Report: Nonprofits struggle to meet expectations with staffing shortages and rising costs

More than 90% of nonprofits are spending more on employee salaries, according to a recent report from FORVIS, an accounting firm which released its annual nonprofit study based on data collected from an electronic survey. Despite economic challenges related to investments and outside contributions, more than half of the 195 respondents reported feeling pleased about their organization’s financial status. 

Rising operational costs, wages, and inflation prompted decreases in net income for almost half of nonprofits, though one-third of nonprofits experienced an increase. Inflation also caused returns from investments to decline by over 40%. 

Due to shifts in donor preferences and the economy, human services and religion-related nonprofits reported substantial decreases in financial contributions whereas educational, environmental, and international organizations reported increases. 

Even with this monetary turbulence, the majority of organizations are spending more on employee salaries to resolve staffing issues and compete with other industries. Most nonprofits said they are trying to reduce staff vacancies which create difficulty when executing services and programs. At the same time, to minimize expenses, more than half of nonprofits eliminated or decreased staff positions, staff hours, and programs/services. With higher costs and demand, nonprofits are struggling to meet expectations. 

“Similar challenges and new worries have appeared since last year’s report for nonprofits,” said Dan Prater, senior managing consultant with FORVIS and author of the report. “Although talent acquisition and retention issues remain, concerns surrounding the economic fallout and its impact on program delivery are top of mind.” 

Though last year’s skyrocketing inflation took a toll on nonprofits, continued effects of COVID-19 on the economy and global workforce – as people continue to quit their jobs and change industries – also pose threats to the nonprofit sector. To combat challenges created by remote and hybrid learning like less efficiency from employees, nonprofits reported devoting more time to offering staff technology resources, daily check-ins, WFH training and non-work opportunities. 

Yet, people seem to be adjusting to their new work environments. While 32.7% of respondents noted feeling disengaged during virtual meetings, this more than 20% drop from the previous year is outweighed by those who disagreed with the statement. 

Remote working no longer remains a primary concern as growing operational costs, inflation, and staffing shortages become priorities. FORVIS concluded the report with recommendations for organizations such as incorporating feedback from those being served into plans and using concrete evidence to prove efficiency to stakeholders.