With dwindling resources and greater demand for transparency from the Internal Revenue Service and funding sources, nonprofits in New Jersey will need to invest in strategic planning and outsource accounting and technology operations to improve their financial performance in 2012, a nonprofit services executive with The Mercadien Group said.
“One of the things we remind our nonprofit clients of is that nonprofit is a tax status, not a business model, and they need to be making sure that donors and funding sources understand that even though they are a charity, they are still a business,” said Sherise D. Ritter, managing director of Mercadien, who chairs the firm’s nonprofit services group. “No one wants to fund general and administrative expenses, but you can’t have a business without them. A donor to Habitat for Humanity wants to see the whole dollar of every dollar going to building houses, but Habitat for Humanity can’t function without those general departments.”
In Mercadien’s nonprofit outlook survey for 2012, 75 percent of the 92 New Jersey organizations surveyed reported that they expect their net revenue to stay the same or increase — a decrease from 81 percent in 2011. Additionally, 14 percent expect to increase employment this year, while one-third of the 108 business owners polled in Mercadien’s for-profit outlook survey expect to hire more staff.
According to Ritter, projections for flat revenues and employment in the nonprofit sector can be attributed to high turnover rates in top management, restrictive government funding, and increased demand for accountability on IRS forms and from internal board members. In the nonprofit outlook survey, 83 percent of social service sector organizations said they are at risk of losing their top management talent, and 34 percent of respondents receiving government assistance expect a decline in funding — both of which are increases from the 2011 survey.
“Many nonprofits don’t have the resources to find and maintain staff, and they are looking to do more with less, which puts a crunch on their revenue stream,” Ritter said. “Nonprofits can’t run on bookkeepers. They have to pay a CFO-level person to do the finance job, and the pay scale and benefits scale is not comparable to for-profits. They have to do whatever it takes to get the right level of technical skill.”