Many Nonprofits Face a Watershed Moment Amid Economic Upheaval
The nonprofit sector is at a key inflection point—facing the conflicting headwinds of increased demand and a depressed economy—according to BDO’s annual Nonprofit Standards benchmarking survey. Now in its fourth year, this survey of over 200 nonprofit leaders features extensive data on the key trends impacting nonprofit organizations, as well as detailed information on nonprofit operations, finances and governance.
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“For those organizations to be able to continue to do their good work, they need to focus not only on mission, but also on ensuring their own financial stability.”
Prior to the emergence of COVID-19, 43% of nonprofits said a potential economic downturn would be a significant challenge in 2020. And, as of May 28, 75% of organizations report being concerned about their own financial health. Facing months and potentially years before the broader economy has fully recovered, this is a crucial time for nonprofits to balance mission with business acumen.
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“There are over 1.5 million nonprofits in the United States, and each has stepped up in its own unique way to help address the unforeseen challenges we’ve faced this year,” said Andrea Wilson, partner and co-leader of BDO’s Nonprofit & Education practice. “For those organizations to be able to continue to do their good work, they need to focus not only on mission, but also on ensuring their own financial stability.”
One key challenge for nonprofit organizations will undoubtedly be maintaining the cash on hand needed to manage uncertain times, particularly if funding is unpredictable. Nearly a third (30%) of nonprofits surveyed have less than 4 months of operating reserves, meaning they could be vulnerable if faced with further funding cuts or unbudgeted costs.
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