Top Five Survey Findings
Nonprofit Standards
A Benchmarking Survey
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For nonprofit organizations, programs are their raison d’être. They’re how organizations bring their mission to life and advance their cause. As such, there’s often significant pressure both internally and externally to direct most of their spending toward programs.
During your most recent fiscal year, about what percentage of total expenditures were for PROGRAM-RELATED activities?
of all organizations allocated 80-100% of their spending on program-related activities
72%
100%
3%
90%-99%
28%
80%-89%
41%
70%-79%
15%
60%-69%
5%
Less than 50%
50%-59%
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Download the report for organization revenue breakouts.
1. Organizations RisK Falling into the Starvation Cycle
While high programmatic spending shows organizations’ dedication to their mission, it can also leave them open to what’s known as the “starvation cycle,” a phenomenon that occurs when an organization chronically underfunds vital infrastructure like technology and employee training. Organizations are particularly vulnerable if they lack the operating reserves (liquid, net assets without donor restrictions) to serve as a financial safety net. As we’ve noted in years past, the “right” amount of liquidity varies according to organization size, sector and scope. However, we recommend that nonprofits strive to maintain more than six months of operating reserves.
How many months of operating reserves, NOT NEEDED FOR CURRENT OPERATIONS, does your organization currently maintain?
of all organizations maintains 6 months or less of operating reserves
63%
12+ months
20%
7–12 months
17%
4–6 months
29%
<4 months
31%
None
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1.
Which ONE of the following is your organization’s top priority this year?
In the face of funding scarcity, liquidity becomes even more critical. However, it appears nonprofits may be underestimating its importance.
Seek new sources of revenue or funding
39%
Update or revise programs
16%
Digital transformation
11%
Measure impact
10%
Grow and expand staff
9%
Increase board or staffing diversity
Other
12%
1. Organizations Risk Falling into the Starvation Cycle
High challenge
18%
Moderate challenge
22%
Low challenge
38%
Not a challenge
of all organizations say adequate liquidity is a low challenge for their organization, or not a challenge at all.
60%
What LEVEL OF CHALLENGE will adequate liquidity represent for your organization during the next 12 months?
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2. Technology is a Priority, but Nonprofits Favor Those with Clear ROI
Management platforms or software
66%
When asked what technological investments they’re prioritizing, nonprofits favored management platforms or software, including those that assist with tasks like fundraising or social media; data analytics; and automation.
What TECHNOLOGY is your organization planning to invest in this year?
When it comes to infrastructure investments, the nonprofit industry is, like many others, experiencing a boom of activity related to technology and digital disruption. Nearly two-thirds (64 percent) surveyed say they are planning to invest in new technologies this year. This percentage leaps to 75 percent among nonprofit CEOs and presidents, who especially see its value. However, the breadth of technologies available can be overwhelming to nonprofits, which typically have fewer financial and human resources to dedicate to improving digital capabilities than for-profit businesses.
Data analytics
Automation
Artificial intelligence
Internet of Things (IoT)
Virtual or augmented reality
56%
33%
6%
4%
2. Technology is A Priority, but Nonprofits Favor Those with Clear ROI
The past few years have been challenging for nonprofits, particularly when it comes to navigating legislative and regulatory developments. The massive federal tax code overhaul brought on by the Tax Cuts and Jobs Act resulted in both direct impacts to nonprofits—through provisions like the excise tax on executive compensation and changes to the taxation of fringe benefits—and indirect ones like increasing the standard deduction for individuals, which many fear will limit charitable donations. With the new tax code in place, as well as new data privacy and financial reporting regulations for nonprofits and the implementation of the new revenue recognition standard, it’s no surprise that nonprofits are feeling stressed by regulations.
3. Regulatory and Legislative Challenges are Growing
Nearly two-thirds of organizations surveyed say the time and effort to deal with government regulations and legislative changes will be a high or moderate challenge this year, up from 45 percent last year.
