July 21, 2017
 
Attaining Long-Term Financial Stability Is Top Nonprofit Goal

January 3, 2017 — More than half of nonprofit leaders nationally expect conditions in the sector to be more difficult in 2017, and more than one in four say that achieving long-term financial stability is the greatest challenge facing their organizations, according to a recently completed survey.

The Nonprofit Leadership Pulse, undertaken by the accounting, tax, and advisory firm Marks Paneth, reported that 44% of the 371 nonprofit leaders surveyed said the year ahead will be somewhat more difficult, compared to the previous year; another 11% said the next year will be much more difficult.

Twenty-eight percent said achieving long-term financial stability is the greatest challenge facing their organizations. Other challenges—including covering overhead , stabilizing revenues and cash flow, attracting and retaining staff, and getting the right people on their boards—although significant, were not seen as important.

To achieve long-term financial stability, 81% agreed that identifying programs that generate positive cash flows will be very important.

Although 60% of leaders surveyed cited government funding as an important source of cash flow, 78% said that they rely on funding from corporations, foundations, and individual donors; 54% rely on state grants and 46% rely on federal grants.

The consolidation of wealth in the United States is likely to mean more intense competition for funding from fewer private sources, according to Marks Paneth.

“One conclusion,” said Hope Goldstein, a partner in the Nonprofit and Government Group at Marks Paneth, “is that, as funding sources change, fundraising too must change. The first place to focus is tracking donors and building programs to retain them. Partnering with corporations is another place to focus.”

Over the past year, according to the survey:
  • 52% of organizations reported an increased demand for programs and services.
  • 48% expanded programs and services and 47% experienced growth in the number of clients served
  • 43% collaborated with other organizations to meet demand
  • 29% reported an inability to meet the demand/service gap
Low job security and low salaries makes it difficult for nonprofits to attract and retain talented staff, contributing to nonprofit fatigue, according to the report. In the past year, 60% of nonprofits reported staff turnover, while 20% experienced a change in executive leadership.

When it comes to fundraising, 83% of survey participants said they rely on internal staff, and only 69% rely on board members. Thirty-four percent rely on volunteers and 24% use third-party fundraisers.

While donors increasingly expect nonprofits to measure SROI—the social return of their investment, defined as the social and/or environmental value of programs and services provided by a nonprofit— only 17% of nonprofit leaders said that their organizations were adequately funded for the costs associated with measuring such outcomes.

Of the organizations surveyed, 48% said that it was a challenge to meet donor expectations regarding SROI reporting. The challenge is due to a gap in resources for measuring and reporting SROI. Sixty-one percent of nonprofit leaders surveyed said that their organization experienced such a gap, with 33% saying that the gap was large.

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