Top Priorities for Nonprofits in 2023
2023 is poised to be a year of both continued uncertainty and opportunities for nonprofits to evolve to meet the ever-changing needs and landscape of the sector and their constituencies. In this article, we explore some of those opportunities that nonprofits might consider in the next eleven months.
Operations, Automation, and Digital Priorities
Nonprofits are continuing to focus on ways to increase efficiencies in their operations and accounting processes. Whether you are looking to modernize your systems, operations, or financial reporting, the right processes for your organization can lead to a more efficient finance department.
Automation and abundant data are radically changing the world, and nonprofits are responding to that challenge. There is a huge opportunity for mission-driven organizations to make better use of their data. From automating manual reporting to technology-enabled workflows to integrating disparate systems, nonprofits should consider replacing obsolete technologies, automating low-value-add activities, and empowering decision makers with higher quality data—faster.
A few digital opportunities nonprofits might consider this year:
- Investing in contemporary technologies. While it may sound like old news, nonprofits are sifting through mountains of data but lacking the systems and people-power to bring it together and into focus. Organizations serious about competing (and collaborating) for the public’s resources, time, and attention will need to get serious about using modern data science and business intelligence tools to bring order to the chaos.
- Using artificial intelligence and machine learning to automate low-value-add activities. New digital tools coupled with an abundance of data means the nonprofit sector is ripe for gains in productivity, efficiency, and opportunity. For example, using natural language processing models in combination with other AI technologies to streamline burdensome tasks, making grant writing more efficient while freeing up team members to focus on more meaningful work.
- Cutting through the reporting clutter. Nonprofit organizations often relate the “healthy tension” between a (usually) more mission-focused executive team and a metrics and quantitative focused board. While healthy, this tension often makes preparing for board meetings overwhelming. Management might spend dozens or hundreds of hours collecting relevant materials into an exhaustive board packet that few read deeply. But there are automation and visualization technologies here to help.
Workforce Development Priorities
A key concern for all organizations—large or small, flush and well-resourced or lean and economical—is workforce development. No matter the product or mission, any organization’s most valuable resource is its people. For nonprofit organizations, this can be especially true: mission engagement, institutional and subject matter knowledge, and cost of replacement are important considerations. Nonprofits need to continue emphasizing their unique value propositions to confront challenges in recruitment and retention as the job market remains competitive. Candidates’ expectations of salary, benefits, and flexibility in schedule and remote/in-office arrangements remain high. Effective use of technology to broaden recruitment reach and improve candidate experience (think customized, immediate communications when someone applies to your job posting) will be increasingly significant. Those organizations that have not adopted modern approaches will be more motivated to evolve. Another trend in recruitment and retention will be creativity and generosity with benefits (from pet insurance to elder care referral resources to greater emphasis on employee wellness).
Training is also core to workforce development, and like all employers, nonprofits will also need to continue prioritizing cybersecurity training to keep staff vigilant about protecting information. 2023 will also see a continued emphasis on the importance of organizational culture and diversity, equity, and inclusion (DEI) practices, as many nonprofits continue to grapple with the intersections between mission, vision, values, community service and engagement, and DEI. Unfortunately, all of these needs require resource investment – time, thought, financial expenditure. And while nonprofit organizations may also be challenged by shrinking resources, donor fatigue, and competition, with a proactive approach to 2023 and beyond, nonprofits will continue to be essential contributors to our world.
Lastly, we expect to see an uptick in organized labor within the millions of individuals powering nonprofits. As organized labor and unionization burgeons across all sectors, we are seeing nonprofit employees join or start unions nationwide, which has an untold number of potential impacts for the sector.
Tax Priorities
As always, nonprofits organizations should be mindful of their tax compliance requirements and opportunities that may arise. Changes in tax legislation, IRS guidance, and tax cases and understanding how those changes impact their own organizations is increasingly important for exempt organizations.
Overlapping with nonprofit organizations’ focus on workforce development, there are some important related tax considerations. For example, nonprofits who have not yet considered if they qualified for the Employee Retention Credit (ERC) should spend the time and resources, whether it is your internal management time or your professional tax service providers, to do a high-level review to see if it is worthwhile to look any further. It’s not too late to claim this lucrative credit. Some organizations have been surprised that they qualified. On the other hand, if nonprofits have taken the ERC, make sure documentation is in order and could withstand IRS scrutiny. The Service has training materials to prepare its employees to perform ERC audits.
Many organizations, to recruit and retain workforce, are offering attractive fringe benefits. Employees love fringe benefits, whether it’s additional education and skill-building, trips, employer-provided vehicles, gift cards, or other types of reimbursements or benefits for them and their families. While the creativity and effort are great and needed in today’s workforce environment, be sure to treat benefits correctly for tax purposes. The last thing an organization needs is to deal with an employment tax problem (or worse) in the future.
Policies and Legislation Priorities
Over the last few years, some significant legislation has been passed that is poised to create many opportunities for the nonprofit community. From the Infrastructure Investment and Jobs Act (IIJA) to the Inflation Reduction Act (IRA), these packages will create many programs and granting opportunities for nonprofits to take advantage of. As mentioned in our Infrastructure Bill and its Support for Schools and Nonprofits blog, the IIJA has many provisions designed to help improve the deteriorating infrastructure of nonprofits and schools. On the other hand, the IRA takes fighting climate change to the next level and impacts many nonprofits, ranging from environmental advocates to facility and transportation heavy nonprofit organizations to nonprofits working with communities disproportionately impacted by climate change. Taking time to follow the agencies tasked with distributing the allocated funding (i.e., Department of Energy or Environmental Protection Agency) to monitor how and when to apply to these newly established programs will be important so that opportunities are not missed. These programs will help nonprofits fund their own programs to capital improvements. In a year of economic uncertainty, it will be important for nonprofits to diversify their revenue streams, and take advantage of granting opportunities that are meaningful and impactful to their mission will help do just that.
Additionally, in 2023, guidance is expected from the IRS on the IRA’s energy tax credits and how nonprofits will be able to claim them. There are also other specialty tax incentive programs that are now applicable to nonprofits, in particular, the 179D Deduction. Taking advantage of these opportunities could have a sizeable impact on nonprofits, especially if any prove to be as successful as the ERC opportunity.
Lastly, the end of the 2022 calendar year saw the passing of the Consolidated Appropriations Act, 2023, which included the SECURE 2.0 Act of 2022. Like the opportunities mentioned above, nonprofits will want to understand the legislation’s intricacies for additional granting and tax solutions as well as how their employees and retirement plans will be impacted by the changes to the U.S. retirement system.
CLA Thought Leadership in the Coming Year
In 2022, our nonprofit team produced more than 55 articles and blog posts, hosted 11 webinars, and presented at many events, all in an effort to share what we see working, new opportunities, and practical tools for our clients and other friends in the nonprofit community. In 2023, we seek to build on that foundation. With more than 75 of our 805 nonprofit professionals engaged in our thought leadership efforts, we are excited to share with you in writing, presentations, and some in-person gatherings in the areas of:
- Financial operations
- Digital
- Compliance (audit and tax)
- Workforce
- Public policy and current events
How CLA Can Help
With one of the largest nonprofit practices in the country, CLA has the deep industry experience, leadership, and knowledge to help nonprofits through the challenges of today and seek opportunities for the future. Reach out if you need help addressing your new year priorities and resolutions.
Authors:
Jen Olivier – Principal
Ben Aase – Principal
Jessica Smith – HRCO Consultant
Laura Kenney – Principal
Kelsey Vatsaas – Principal
Robert Zuengler – Principal
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