Nonprofits are built for moments of difficulty.
While the impact of the pandemic, inflation, and revolutions in the labor market, to name a few challenges from recent years, have presented difficulties for many organizations, nonprofits are built for—and often built in response to—difficult times.
Recent challenges may have even sparked positive changes that are beneficial for nonprofits: Nonprofit leaders are seeing increased monetary donations at the foundation and individual levels and a higher level of trust from funders who have increased their provision of multiyear and unrestricted funding, according to the most recent State of Nonprofits report from The Center for Effective Philanthropy (CEP). The survey, fielded at the beginning of 2023, sheds light on emerging trends and gives fellow nonprofit leaders a reason to be optimistic about their budgets for 2024.
Accessibility to funds increases
Healthier-than-expected budgets have held steady for most nonprofits over the last few years (from 2020-2022). The CEP’s 2021 report noted that while nonprofits were negatively impacted by the COVID-19 pandemic, they fared “better through 2020 than their leaders had originally anticipated.”
In fact, the COVID-19 pandemic may have prompted several positive changes from funders, like easier application processes and reduced reporting requirements; as well as increases in unrestricted funding, multiyear contributions, and nonmonetary support.
Don’t be afraid to ask for funding without donor restrictions. It helps to lighten the administrative requirements of tracking that restricted money so you can spend more of your time focusing on your programs.
The latest report, which reflects the 2022 fiscal year, notes that “While some have expressed concern that changes in funder practices would be short-lived, our data indicate continued positive change in relationships between funders and nonprofits.”
In 2022:
- 36% of nonprofit leaders surveyed reported increased monetary contributions from foundations
- 40% of leaders reported an increase in multi-year funding from foundations
- 55% of nonprofits surveyed reported a budget surplus
- 67% reported an increase in the size of monetary contributions from individuals
Nonprofit leaders also reported increased accessibility to funds in 2022:
- 48% reported reduced or removed grant restrictions from foundations
- 52% said there were reduced reporting requirements
- 62% said foundations made the application process easier
In early 2023, when the survey was taken, less than a quarter of respondents (23%) projected a budget deficit for the end of the year. “Despite concerns expressed by some leaders and sector-watchers,” the report notes “our data suggest that nonprofits’ financial performance has been—and is—relatively strong.”
Make the most of your budgets
At Han Group, we exclusively work with nonprofits so we understand their unique financial challenges. In light of these trends that we’ve been seeing, nonprofits have an opportunity to reassess their financial priorities as they develop their relationships with new and existing funders.
For example, don’t be afraid to ask for funding without donor restrictions. This can have several benefits, including directing funds toward any program in need or supporting your organization’s general operations, which can be critical to achieving your nonprofit’s mission. It also helps to lighten the administrative requirements of tracking that restricted money so you can spend more of your time focusing on your programs.
As you create your budgets and plan your donor outreach this year, remember the resilience and adaptability that have characterized the nonprofit sector throughout recent years. The positive trends in funding and donor flexibility are a testament to the vital role nonprofits play in our communities, especially during challenging times.
Embrace these encouraging signs as a call to innovate, to strengthen your mission, and to continue making a profound impact. At Han Group, we are more than just your accounting firm; we are partners in navigating this evolving financial landscape, dedicated to empowering your organization to thrive in 2024 and beyond.
Reach out to Han Group for questions about our work or to submit an RFP.
