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Not-for-Profit

Quarterly Industry Report

 
Issue: 1/2019

Challenge: Non-Profits Vulnerable to Data Breaches, Study Finds - Many nonprofit organizations lack cybersecurity readiness, according to new research from the Nonprofit Technology Enterprise Network (NTEN) and Microsoft. In their November 2018 "State of Nonprofit Cybersecurity" report, the two organizations surveyed more than 250 US non-profits, and found few are prepared for data large scale data breaches. Some 45% of respondents either don't have a policy to guide the handling of cybersecurity risk, equipment use, and data privacy, or don't know if they have one. Nearly 60% say they provide no cybersecurity training. Some 30% don't have a plan (or aren't aware of one) governing backups for data, hardware, and software. Furthermore, some 68% of nonprofits lack documented policies and procedures to follow after an attack, and another 11% don't know of such policies. In approximately 27% of organizations, IT duties are handled by a less-than-full-time person; another 16% have no one handling IT.

Industry Impact - In order to minimize any damage from a potential data breach, non-profits will need to devote more efforts to cybersecurity readiness, including increasing IT staff, offering cybersecurity training, and instituting plans governing data privacy.

Critical Issues

Dependence on Economic Conditions - Charitable contributions typically shrink in difficult economic times. Donations from individuals, estates, foundations, and corporations in the US reached an all-time high of more than $410 billion in 2017, the fourth year to exceed the previous peak set before the late-2000s recession. Even nonprofits with large endowment funds suffer in down economies, because their investment income depends on the state of the financial markets.

Dependence on Big Donors - Many nonprofits depend on a few major donors for a large share of revenue. Big donors may declare an intent to continue contributions, but few nonprofits have binding contractual assurances. In down economies, some donors who previously had made multi-year promises may be unable to fulfill them when the value of their financial assets declines.

Business Challenges

Recruiting and Retaining Qualified Staff - Barriers to securing key nonprofit leaders include work-life balance concerns, insufficient lifelong earning potential, lack of mentorship and training, and overwhelming fundraising responsibilities. During periods of economic prosperity, nonprofits are likely to experience increased staff turnover.

Competition for Resources - The number of US nonprofit organizations continues to grow as charities respond to a variety of needs caused by humanitarian crises, natural disasters, and disease outbreaks. This proliferation of charities, especially among smaller organizations at the grassroots level, can result in the duplication of services, a drain on individual nonprofits' funding resources, and an increased demand for experienced nonprofit managers and staff.

Seasonal Cash Flow - Many nonprofits raise a majority of their income during the last quarter of the year, when donors are often in a more charitable mood and large donations may be made for tax reasons. Organizations can mitigate this seasonality by boosting fundraising efforts at other times of year.

Business Trends

Public Confidence and Transparency - More nonprofits aim to build public trust by drawing up stiff codes of conduct and appointing ethics officers. Others are creating donors' bills of rights that assure contributors access to information about their finances. Nonprofits are being encouraged to conduct annual ethics audits and are beginning to require CEOs to certify their organizations' annual financial statements.

Purchased Fund-raising Lists - Letter, email, and telephone fundraising campaigns increasingly rely on donor lists bought from other organizations. Large national nonprofits often sell access to their donor lists to smaller nonprofits. Additionally, many nonprofit organizations exchange donor lists with other nonprofits. Brokers and list managers have become sophisticated at building lists that target potential donors according to desirable demographic characteristics.

Charity Gaming - Most states in the US allow nonprofits and charities to raise donations through some form of gambling. Rules can vary from state to state, but in jurisdictions where it is legal charities can run bingo games, pull-tabs, raffles, or even casino-style games such as blackjack and roulette. Success can depend on how well the games are organized and run. Competition from casinos, state lotteries, and other forms of legal gambling can have a negative impact on charitable gaming.

Industry Opportunities

Favorable Demographics - Older people and their estates represent a significant portion of the donor base for many nonprofits. Americans 65 and over are the fastest-growing segment of the population, projected to increase by nearly 50% between 2016 and 2030. Many older Americans have both the inclination and the means to make larger charitable contributions.

Internet Donations - Many nonprofits have made it easy for donors to contribute over secure websites. Consequently, online giving has joined more traditional channels as a mission-critical part of the fundraising mix. Donating online is often more efficient than offline and can help charities reduce administrative costs. Nonprofits seem to have the most success when they combine traditional appeals, such as direct mail, with the option to give electronically.

Social Networking - Some nonprofits are creating and maintaining profiles on online social networking sites to recruit new staff members and volunteers, engage audiences interested in their cause, build supporter lists, and raise money. Some of the most popular social networking sites include Facebook and Twitter. Nonprofits may also use professional online networks, such as LinkedIn, and issues-focused networks, like Change.org.

 

Copyright 2019, Hoover's Inc., All Rights Reserved. This data cannot be copied, sold, or distributed in any manner without the written permission of First Research.

Industry Growth Rating

Demand: Tied to special interest and social service need

Need strong fundraising skills and name recognition

Risk: Economic health affects donation levels

Industry Forecast

Domestic demand for nonprofit institutions is forecast to grow at an annual compounded rate of 4 percent between 2019 and 2023. Data Published: January 2019

Nonprofit Industry Forecast Bar Graph
Not-for-Profit Growth Projection Scale - Medium
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