2017 was an eventful year for the nonprofit sector. While the number of nonprofits continued to grow, the political environment caused great concern and led to increased giving in certain areas of the sector. Nonprofits were called out for not raising the bar on Board diversity, but continued to be an irreplaceable resource to those in need. It is clear that 2018 will see a continuation of the challenging environment, but I expect the sector will answer, as it always does, with dedication and unparalleled service. Looking ahead, the following are some of the issues and challenges that the sector will face. As a nonprofit leader, be aware of these topics, look for resources to educate your organization and reach out to others in your networks to help prepare.
No issue is as likely to have an immediate impact on nonprofits as the new tax law. It remains to be seen how the new standard deduction will change how individuals contribute. It is clear, however, that nonprofits will need to monitor and engage their donors to reemphasize the value they provide.
Affordable Care Act
While the ACA was not repealed in 2017, several parts of the law were altered and I expect these changes will continue in 2018. The nonprofit sector must prepare to provide services to those people who are left without health care coverage. Those organizations providing health-related services space should be preparing for what could be a rough road ahead.
Donor Advised Funds
Individuals continue to move toward Donor Advised Funds and away from direct contributions. It is unclear if many donors understand the restrictions that DAFs place on their contributions. They are effectively giving up control over their dollars. Donors may not realize that the DAF they select may not fund the nonprofit organizations that they wish to support. In addition, the DAF may place limitations or other restrictions. Nonprofits need to work with DAFs to ensure transparency and make this one of their priority topics for donor outreach.
Undermining of the Johnson Amendment
The repeal of the Johnson Amendment did not happen in 2017. However, it is clear that the current administration does not support the notion that nonprofits should not engage in politics. 2018 will like provide insight into whether or not the government will enforce it. Nonprofits should consider adopting a policy stating they will act in accordance with the Johnson Amendment, even if it is eventually repealed.
The sector came together to challenge the repeal, but it is unclear if donors understand the sector’s urgency on the matter.
Organizations with endowments or other investments need to be aware of this topic. For those unfamiliar with the term, impact investing is simply the concept of investing funds where there is a measurable social benefit along with the financial return. Historically, evidence suggested that these types of investments underperformed traditional investments and had higher risk, but that is changing.
Big Data and Outcomes
More and more data is becoming readily available and nonprofits are going to need to show that their efforts are driving change. The shift from output measurements to outcomes has been going on for a while now, but the addition of increasing amounts of data will accelerate the process.
The continuing growth of the number of nonprofit organizations spreads resources and can cause operational inefficiencies. The result is huge challenges to the sustainability of smaller organizations. Consolidation is a way to build an organization, broaden scope, bring in new resources and take advantage of cost savings. The nonprofit sector will face pressure to continue and accelerate combinations as funders search for ways to show larger impacts.
These are only a few of the topics likely to impact nonprofits in 2018. Nonprofit leaders must take the time to learn about these and other issues impacting their neighborhood in the sector. They then must prioritize and work to realign their organizations to address these issues. The sector must find ways to work together on the larger topics.
What topics are on your radar for 2018? Please share them in the comments section.
I would like to thank all of the dedicated participants of the nonprofit sector for your hard work. Each of you performs miracles on a regular basis and although you do not seek acknowledgement, you certainly deserve it. I also want to thank all of the folks that read and follow the Not for Profit Beyond the Numbers blog, as well as, those who have commented, shared or provided feedback.
Warmest regards, –mike
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For more about the author, follow this link: Michael F. Cade, CPA, CGMA