The state of US not-for-profits: More demands, fewer resources

By Jeff Drew

U.S. not-for-profits are being hit today with a double-whammy of more demand and less resources — and that's causing problems now and could lead to more.

That's the main theme of the 2022 State of the Nonprofit Sector report, released Thursday by accounting firm BKD CPAs & Advisors. The report, based on a survey of 878 not-for-profit organizations conducted in late 2021, found not-for-profit leaders across the United States more concerned about funding and staffing shortages than they were 12 months earlier. The shortfalls have limited the ability of some not-for-profits to meet higher demand for their programs, though most firms are adding services.

Specifically, the survey found that while 65% of survey respondents had seen an increase in demand for programs or services, 58% said their not-for-profit was dealing with a budget shortfall, and 71% said they were hampered because they didn't have enough staff. Despite those challenges, more than three-quarters (77%) of the survey respondents said they planned to add new programs and services.

"Nonprofits are mission-driven, so it's no surprise they are rising to the occasion in the face of staffing shortages by looking at new programs or services," said Dan Prater, senior managing consultant with BKD National Nonprofit Group and lead author of the report, in a news release. "But they risk burning out their dedicated employees — including senior leaders — if they don't address staffing."

Nearly 80% of the not-for-profits surveyed said they were boosting pay and benefits to attract and retain staff. Other measures to address the talent crunch being undertaken by most respondents include:

  • Improving workplace diversity, equity, and inclusion efforts (71.2%);
  • Increasing workplace flexibility (66.8%); and
  • Improving internal advancement opportunities (63.6%).

The efforts to increase compensation face challenges, the report said, pointing to pandemic-related restrictions continuing to hurt the ability to hold in-person fundraising events. A surge in government and institutional support during the pandemic is largely over as well, the report said.

To meet the challenges, Prater sees not-for-profits making mindset and operational changes to make their operations more efficient and effective.

"Nonprofits are resilient, and while the current environment is challenging, many organizations will thrive as they respond by becoming more entrepreneurial and getting smarter about planning, forecasting, and following the right metrics," Prater said.

— To comment on this article or to suggest an idea for another article, contact Jeff Drew at Jeff.Drew@aicpa-cima.com.

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