Challenges and Priorities for Nonprofit Organizations · Crowdfunding platforms let nonprofits show their work through individual stories and photos in the space where young adults

1 2018 OUTLOOK SURVEY REPORT

Challenges and Priorities for Nonprofit Organizations

2018 Outlook Survey Report


IntroductionThe Nonprofit Financial Priorities Benchmark 2018 Survey sponsored by Wipfli was conducted in

December 2017. Polling over 350 financial professionals and executives from the nonprofit sector

across the country, the survey explored the challenges facing this industry, as well as organizations’

priorities in 2018.

The financial performance of nonprofits in the U.S. must contend with stock market results,

government reform initiatives, and an uncertain political environment. Nonprofit growth is

another indicator of an organization’s impact and sustainability and will require priority by

executive leadership throughout 2018. The survey prompts organizations of all sizes to consider

how to effectively scale and continue delivering on their missions and to consider what financial

guidance decision makers might need to produce the best results for their nonprofit.

The following survey questions identify several key aspects necessary for growth and operational

efficiency recognized by nonprofits as needing their time and attention this year. Respondents also

describe the nature of running a nonprofit in this era of changing local, state, and federal government

regulations. Study highlights reflect these concerns and challenges:

• Survey participants rank government oversight (18.8%) and generating revenue (16.7%)

as their top overall challenges facing their organizations.

• Leading the list of priorities in 2018 are expanding fundraising and development (60%)

and implementing operational efficiencies (55.8%).

• The top financial challenges reported by respondents are development/growth/revenue/

cash flow (22.8%) and fundraising (13%).


Government Regulations

Growth/Generate Revenue

Funding/Donors

Staff/Volunteers

Technology/Software

Fundraising

Membership/Recruitment

Corporate Improvement(Building improvements, management transitions, expansions, closing)

Other

Budget

Education

Community Outreach/Public Relations

18.8%

7.5%

8.5%

11.3%

16.7%

5.1%

6.5%

7.5%

7.5%

3.8%

4.4%

2.4%

0% 10% 20% 30% 40%

1. Describe the top challenge your organization is facing in the upcoming year.

Government regulations and generating revenue top the list of the two biggest challenges facing

nonprofits in 2018. Most nonprofits are dealing with regulation and oversight of the federal and

state governments where they operate. The overriding uncertainty of the political climate has the

power to impact the revenue and operating environments of any number of fields of nonprofits.

Nonprofits, particularly those which receive government funding, need to assess the risk associated

with their revenue streams. Many of the services provided by nonprofits are funded at least somewhat

by local, state, or federal governments. In uncertain times, a contract does not always guarantee

prompt payment. In addition, with regulations and legislation change, the possibility remains that

organizations may not be able to bill for all services rendered or continue to receive the same level

of funding for services. These factors highlight the importance of nonprofits to building government

relationships and vibrant long-term advocacy and seeking alternative revenue sources.

Nonprofits are also looking ahead in trying to determine how recent tax reforms may impact their growth. Donors

may give less if their tax deductions are less valuable than in the prior year. While

nonprofits can point to a strong economy, they must

also consider the impact a major global event, such

as tensions with North Korea or a large natural disaster or tragedy like Las Vegas, may

have on deterring or spiking giving.


2. What are your top five financial priorities in the upcoming year?

Organizations are prioritizing fundraising and several aspects of operational efficiency for 2018.

Nonprofits are built around their missions and must be supported by the right revenue streams and

expense models, which together produce an integrated enterprise model. Recognizing the need to

reduce the overall cost of finance means nonprofits will have to work hard to boost the productivity

of core transaction processing. Automating routine transaction processing in accounts payable,

accounts receivable, and general accounting can contribute to lowering costs. In addition, experts

agree that simplifying the resource-planning environment and reducing disparate vendors and software

occurrences will help allow for effective standardization and automation of key business processes.

55.8%

29.3%

38.9%

39.3%

43.1%

Expand fundraising and development

Implement operational efficiencies

Reduce operational costs

Rethink revenue model andincome generation strategies Improve program results and metrics

Improve business process automation

Develop dashboards, KPIs, and trends analysis reports

Improve cash flow

Manage reserves and investments

Automate fiscal controls and systems

Improve accuracy of financial reporting

Access financing to grow operations

Implement new financial management systems

Access financing to maintain operations

Other

Don't know/None

Staff development

Member recruitment

New payroll system

Implement project management systems

25.8%

15.5%

16.2%

19.6%

25.5%

11%

3.8%

7.9%

9.6%

2.1%

1.4%

1%

.7%

60%

.3%0% 10% 20% 30% 40% 50% 60%


3. Describe your top financial challenge.

Growth is a constant focus for nonprofit leadership. A 2016 Stanford Social Innovation Review

found three common attributes among nonprofits that were able to efficiently transition from idea

to a $2 million budget: strong teamwork, an effective outcome evaluation system, and access to

capital. These are aspects nonprofits can focus on to develop a performance-driven culture.

