Facing the Fallout: Navigating the Downturns of a Turbulent Economy

Facing the Fallout: Navigating the Downturns of a Turbulent Economy

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In a rollercoaster ride of recent years, not-for-profit organizations have found themselves locked in a ceaseless battle with an unpredictable economy. With charitable contributions on a downswing, a persistent talent drought and supply chain hiccups spawning delays, the not-for-profit sector finds itself grappling with challenges from all directions.

Last year, organizations across the United States experienced a significant tumble in contributions, as revealed by the comprehensive study, Giving USA: The Annual Report on Philanthropy .

Published by The Giving Institute, the report indicated a downturn in individual charitable contributions to an estimated $499.33 billion, representing a 3.4% decline in current dollars and a steeper fall of 10.5% after the inflation adjustment. The 2021 total was $516.65 billion.

The recent wave of economic uncertainty — characterized by stock market volatility, escalating interest rates and rising inflation —appeared to be the prime catalyst for this change in giving behavior. This downturn marks the fourth instance where charitable donations have diminished in the last four decades. It comes after two consecutive years—2020 and 2021 — of elevated philanthropic donations when donors were motivated to help with escalating pandemic needs and further causes focused on fighting racial injustice.

This article will look at the economic factors driving the declining donation trend and delve into two other hurdles — talent scarcity and supply chain disruptions — that the not-for-profit sector continues to grapple with.

Economic Instability Plays a Role

Given that individual donations form the lifeblood of many not-for-profits' funding, the decreased funding is cause for concern. Market forces, such as the 19.4% tumble in the S&P 500 index late last year, the steady ascent of interest rates, and soaring inflation reaching 8 % — the highest in four decades — are likely contributing factors to this downturn.

While the decrease in individual philanthropy paints a stark picture, the recent report did illuminate some bright spots. Giving by foundations and corporations saw a healthy uptick, even though it fell short of outpacing the inflation rate.

Fortunately, many not-for-profit organizations have proven their resiliency in this uncertain economic climate, as seen in the Not-for-Profit Pulse Survey released by CBIZ earlier this year. The findings demonstrated that immediate and long-term strategies for tackling post-pandemic financial difficulties are a top priority for many of these organizations.

Overcoming the Ongoing Talent Crunch

Aside from the unsettling slide in donations, not-for-profits face another formidable challenge: maintaining a robust and efficient workforce. This sector, already wrestling with talent acquisition and retention pre-pandemic, finds itself on an even steeper uphill battle post-pandemic. A wave of employees has chosen not to re-enter the workforce, particularly the not-for-profit arena. A study from Nonprofit HR unveils that nearly half – 45% – of responding not-for-profit employees plan to seek new or alternate employment within the next five years. Alarmingly, almost a quarter of this group asserted they would not pursue further roles in the not-for-profit sector.

To add to the string of challenges, not-for-profits are now weathering a historic drop in volunteerism. According to a recent survey by the U.S. Census Bureau and AmeriCorps, formal volunteer participation plummeted by 7%, from 30.2% to 23.2%, between 2019 and 2021. This marks the most significant decrease since the survey’s inception in 2002. Likely, the current economic turbulence contributes to this volunteering vacuum, further exacerbating the hardships for the not-for-profit sector. As these organizations navigate the turbulent tides of declining donations, staffing struggles, and dwindling volunteer numbers, they must find innovative solutions to sustain their critical work.

To combat the talent issue, not-for-profit organizations may want to consider adopting outsourcing methods, such as freelance contracts, or implementing automation tools.

Grappling With Supply Chain Disruptions

Over the past few years, supply chain disturbances have dealt a heavy blow to not-for-profit organizations, leaving them grappling with various operational challenges. For example, organizations that lean heavily on supplies to drive their operations or those tasked with distributing essentials to their beneficiaries — think food banks or disaster relief agencies — are now contending with precariously stretched budgets as the cost of goods spirals upwards.

There are steps not-for-profits can take to combat supply chain issues now and in the future. They include:

  • Contingency Planning: Develop plans that outline alternative suppliers, cost-effective substitutions for essential goods, and emergency funding sources. This allows organizations to quickly pivot when disruptions occur.
  • Building Strong Relationships with Suppliers: Building a solid relationship with suppliers can be beneficial during disruption. Suppliers may be more likely to prioritize long-term, loyal customers when supplies are limited.
  • Collaboration and Resource Sharing: Partnering with other nonprofits, businesses, or government entities can help share resources and information, mitigate costs, and provide mutual support during disruptions.

For insights into four strategies to bolster your not-for-profit's funding amid declining donations and economic stressors, follow this link.

How CBIZ Can Help

During periods of economic instability, having reliable financial support can be invaluable. If your organization requires assistance, please contact us.

Copyright © 2023, CBIZ, Inc. All rights reserved. Contents of this publication may not be reproduced without the express written consent of CBIZ. This publication is distributed with the understanding that CBIZ is not rendering legal, accounting or other professional advice. The reader is advised to contact a tax professional prior to taking any action based upon this information. CBIZ assumes no liability whatsoever in connection with the use of this information and assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

CBIZ MHM is the brand name for CBIZ MHM, LLC, a national professional services company providing tax, financial advisory and consulting services to individuals, tax-exempt organizations and a wide range of publicly-traded and privately-held companies. CBIZ MHM, LLC is a fully owned subsidiary of CBIZ, Inc. (NYSE: CBZ).

Facing the Fallout: Navigating the Downturns of a Turbulent Economyhttps://www.cbiz.com/Portals/0/Images/Hero-FacingtheFallout.jpg?ver=f7fKc1CXRrH7-uNfzGZQDQ%3d%3dhttps://www.cbiz.com/Portals/0/Images/Thumbnail-FacingtheFallout.jpg?ver=MIbo5PAJ7wqoYHw9Zb7oPw%3d%3dThis article will look at the economic factors driving the declining donation trend and delve into two other hurdles — talent scarcity and supply chain disruptions — that the not-for-profit sector continues to grapple with.2023-07-21T17:00:00-05:00

This article will look at the economic factors driving thedeclining donation trend and delve into two other hurdles — talent scarcity andsupply chain disruptions — that the not-for-profit sector continues to grapplewith.

Planning & Tax MinimizationNot-for-Profit & EducationFinancial Planning & AnalysisRevenue RecognitionYes