Looking Ahead to 2022: Three Keys to Nonprofit Governance Are Essential to Optimize Operations

These are uniquely challenging times for nonprofits. While many are experiencing surging demand for goods and services, their financial outlook is often bleak.

According to one report, nearly three-quarters of nonprofits report declining contributions this year, and half expect to see their year-over-year revenue decline by at least 20 percent. In contrast, only six percent expect giving to increase during that time.

The fallout has been devastating. John Hopkins University reports that 1.6 million nonprofit workers have lost their jobs, forcing them to reduce services and cut programs. As Stephan Cavanaugh, the community development manager for the American Cancer Society, told USA Today, “The pandemic has severely reduced our fundraising revenue and forced us to take significant cost-saving measures.”

Unfortunately, their story is not unique. The Washington Post reports that one-third of nonprofits will close before the pandemic subsides, creating incredible urgency to identify new and better methodologies to maintain funding and preserve service continuity.

Nonprofits can look internally to maximize potential and remain operational during this challenging time, pursuing exemplary governance through transparent expense reporting, asset allocation, and time tracking to demonstrate value at every level.

For nonprofit leaders navigating this difficult season, here are three tips to get started today.

1. Embrace Transparent Expense Reporting

To survive or even thrive, nonprofits must maintain existing fundraising methodologies while incorporating new opportunities into their funding apparatus.

First, nonprofits need to respond to shifting donor trends. For example, according to a report on donor behavior, nearly 70 percent of potential funders require specific insights into a nonprofit’s overhead costs before contributing. Just slightly more donors require a comprehensive understanding of an organization’s impact, underscoring the importance of overhead transparency.

In other words, funders want to know that nonprofits will steward their contributions appropriately. As Nonprofit for Good, a PR consultancy supporting nonprofit donor relations, explains, “Donors come to your nonprofit because they believe in your mission. They stay with you because you prove yourself worthy of their trust and commitment."

Exemplary governance in the form of exceptional time and expense tracking creates a mechanism for donor engagement initiatives, demonstrating accountability, efficiency, and excellence in financial management. More specifically, better time and expense management can convey spending totals, overhead, projections, and staff or volunteer cost and pay equity.

What’s more, government grants provide a significant financial lifeline for nonprofits. Time and expense reporting can help ensure grant eligibility while providing a competitive differentiator among other applicants. Taken together, transparent expense reporting is a powerful tool that positions nonprofits to maximize available funding opportunities.

2. Optimize Asset Allocation

As nonprofits strive to do more with less, generating new efficiencies is a veritable requirement. Of course, it’s easy to conflate “efficiency” with service or personnel drawdowns. Since the stakes for nonprofit work are so high, they will need to pursue efficiencies without compromising outcomes.

In response, a data-driven approach to resource allocation can help ensure that personnel and other resources are effectively deployed.

For instance, organizational drift or expanded spending, two likely pre-pandemic nonprofit realities, can siphon resources without achieving the organization’s most central mission. Exemplary governance will review spending and asset allocation, ensuring that they are aligned with critical priorities.

When resources are limited, nonprofits can remain operational by executing their priorities with pinpoint precisions.

3. Convey Value Through Project Tracking

Potential donors want to know that nonprofits are operating ethically and efficiently, but they are also outcome-driven. To address this priority, many nonprofits go to great lengths to demonstrate value, deploying expert storytelling, intricate data, and forward-thinking business models to attract and retain funders.

Exemplary governance capitalizes on these instincts by harnessing time and expense tracking efforts to quantify efforts and convey investment.

While nonprofit leaders will want to be especially sensitive to the potential ancillary consequences of time tracking initiatives, these efforts can yield valuable insights that can drive decisions, inform donors, and convey value.

An effective pandemic recovery relies, in part, on nonprofits’ critical work. The challenges posed by the pandemic, while unpleasant and problematic, will also shape the sector’s future, forcing nonprofits to evaluate their internal governance and ensuring that they are ready to meet the moment.

As stakeholders, board members, and donors demand more from nonprofits, exemplary governance can play an important role in maintaining operational continuity, enticing new funding, generating new efficiencies, and conveying value in more measurable ways. Simply put, this challenging season is an opportunity for nonprofits to become strong, more resilient organizations capable of effectively serving their constitutions in the months and years ahead.