Fundraising efforts will also require a new focus by nonprofits in the upcoming year. According to

experts, new donors are taking many forms. Many are putting assets into donor-advised funds at

a record pace, some are completely new to charitable giving and are reacting to the political

environment, others are tech savvy and drawn to nonprofits that appeal for support as “investments.”

Development/Growth/Revenue/Cash Flow

Fundraising

Other

Funding/Donors

Government Regulations/Uncertainties

Budget/Forecasts

Operational Costs

Reporting

None/Don’t Know

Membership

Reserves

Competition

Infrastructure/Operational Improvements/Changes

Too Much Time on Finances/Books

Automation

System Upgrades/Conversion

Accounting System Efficiencies

New Financial Management System

Financially Secure/Sustainability

New Timekeeping System

22.8%

7.4%

9.1%

11.9%

13%

5.6%

3.2%

3.9%

3.9%

5.3%

2.8%

2%

2.1%

2.5%

1.8%

0% 10% 20% 30% 40%

1.4%

.7%

.7%

.7%

.3%


4. Which accounting system does your organization currently use?

Approximately a quarter of nonprofits surveyed use QuickBooks for their accounting and bookkeeping

needs. QuickBooks is a do-it-yourself accounting software used mostly by small businesses and nonprofits.

For smaller organizations, this is an economical solution to help them manage their nonprofit finances.

Nonprofits must deal with business process differences such as grants vs. endowments vs. contributions,

as well as donor intent and grant restriction mandates. They are also responsible for meeting the reporting

needs of multiple stakeholders including board of directors, donors, and local, state, or federal governments.

Nonprofit accounting requires quite a bit from its system. Cloud-based systems can offer better visibility,

reporting, and dashboard while reducing operational costs.

25.5%

9.7%

11%

12%

13.1%

QuickBooks

Other

Blackbaud Financial Edge

MIP

None/Don’t know

Dynamics GP

Dynamics SL

Intacct

Fund EZ

GMS

Oracle

Banner

Deltek

Internal

MS Excel

Skyward

Lawson

8.2%

2.1%

2.8%

2.8%

5.6%

1.7%

1%

1%

1.4%

.7%

.7%

.7%

0% 10% 20% 30% 40%


5. What best describes your organization’s revenue?

Close to 40% of nonprofit respondents are with small organizations. While all nonprofits

work in the same political and economic environment, these indicators signaled uncertainty

in some respects, yet tended to deliver growth in 2017 for both small and large nonprofits.

38.7%

9.6%

11%

20.6%

20.1%

Under $5 million

$5 million to $9.99 million



Over $50 million

0% 10% 20% 30% 40%


6. What best describes your organization’s type?

Most nonprofits operate as a 501(c)(3). Incorporating in this manner provides organizations

with legitimacy and status. It allows them to capture foundation and government funds that

would otherwise not be available to their organization. Incorporation can also help ensure that

organizations are accountable to their mission and bylaws.

501 (c)(1)

501 (c)(2)

501 (c)(3)

501 (c)(4)

501 (c)(5)

501 (c)(6)

501 (c)(7

501 (c)(8)

Government

Education

Other

81.1%

.6%

1.2%

6.6%

1.7%

.3%

.9%

3.2%

.3%

.9%

3.2%0% 10% 20% 30% 40% 50% 60% 70% 80%


7. Which best describes your organization’s number of FT employees?

The survey reveals that respondents report staffing challenges as an immediate concern in 2018.

Similar findings from the Nonprofit HR’s 2016 Nonprofit Employment Practices Survey found that

the top two biggest challenges for nonprofit employers are being able to pay a competitive

wage and finding qualified staff. Smaller organizations, those with an annual operating budget of

$5 million or under, in particular, lack in this area, with 73% not having a formal recruiting strategy

and 91% not having a formal recruiting budget. Organizations will benefit from talent acquisition

and retention strategies that can stretch training budgets and increase employee engagement.

