Non-Profit Standards

Executive Summary

In the past few years, many nonprofits were buoyed by COVID-19-related influxes in revenue, be it from donors who were more attuned to the mission and willing to give or, more likely, federal stimulus funding. Now, as giving slows and costs surge due to inflation, nonprofits are looking to transform their organizations. This includes finding ways to increase revenue—such as deepening donor relationships, expanding their donor base, and diversifying funding sources—as well as ways to improve efficiency via strategic investments in technology. Some organizations are going so far as to rethink their mission and operations, including developing and executing their ESG strategy. While such endeavors may be challenging, transforming their organization today will help nonprofits build resilience for the future.

BDO’s seventh annual Nonprofit Standards benchmarking survey asked 250 nonprofit executives about the top issues facing their organizations this year. This report showcases findings from the survey, as well as analysis from BDO thought leaders.

Nonprofits Transform Their Organizations

Nonprofits can no longer rely on the plentiful giving, abundant government funding, and low borrowing costs they saw during the pandemic years. As a result, they’re looking to maintain and grow revenue levels and create efficiencies in their operations. As funders tighten their purse strings, some are asking for more information on operations, outcomes, and impact.

FUNDRAISING, TECHNOLOGY, ADVOCACY, AND RISK MANAGEMENT TOP SPENDING PRIORITIES

Nonprofits are increasing spending on fundraising and donor relations as they try to counteract a decline in giving. A report from Giving USA found that charitable giving fell 3.4% in 2022, which represents only the fourth time in four decades that charitable giving fell. Funders and donors may be tightening their belts due to inflation and economic uncertainty. Additionally, many people were inspired to give to charitable organizations during the COVID-19 crisis and the social justice movements of 2020.

An increase in spending on technology is not surprising, as nonprofits understand that they will need to upgrade their technology to increase efficiency. While this requires initial investment, technology enhancements can help reduce overhead costs in the long run by allowing staff to devote more of their time and resources to program activities.

Even amid efforts to lower costs, organizations are no less committed to the populations they serve. Advocacy is still a clear priority, and nonprofits remain devoted to spreading awareness and encouraging action for issues related to their mission.

The increased organizational spending on risk management and compliance may be in response to increased scrutiny from donors, funders, and governments. With higher costs, donors and funders are tightening their budgets and will naturally want to make sure their donations are spent efficiently. Now is the time for nonprofits to reflect on the processes and controls they have in place to govern their spending to be prepared for additional scrutiny.

These spending priorities contrast with last year’s survey, where talent topped the list. Now that the talent shortage has subsided somewhat from 2022, nonprofits are turning to other priorities to manage costs and increase revenue amid persistent inflation. Download full PDF