Building Nonprofit Resilience Through Administrative Spending
Researchers from The Ohio State University and the University of Notre Dame have developed a mathematical model to guide nonprofits on how to divvy up their spending to optimize current performance and future resilience through spending priorities. Although the model takes into account the fact that spending more on core programs generally leads to increased funding, it challenges conventional wisdom that nonprofits should allocate nearly all of their budget to program costs.
Nonprofits often feel pressure from donors and grantmakers to reduce administrative or overhead costs, with some funders even imposing limits in grant agreements. The researchers’ model, however, indicates that new organizations that are operating on small budgets need to spend a larger share of their revenue on administrative costs than larger, more established nonprofits. Such investments lay a solid foundation for long-term resilience and ensure these organizations are better equipped to serve their constituents.
New Features of ProPublica’s Nonprofit Explorer Tool
Journalism nonprofit ProPublica has added new features to its Nonprofit Explorer database. The database includes financial details of every U.S. tax-exempt organization that files annual reports with the IRS. Among other things, Nonprofit Explorer now offers email alerts to users when it publishes more documents on a nonprofit of interest.
The database boasts an improved search function that allows, for example, a user to find only organizations that claim they provide first-class travel or have reported conflicts of interest. It also has indicators to show if a nonprofit operates a school, hospital or donor-advised fund, or provides certain benefits to executives. And it now offers charts of revenue, expenses, and assets and liabilities, providing a snapshot of a nonprofit’s activities and health over time.
Report Waves Red Flags for Nonprofit Sector
Independent Sector’s latest “Health of the U.S. Nonprofit Sector Annual Review” report contains findings suggesting that the nonprofit sector’s future could be in jeopardy if changes aren’t made. For instance, although nonprofits contributed $1.4 trillion to the economy in 2022, their employees are financially stressed. Twenty percent of nonprofit workers struggled to afford basic necessities in 2021, and high rates of burnout — especially for women — and workforce shortages persist.
In addition, only 52% of the U.S. public reported trusting nonprofits in 2023, down 7% from 2020. According to Independent Sector, this decline, combined with a 10% drop in donors in 2022, shows that people are disengaging from nonprofits. Moreover, low levels of advocacy and lobbying activity make it more difficult to successfully address issues undermining nonprofit health.