17.7%

16%

14.8%

12.8%

14.6%

Fewer than 10 employees

10 - 29 employees

30 - 49 employees

50 - 99 employees

100 - 200 employees

Over 200 employees 24.1%0% 10% 20% 30% 40%


8. Which best describes your role within your organization?

Nonprofit leaders must continue to pursue strategic leadership principles to guide their

organizations in 2018 and beyond. A key element in the success of nonprofits is fund

development, which is often the responsibility of executive directors. A strong finance

team allows for the focus to remain on capital, without allowing distractions to take

away from accomplishing their mission.

21.6%

8.7%

11%

11.9%

12.9%

CFO or VP of Finance

Other Directors/VPs

Executive Director

Other

Director of Finance

Controller

Director of Development

COO or Director of Operations

President or CEO

Director Programs/Events

Marketing

Accounting

Director of IT

Board Member/Chief of Staff

HR

7.2%

3.2%

3.5%

4.7%

5.2%

2.6%

1.7%

2%

2.3%

1.5%

0% 10% 20% 30% 40%


Conclusion and Trend Initiatives

Nonprofit organizations have a range of priorities in 2018. Their primary focus looks to expand

fundraising and develop operational efficiencies while reducing operational costs. Organizations

of all sizes will have an opportunity for growth this year and need to raise essential funds through

new and innovative approaches. This survey helps establish four trend initiatives to assist nonprofits

in effectively and efficiently continuing to deliver on their mission.

Increase Fundraising With Crowdfunding and Other Alternative Sources An innovative approach to increase fundraising efforts can begin by attracting donors online

through crowdfunding. This nontraditional method may help to reach what is considered by

many in the philanthropy world as one of the toughest groups to attract for giving, Millennials.

Crowdfunding platforms let nonprofits show their work through individual stories and photos in the

space where young adults occupy most of their time and also taps into their tendency to give to people

rather than organizations. Nonprofits like The American Cancer Society have started with modest

initial goals and believe that lots of small donations can really add up. Crowdfunding is continually

growing; as a report by Massolution estimates that $34 billion was raised through this method in 2015

and is expected to more than double in subsequent years.

Improve Long-Term Financial HealthNonprofits and charity experts are seeing a change in the attitude of grant makers over the past

few years, with foundations increasingly providing support for general operating costs. For many

small nonprofits, having enough cash to cover more than a month or two of operations is a struggle.

This movement requires a shift in thinking and trust on both sides. Truly understanding a nonprofit’s

overhead costs will benefit the overall health and sustainability of the organization. As this movement

progresses forward, it now needs to become the goal of nonprofits to identify their actual costs and

develop budget documents that accurately reflect the full costs of their work.


Develop Talent Acquisition and Retention StrategiesAccording to the U.S. Census Bureau, there are 74.1 million baby boomers born between 1946

and 1964 who are retiring at an average rate of 10,000 individuals every day for the next 15 years.

This presents an enormous opportunity for nonprofits to tap into this abundance of people with vast

experiences and talents who desire meaningful activities. Organizations’ strategic plans for 2018

need to include a goal of implementing a way to best capitalize on the availability of this experienced

and free labor. In addition, nonprofits’ technology priorities must address how to take advantage of

advancements to increase the potential for this generation to volunteer right from their own home.

Nonprofits also will benefit from focusing on retention initiatives. Developing approachable

leadership has been shown to directly correlate with lower turnover. Relationship building

activities can provide key learning opportunities to foster effectiveness related to this goal.

Deliver Data-Driven ResultsNonprofits have an opportunity to transform their organizations by building a culture around using

data. Using data can help drive decisions and improve results. It can provide answers to some of the

most important questions facing nonprofits today, such as which donors are most likely to give to

my organization, which donors are most likely to stop giving to my organization, and which volunteers

or donors are likely to be the best donors in the long-term. An initial goal nonprofit organizations

can make in 2018 toward creating a data-driven fundraising program is investing time to create

healthy data. Identifying key metrics to measure program outcomes and mission success is

the first step toward delivering data-driven results.

Sources: Chronicle of Philanthropy. November 2017. Volume 30, Issue 1.Chronicle of Philanthropy. Data and the Science of Raising Money. September 2016. Volume 28, Issue 11.

Challenges and Priorities for Nonprofit Organizations · Crowdfunding platforms let nonprofits show their work through individual stories and photos in the space where young adults

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