Report: Top Issue Facing Nonprofits
According to a recent BDO report, obtaining funding and complying with government are two of the biggest issues for nonprofits. In an article published by the Journal of Accountancy, author Joseph Radigan examines the results of the BDO’s third annual Nonprofit Standards benchmarking survey.
According to the report, these are the biggest issues for nonprofits:
- Government Regulations & Legislative Changes – Meeting regulatory requirements is a time-consuming undertaking for nonprofits. The challenge only increased with the passage of the 2017 Tax Cuts and Jobs Act, which overhauled the U.S. tax code. The tax legislation included a new excise tax on nonprofit executive compensation, as well as an increase in the standard deduction, which can be a threat to nonprofit funding streams.
- 2008 Financial Crisis – Nonprofits continue to deal with the fallout of the Great Recession in the form of incessant financial pressures. Funding that dried up in the wake of the crisis has been slow to reemerge, and often has yet to reach its previous levels.
- Struggles with Liquidity – The two above-mentioned issues both contribute to an ongoing fight to maintain sufficient cash levels within nonprofits. Many function with insufficient operating reserves, which can work in the short run, but is difficult in the long run.
- Unbalanced Resource Allocation – Many nonprofits are devoting a larger fraction of their resources to services, to the detriment of their operations. This isn’t necessarily their fault—many donations come with restrictions about how and where the money can be spent. Donors often prefer their money to go towards the organization’s mission, rather than important areas such as staff salaries.
For more details, including many statistics from the report, visit the Journal of Accountancy.