What level of challenge will the TIME & EFFORT REQUIRED TO DEAL WITH GOVERNMENT REGULATIONS & LEGISLATIVE CHANGES represent for your organization during the next 12 months?
High
14%
Moderate
Low
37%
2018
2019
26%
select a year
32%
46%
2%
of all organizations rate compensation as a moderate or high challenge
78%
What level of challenge does COMPENSATION LEVELS represent for your organization?
Regardless of its scope or mission, a nonprofit’s greatest resource is its people. However, attracting and retaining talent can be tough with limited resources—and compensation remains a critical element of the employee satisfaction equation.
4. Mission + Compensation = Employee Satisfaction
Nonetheless, compensation isn’t enough: Employees also value their connection to the mission of the nonprofit. Nearly one in four organizations (24 percent) ranked a disconnect from the mission as a high or moderate employee satisfaction issue. This may be of even more importance when an organization is financially strapped—more than a third of organizations that experienced net loss in revenue last year rank disconnect from the mission as a high to moderate challenge, compared to 21 percent of those with net income. It’s clear that nonprofit employees value both the financial and social aspects of nonprofit work; savvy organizations will need to effectively address this both to gain and keep top talent.
21%
62%
of all organizations ranked a disconnect from the mission as a moderate or high challenge
24%
What level of challenge does EMPLOYEES FEELING DISCONNECTED FROM THE MISSION represent for your organization?
4.
31% of HHS organizations meaningfully expanded the scope of their mission in the past year, compared to 18 percent of the other organizations surveyed. This could be a result of increased demands for their services, potentially as a result of shifting socioeconomic forces.
More HHS organizations expanded the scope of their mission
Health and human services (HHS) organizations, which make up more than a third (35 percent) of this year’s respondents, operate in conjunction with both the public and private sectors to reduce expenditures and improve the delivery of services. As such, they face unique challenges like rising operational costs, funding deficits, and increased demands for transparency. Highlights from the HHS cohort of respondents include:
5. Health and Human Services Organizations Face Unique Challenges
Likely related to these expansions, HHS organizations disproportionally cite growing and expanding staff as their top priority this year (17 percent vs. 5 percent of other organizations).
Although expanded scopes likely correlate with increased government funding for these organizations, this funding often does not adequately cover overhead costs, meaning HHS organizations may find themselves particularly at risk of entering the “starvation cycle.”
All organizations are responsible for communicating the impact of their programs to stakeholders— particularly, funders.
More of HHS organizations’ funding sources required additional information on impacts and outcomes
65% of HHS organizations report that more than a quarter of their funders asked for more information on outcomes and impact than they previously required.
The top board challenge highlighted by HHS organizations is succession planning, cited by 67 percent of respondents, compared to 54 percent of non HHS organizations.
Succession planning and cybersecurity are top-of-mind for HHS boards
HHS organizations also face disproportionate challenges when it comes to cybersecurity, which is likely due to the amount of sensitive personal information they maintain.
5.
During your most recent fiscal year, approximately what percentage of your funding sources requested more information on OUTCOMES AND IMPACTS than they previously required?
All organizations
65%
HHS
13%
36%
76%-100%
51%-75%
19%
42%
25%-50%
Under 25%
During the past 12 months, how would you rate the LEVEL OF CHALLENGE facing your board when considering each of the following? (Participants who rated these challenges as HIGH or MODERATE)
Succession planning
67%
54%
61%
57%
47%
48%
55%
34%
45%
50%
23%
Internal resource constraints
Cybersecurity
Managing growth
Increase in regulation
Loss or decline of a major revenue stream
Increased demand for services without a plan to meet demand
Fraud risk
During the past 12 months, how would you rate the LEVEL OF CHALLENGE facing your board when considering each of the following?
Nonprofit Standards is a national benchmarking survey of 200 nonprofit organizations across a variety of sectors, including health and human services, higher education, public charities and private and community foundations. The survey was fielded by Market Measurement, a market research consulting firm. Nonprofit Standards includes more precise drilldowns by annual revenue, so readers have access to data from a narrower peer group.
Download our survey to learn more.
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