Survey of Nonprofits Finds Most Have Seen Increased Revenue

By:
Chris Gaetano
Published Date:
Nov 5, 2019
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A survey of 126 executive and C-level leaders at nonprofit organizations has found that most organizations have higher revenues, but at the same time are gearing up for leaner times. 

According to the survey, conducted by Marks Paneth, 57.7 percent of respondents saw increased revenue this year, as opposed to about 30 percent of respondents last year. In addition, fewer organizations have reported funding losses this year than last, going from 38 to 17 percent. Organizations have also built up resources this year, with 49 percent saying they ended their last fiscal year with a surplus, versus 29 percent that broke even, and 18 percent that ended at a loss. One possible effect of this relative financial health has been less board turnover, with only 7.3 percent reporting that a quarter or more of their board members left the organization versus 33 percent last year, and less staff turnover, with the number of organizations reporting no change in staff levels going from 24 to 67 percent. 

While there is a sense of optimism among nonprofit leaders, according to the survey, it is a cautious one. Marks Paneth said, "it is evident that leaders are focused on planning ahead for potentially leaner times." The report said this is evidenced from 40 percent of nonprofits reporting that finding experienced talent is their top concern, as well as 35 percent saying they are seeking new partnerships with both for- and non-profit organizations to address possible weaknesses in finances, operations or staffing. The poll also noted that leaders are seeking to diversify funding sources, with arrangements such as donor advised-funds and multiyear funding arrangements, as traditional avenues run dry. 

The survey also noted that more than half of organizations are focused on raising more money and continuing to build reserves for what they anticipate as leaner times ahead. Another 35.7 percent are focused on succession planning, and 32.3 percent are conducting risk assessments. 

"Nonprofit organizations surveyed seem to be in a relatively healthy financial and operational condition—right now," said the report. "However, leaders share concerns about replacing lost funding, managing unexpected legislation and developing next-generation leadership. Interestingly, talent is a bigger worry than funding or technology upgrades."

Nonprofits have experienced significant disruption from the Tax Cuts and Jobs Act, which has at least partially contributed to the caution their leaders refer to in the survey. For one, the act increased the standard deduction, which effectively halved the number of people who benefit from charitable deductions. Consequently, the number of donors has dropped by 4.3 percent compared to last year, however the value of those donations has increased by 2.6 percent. While this might seem like a wash, the Journal noted that wealthier donors tend to prefer different types of charities than the middle-income donors who no longer benefit from charitable deductions. 

The act also brought new taxes on certain nonprofits: The TCJA imposes a 21 percent excise tax on nonprofits that pay compensation of $1 million or more to any of their five highest-paid employees, which applies to all forms of remuneration of a covered employee. Along similar lines, the TCJA seems to be harmonizing regulatory treatment between different types of nonprofits, too. Colleges and universities have traditionally been treated like public charities, but a new excise tax imposed on their endowments puts them more in line with private foundations. The new law imposes a new 1.4 percent excise tax on net investment income. 

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