By: Aleisa Howell, CPA
As the Covid-19 pandemic ebbs in the U.S., the country is excited about a return to better days. But, while the public health crisis may be easing, allowing Americans to gather once again in their ofices and favorite haunts, charitable organizations are facing a number of challenges. The shifting landscape for these organizations is not solely a result of the pandemic; it represents a collection of changes that began in recent years and continue to intensify today.
Understanding and adapting to these trends is crucial if NFPs are to adapt and thrive in the post-pandemic world. Here are five of the most significant.
- Shrinking budgets. Charitable giving has shown a downward trend – with exceptions. Both foundations and individuals increased their giving in 2020, due at least in part to the stock market’s exceptional performance during the Nevertheless, the pattern over the longer term has been one of decreasing numbers of donors, less government support and shrinking budgets for nonprofits. Since the 2017 tax changes severely reduced the tax benefits to individuals for charitable donations, that’s likely to continue.
- Increasing demands. Many Americans are still struggling with pandemic-related losses, both economic and emotional, and needs of all types continue to grow within the communities that charitable nonprofits serve. Shrinking safety nets at the federal and state level and rising numbers of citizens impacted by natural disasters are two of the longer-term factors that make it ever more dificult for these organizations to meet a rising tide of
- Donor advised funds. Along with the ability to make donations online, through financial apps and social media platforms, donors are demanding more control over their gifts. Donor advised funds (DAFs) provide the added influence they desire as well as significant financial benefit, making these tools an extremely popular vehicle for charitable giving. Nonprofits must clearly understand the special rules governing DAF giving, which disallow donors from receiving any benefit from the gift (among other limitations). Philanthropic organizations must assiduously work to manage donor expectations while remaining constantly mindful of IRS
- Cybersecurity With limited budgets and lengthy lists of needs, NFPs often put current technology at the bottom of their priority list. However, they gather and maintain vast amounts of sensitive data: names, addresses, birthdates, social security numbers, credit card numbers, bank account information and even medical records, in some cases. Together, these two facts make nonprofits ideal targets for hackers, and cybercriminals have begun to target these organizations in recent years. Managing and mitigating cybersecurity risks creates an unwelcome drain on scarce resources and diverts focus from the primary mission, but ignoring the threat creates an unacceptable level of risk for donors, staff, clients and the organization itself.
- Diversity, inclusion & Lack of diversity at the staff, leadership and board level is a serious problem for nonprofits. There may also be concerns about equity related to recipients of a charity’s services, creating a point of ethical vulnerability for the organization. With the public increasingly aware of such discrepancies and committed to seeing them disappear, NFPs must address the issue proactively or risk almost certain negative consequences to reputation, brand perception and ultimately, to giving.
Nonprofits aren’t only facing more demands in the community; they’re also facing challenges of their own that the demand creativity, commitment and resourcefulness that has long distinguished these organizations. Recognizing the trends is the first step to finding optimal solutions. The nonprofit advisors at Mauldin & Jenkins are here to help your nonprofit overcome today’s hurdles as well as those yet to emerge.