As we turn the calendar page from 2022 to 2023, we do so with hopes, aspirations, and resolutions for improvement… this is important as 2023 will require a significant level of innovative thinking, re-evaluation, and change. I’m not going to sugarcoat it; 2023 will come in like a lion… but we may not catch a glimpse of that lamb until 2024. As you read through the pages of our 2023 trend report, you will see a tremendous level of consensus across nonprofit leadership… the nonprofit sector in the post-COVID era will need significant transformation. This is both exciting and scary. For organizations to excel going forward, they will need to do an internal inventory and some introspective analysis to determine if they have the resources and programming to be impactful and relevant.
To be clear, 2023 is not a surprise… it’s not like we turned the corner on 2022 and… oh my God! Where did 2023 come from? No, 2023 is just a natural transition from 2022, which was born from 2021 and prior. Unfortunately, 2023 is when a lot of the balls that we have been juggling over the last three years will come crashing to the ground…
… crash – recession
… crash – a tight labor market
… crash – decreased funding and government cutbacks
… crash – increased risks, regulations, and audit activity
… crash – a leadership shortage
… crash – Polarization and divisiveness
… crash – Global unrest and war
Yes, these are all things that were identified and tracked during 2022; however, unfortunately, the nonprofit sector, as a whole, has not effectively responded to these issues, working in crisis management mode in hopes that the new year would bring clarity and relief. It’s now time for organizational leadership to put the past in the past where it belongs and become more proactive, think differently, and question everything about your agency…
- Are we delivering the right services in the most efficient and impactful way?
- Do we have the right leadership—at all levels—to move the organization forward in these somewhat turbulent times?
- Are we doing all we can for our staff and the individuals we serve?
- Does our model still work? Are there ways we can better diversify our revenue streams?
- Are we effectively communicating with our stakeholders and delivering the appropriate messaging?
- Are we taking advantage of all the opportunities ahead of us?
- Do we effectively understand our risks, and are we taking the necessary steps to mitigate them?
- Are we effectively partnering/collaborating with our partners at all levels… public, private, and nonprofit?
Let’s face it, 2023 will be much like 2022 but without the safety net of CARES Act funding. Nonprofits will need to grapple with challenges:
- An economic downturn/recession that will bring with it additional increases in inflation, interest rates, demand for services, and unemployment, with anticipated corresponding declines in the stock market and funding streams.
- A shortage of leadership at all levels… board, C-suite, and middle management are exacerbated by the lack of appropriate succession planning.
- Increased competition for donations will require agencies to be more strategic in their approach to fundraising and open in their ongoing communication.
- Increased threats from cybersecurity, government audits, compliance matters, and more. This will require nonprofits to assess the various internal and external risks and work with their boards to monitor them. This may necessitate the need for a compliance committee.
- The need to hire and retain quality staff. This will require organizations to rethink traditional staffing models to add more flexibility or different work arrangements (4 days a week), increase benefits and pay, and find ways to provide meaningful experiences for their staff.
- Declining government funding and cutbacks will be back on the table as state and local agencies look to balance budgets in a post-CARES act funding era. As a result, organizations must look for ways to diversify revenue streams to ensure that cutbacks from one agency will not have as devastating an impact. Unfortunately, way too many organizations work off a fixed budget.
- Lack of socialization, increased polarization, equity and inclusion issues, and ongoing divisiveness lead to isolationism, social unrest, bullying, fear, anxiety, and mental health issues. Therefore, nonprofits need to continue to identify ways to bring people together in collaborative processes and provide opportunities for employees and individuals served to work through issues and relieve stress and anxiety positively and constructively.
Organizations need to remember that each challenge brings with it opportunities for growth, progress, and forward movement in unexpected directions. It also brings an opportunity for collaboration and teaming with partners across all sectors.
In the words of Lisa Lewis, founder and executive director of Omnium Circus,
“Our world is constantly in a state of growth and change. We are not who we were two years ago or 50 years ago; there is much more to be done toward the vision of a better world for everyone. With every challenge comes opportunity. Flexibility is key, and never lose sight of your mission. NFPs must stick together, holding each other to our highest selves and create the world we all want to see for ourselves and generations to follow.”
Kenneth R. Cerini, CPA, CFP, FABFA
Managing Partner
Ken is the Managing Partner of Cerini & Associates, LLP and is the executive responsible for the administration of our not-for-profit and educational provider practice groups. In addition to his extensive audit experience, Ken has been directly involved in providing consulting services for nonprofits and educational facilities of all sizes throughout New York State in such areas as cost reporting, financial analysis, Medicaid compliance, government audit representation, rate maximization, board training, budgeting and forecasting, and more.