2018 was a dynamic year for the nonprofit sector. The prophecies of fundraising doom did not immediately come to pass, although negative pressures from 2016’s tax law change are still being realized. The sector continued to focus on mission and finding creative ways to do more with less. We continue to witness the impacts of demographic change as long-standing leaders depart the sector for other pursuits, but organizations continue to function in spite of the number of empty Executive Director seats.
Check out the post from last year 7 Hot Nonprofit Topics for 2018
It is clear that 2019 will see even greater uncertainty as the political landscape returns to a split party congress and the impacts of the 2016 tax changes enter their second year.
The following are some of the challenges that the sector will likely face in 2019 and beyond. Be aware of these topics, educate your organization and Board and reach out to your networks. Identify those that represent a critical threat or major opportunity and prepare.
Slowdown in New Nonprofit Growth
The last few years have seen a surge in the number of new nonprofits and appears that some segments and areas are reaching a saturation point.
The sector is experiencing funding limitations, increasing competition for donations and grants and a decline in qualified nonprofit leaders. 2019 may be the year that these challenges slow or even reverse net growth in nonprofits. Expect an increase in nonprofit failures, consolidations and fewer new nonprofit applications.
Nonprofit Alternatives
Social Enterprise
2019 will likely see an acceleration in alternatives to traditional nonprofit organizations. Social enterprises and organizations such as Benefit Corporations have been advancing the idea that social good and profit can coexist. At a point, acceptance of this concept may lead to a surge in these organizations.
These nonprofit alternatives tend to focus efforts on earned income services. The same types of services that nonprofits are starting to rely on for unrestricted funds to cover overhead and establish reserves.
Non-charity Donations
Another concern is competition from giving platforms with non-charity campaigns, such as GoFundMe. These social media platforms accumulate donations for nonprofits and also for individuals or causes not associated with a nonprofit. Donations to individuals are not tax deductible for the giver and can even be taxable to the recipient, but many of these campaigns have gone viral and raise large amounts.
Decline in Giving Tuesday
While the total amount contributed on Giving Tuesday in 2018 was a record, the increases are likely not sustainable. The event is oversaturated and is becoming dominated by large nonprofits with big social media budgets. Many small to mid-sized nonprofits will not even attempt campaigns. The event is losing (or has lost) its grassroots nature and sooner or later, perhaps in 2019, giving may slow as smaller nonprofits strive to reconnect with donors.
Conversion of Event Givers to Recurring Supporters
Long-term commitment to nonprofit organizations have been declining in favor of cause and event-based. This is partly due to demographics, but social media also plays an important role here. Storytelling and messaging are replacing mission as donor drivers. In 2019 nonprofit leaders need to engage contributors in new ways to help them understand that cause-based giving undermines nonprofit sustainability.
Time to Address Inequity
Nonprofits cannot only serve popular causes and impact inequity is already a serious issue as fundraising is often least successful for issues that impact lower income and minority segments. Funds raised by the nonprofit sector are not going to the most critical and underserved issues.
Social media driven cause and event giving will only worsen the problem. The communities with the direst needs typically do not have social media access and their causes do not translate easily into the new cause and event fundraising model.
As inequity grows, efforts to address the issue will start to take hold, perhaps in 2019.
Impact of Tax Law Changes
As we approach the end of the first full year of the latest tax law questions remain about the impact to contributions by the change in the standard deduction. While that could end up being a huge impact, there are other serious concerns that will start appearing in 2019. Aside from paying taxes on employee benefits like parking and gym memberships, the real tax impact will be on the demand side.
The decrease in the corporate tax rate will trickle down as decreases to federal and state level services. Those changes will result in program cuts and will end up widening gaps currently filled by nonprofits. States will be looking for ways to cut costs, so nonprofits need to engage program leaders, determine where the cuts will come and find ways to prepare.
Liquidity
New accounting rules are putting a spotlight on nonprofits’ health via liquidity. Nonprofits that produce audited financial statements will disclose how the organization maintains adequate cash to fund ongoing operations. The problem is that many nonprofits currently do not maintain adequate cash to fund ongoing operations. While this issue is nothing new and everyone pretty much already knows about it, for the first time it will be written down in publicly available documents.
You can be assured that sooner or later the raters and rankers will get ahold of this information and add it to their calculations.
In 2019, nonprofit leaders need to get very serious about building liquidity in their organizations.
Partisanship
2017 was full of uncertainty driven by political partisanship and 2018 took partisanship to new levels. Well, fasten your seatbelts, because we haven’t seen anything yet. All signs point to 2019 being partisanship on steroids. What that will mean for nonprofits is anyone’s guess, but the magnitude of uncertainty cannot be a good thing.
Bottom Line
These some of the hottest topics that nonprofit leaders should expect in 2019. They must find the time and resources to learn about these critical issues and then prioritize and realign organizations to address them. And if that isn’t enough, there are still the issues from 2018 that have not gone away.
What topics are on your radar for 2019? Please share them in the comments section.
About the author:
Michael F. Cade is an advisor and executive coach, guiding nonprofits to think Beyond the Numbers. He is a leadership pathfinder, helping nonprofits solve problems, optimize operations and execute strategy to attain long-term viability and relevance. His Framework for Fiscal Sustainability is an innovative approach to evaluating organizational health and ensuring ongoing mission success.
Mr. Cade speaks on nonprofit and strategy topics, has authored articles on financial and nonprofit leadership, as well as, guest blogs and podcasts. He publishes the nonprofit leadership blog Not for Profit Beyond the Numbers
If you have questions or would like a consultation on a nonprofit leadership or operational issue, contact him at: mfcade@nfpbeyondthenumbers.com
