit HR’s 2016 Nonprofit Employment Practices Survey found that
the top two biggest challenges for nonprofit employers are being able to pay a competitive
wage and finding qualified staff. Smaller organizations, those with an annual operating budget of
$5 million or under, in particular, lack in this area, with 73% not having a formal recruiting strategy
and 91% not having a formal recruiting budget. Organizations will benefit from talent acquisition
and retention strategies that can stretch training budgets and increase employee engagement.
17.7%
16%
14.8%
12.8%
14.6%
Fewer than 10 employees
10 - 29 employees
30 - 49 employees
50 - 99 employees
100 - 200 employees
Over 200 employees 24.1%0% 10% 20% 30% 40%
10 2018 OUTLOOK SURVEY REPORT
8. Which best describes your role within your organization?
Nonprofit leaders must continue to pursue strategic leadership principles to guide their
organizations in 2018 and beyond. A key element in the success of nonprofits is fund
development, which is often the responsibility of executive directors. A strong finance
team allows for the focus to remain on capital, without allowing distractions to take
away from accomplishing their mission.
21.6%
8.7%
11%
11.9%
12.9%
CFO or VP of Finance
Other Directors/VPs
Executive Director
Other
Director of Finance
Controller
Director of Development
COO or Director of Operations
President or CEO
Director Programs/Events
Marketing
Accounting
Director of IT
Board Member/Chief of Staff
HR
7.2%
3.2%
3.5%
4.7%
5.2%
2.6%
1.7%
2%
2.3%
1.5%
0% 10% 20% 30% 40%
11 2018 OUTLOOK SURVEY REPORT
Conclusion and Trend Initiatives
Nonprofit organizations have a range of priorities in 2018. Their primary focus looks to expand
fundraising and develop operational efficiencies while reducing operational costs. Organizations
of all sizes will have an opportunity for growth this year and need to raise essential funds through
new and innovative approaches. This survey helps establish four trend initiatives to assist nonprofits
in effectively and efficiently continuing to deliver on their mission.
Increase Fundraising With Crowdfunding and Other Alternative Sources An innovative approach to increase fundraising efforts can begin by attracting donors online
through crowdfunding. This nontraditional method may help to reach what is considered by
many in the philanthropy world as one of the toughest groups to attract for giving, Millennials.
Crowdfunding platforms let nonprofits show their work through individual stories and photos in the
space where young adults occupy most of their time and also taps into their tendency to give to people
rather than organizations. Nonprofits like The American Cancer Society have started with modest
initial goals and believe that lots of small donations can really add up. Crowdfunding is continually
growing; as a report by Massolution estimates that $34 billion was raised through this method in 2015
and is expected to more than double in subsequent years.
Improve Long-Term Financial HealthNonprofits and charity experts are seeing a change in the attitude of grant makers over the past
few years, with foundations increasingly providing support for general operating costs. For many
small nonprofits, having enough cash to cover more than a month or two of operations is a struggle.
This movement requires a shift in thinking and trust on both sides. Truly understanding a nonprofit’s
overhead costs will benefit the overall health and sustainability of the organization. As this movement
progresses forward, it now needs to become the goal of nonprofits to identify their actual costs and
develop budget documents that accurately reflect the full costs of their work.
12 2018 OUTLOOK SURVEY REPORT
Develop Talent Acquisition and Retention StrategiesAccording to the U.S. Census Bureau, there are 74.1 million baby boomers born between 1946
and 1964 who are retiring at an average rate of 10,000 individuals every day for the next 15 years.
This presents an enormous opportunity for nonprofits to tap into this abundance of people with vast
experiences and talents who desire meaningful activities. Organizations’ strategic plans for 2018
need to include a goal of implementing a way to best capitalize on the availability of this experienced
and free labor. In addition, nonprofits’ technology priorities must address how to take advantage of
advancements to increase the potential for this generation to volunteer right from their own home.
Nonprofits also will benefit from focusing on retention initiatives. Developing approachable
leadership has been shown to directly correlate with lower turnover. Relationship building
activities can provide key learning opportunities to foster effectiveness related to this goal.
Deliver Data-Driven ResultsNonprofits have an opportunity to transform their organizations by building a culture around using
data. Using data can help drive decisions and improve results. It can provide answers to some of the
most important questions facing nonprofits today, such as which donors are most likely to give to
my organization, which donors are most likely to stop giving to my organization, and which volunteers
or donors are likely to be the best donors in the long-term. An initial goal nonprofit organizations
can make in 2018 toward creating a data-driven fundraising program is investing time to create
healthy data. Identifying key metrics to measure program outcomes and mission success is
the first step toward delivering data-driven results.
Sources: Chronicle of Philanthropy. November 2017. Volume 30, Issue 1.Chronicle of Philanthropy. Data and the Science of Raising Money. September 2016. Volume 28, Issue 11.