Nonprofits face staff and budget shortfalls

Nonprofit organizations are dealing with shortages in both their funds and staffing levels as the impact of the lingering pandemic and surging inflation continues to weigh on donors.

The 2022 State of the Nonprofit Sector report, released Thursday by BKD CPAs & Advisors, polled the leaders of 878 nonprofit organizations and found that 58% of the respondents said their organizations were experiencing a budget shortfall, and 71% said they were hampered by staffing shortages. At the same time, 65% experienced an increase in demand for programs or services, and 77% plan to add new programs and services.

A 78.4% majority of the nonprofits surveyed by BKD indicated they were increasing pay and benefits to attract and retain workers. Nonprofits are also improving workplace diversity, equity and inclusion efforts (71.2%), increasing workplace flexibility (66.8%) and improving internal advancement opportunities (63.6%).

“Like last year’s report, this national study examines critical areas of operation and governance, with a special emphasis on the impact that staffing shortages are having on organizations,” said Dan Prater, senior managing consultant with BKD National Nonprofit Group and lead author of the report, in a statement. “The biggest challenges are overall staffing and capacity.”

A separate survey, released Tuesday by another accounting firm, the CBIZ Marks Paneth Annual Nonprofit Pulse Survey, found that staffing challenges became the most cited threat among 69% of the 69 nonprofit leaders polled. Last year’s survey found budget shortfalls and rising expenses to be the biggest threat, but only 48% of the respondents selected that concern this year. Nearly one-third of respondents (31.3%) cited new funding opportunities as the most significant opportunity for their organization.

The greatest threats cited to their organization were staffing challenges (23.1%), budget shortfalls and rising expenses (15.9%), cash flow challenges (10.8%), and reimbursement rates and schedules (9.7%), while political uncertainty and/or legislative delays, increasing demand for services, and COVID-related issues all tied at 8.2%. However, approximately 25% of the survey participants identified “COVID-related issues” as a significant ongoing threat.

In response to the increasing demands, nonprofit leaders initiated remote staffing, flexible budgeting, virtual and hybrid programming, business continuity planning, cybersecurity and data protection, and online workflow, communications and marketing tools. On the positive side, the Paycheck Protection Program and other government relief helped nonprofits maintain their staffing levels and more, with 38% indicating the forgiveness application is in process or completed. Another 32% said they had no outstanding debt issues. In all, 81.6% of the respondents indicated they are very or somewhat optimistic about the future.

“A lot of what nonprofit leaders did to survive in the last couple of years are changes that will become part of their go-forward operations, like having hybrid in-person virtual events, or leveraging board members and volunteers to fill staffing gaps,” said Hope Goldstein, a managing director at CBIZ who leads CBIZ Marks Paneth’s Nonprofit, Government & Healthcare practice, in a statement.