Nonprofit Sector Trends to Watch
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Nonprofit organizations operate to fulfill their missions, benefit the community and serve the public. They are essential for maintaining a thriving society and contribute greatly to health care, higher education, environmental stewardship, human services, religious services, arts and culture, and other vital services.
However, in the months and years ahead, the nonprofit sector could face several challenges posed by industry trends, including economic uncertainty, labor shortages and heightened cybersecurity risks. These factors may lead to a drop in fundraising and rising operational costs.
As such, it’s important for nonprofit organizations to closely monitor these sector concerns and adjust their risk management practices as needed. This article provides more information on nonprofit sector trends to watch.
Economic/Recession Concerns
Numerous nonprofit organizations—especially those in the health and human services sector—experienced an increased demand for their services during the COVID-19 pandemic and may have seen an accompanying surge in federal funding and private donations. However, federal support and other funding streams appear to be tapering off due to concerns about an impending recession and high inflation.
Many economists and business analysts agree that a recession is likely to happen within the next year. As a result, many organizations will be challenged with changing consumer behaviors, increased costs, labor market changes and increased reputational risk. For nonprofit organizations specifically, economic downturns often result in a decline in private contributions from individual, corporate and foundation donors, decreased funding from the government and reduced endowments.
Data from the Chronicle of Philanthropy found that the recent significant reduction in donations may signal serious financial trouble for nonprofit organizations as the recession hits. According to the report, donor numbers fell 7% in the first half of 2022 compared to the first half of 2021, with the number of people making contributions of $100 or less dropping more than 17%. In fact, nonprofits are experiencing compounding donor loss each quarter, and the most significant concern these organizations face is an uncertain economic year.
Since U.S. nonprofit organizations are valuable contributors to society and the economy in general, it’s important they focus on innovative solutions and effective risk management to ensure short-term survival as the economic downturn leads to a loss of funding. Best practices include diversifying funding sources, aligning with partners across the nonprofit sector to maximize the pool of potential donors and developing a communication strategy to reach target audiences.
Labor Shortages
The nonprofit sector has the third-largest workforce in the United States, employing over 12 million people. However, employment fell by 1.6 million during the pandemic and decreased even more during the Great Resignation—an unprecedented mass exit from the workforce spurred by the pandemic. As a result, a tight labor market and a shrinking pool of workers have increased talent competition, leaving many nonprofit organizations understaffed. Since these organizations may struggle to offer competitive salaries and benefits, they often lose employees and candidates to better-paying jobs elsewhere. Even volunteerism remains below pre-pandemic levels—dropping 7% between 2019 and 2021, according to a U.S. Census Bureau and AmeriCorps survey—as people continue to worry about their health, vaccine protocols and sanitation practices.
Inadequate staffing at some nonprofit organizations may lead to delays or a complete loss of needed services, causing the communities they serve to suffer. A survey from the National Council of Nonprofits found that 26% of nonprofit organizations have a waitlist more than a month long, and 21% don’t even have a waitlist because they are currently unable to accept new clients. In addition to issues with providing services, inadequate staffing can lead to financial instability, damaged reputations, data breaches, insufficiently trained staff and board member liability issues.
To attract and retain staff, some nonprofits have started to offer better pay and benefits as well as improved workplace advancement opportunities and flexibility. Many nonprofits are also making an effort to increase the diversity of leadership and staff, which can have a positive impact on employee and client relationships and help attract and retain top talent. Nonprofit insurance coverage—including general liability insurance, commercial property insurance and business income insurance—can also help organizations ensure the continued protection of people and assets while they fulfill their missions.
Heightened Cybersecurity Risks
Cybersecurity risks are becoming increasingly severe, targeted and frequent across all sectors. However, nonprofits are particularly at risk since many organizations don’t have the funding to implement adequate cybersecurity protocols. In addition, nonprofits often collect and store highly valuable information about their clients, donors and employees, making them a prime target for cybercriminals. The shift to remote work during the COVID-19 pandemic also significantly increased exposure to data breaches and cyberattacks for several reasons, including expanded attack surfaces, less oversight by security staff and unsecured hardware and networks.
Unfortunately, the way many nonprofit organizations conduct business makes them vulnerable to cyberattacks. For example, while technology has made it easier to accept donations online, it has also made it easier for cybercriminals to steal from them, especially if the website is unsecured. Technology has also allowed for simpler communication processes, but clicking a bad link, downloading a file or opening a malicious PDF can result in a cybersecurity incident with potentially devastating consequences. And while volunteers may have good intentions for volunteering their time, there may be cybercriminals who slip through quick onboarding processes and leave organizations at risk of a cyberattack.
Since nonprofit organizations tend to operate on a limited budget, investing in robust cybersecurity measures or recovering from a data breach may be more difficult than it is for other organizations. However, many cyberattacks can be prevented by locking down the digital donation system, securing email communications, and obtaining a criminal background check on all staff and volunteers.
Conclusion
Overall, there are several trends currently impacting the nonprofit sector. By staying on top of these developments and taking steps to mitigate their associated exposures, nonprofit organizations can effectively position themselves to maintain long-term growth and operational success.
For additional, industry-specific risk management guidance, contact us today.
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The RISQ RECAP:
May 1st – May 5th, 2023
Each week, you’ll find specially curated news articles to keep you up to date on the ever-evolving world of insurance and risk management. The articles are divided out between items relevant to Property & Casualty, Employee Benefits/Human Resources, and Compliance. We’ve included brief summaries of each item as well as a link to the original articles.
PROPERTY & CASUALTY
Insurance Could and Should Help Drive Gun Safety Efforts, Survey Says
“Three out of four Americans believe gun owners should be required to have firearm liability insurance. Those are the numbers out of a new Value Penguin survey of 1,995 people ages 18 to 77 exploring attitudes about the role insurance could play in reducing gun violence. While some may say that it isn’t the insurance industry’s place to get involved in the country’s ongoing debate about requirements regarding gun control, insurance has long been an instigator and standard bearer when it comes incentivizing and implementing safety measures that protect people and property.” Full Article
– Insurance Journal
EMPLOYEE BENEFITS, HUMAN RESOURCES, & COMPLIANCE
Pay Equity Audits for the Transparency Era “In recent years, workplace pay equity has become a priority for many states and cities, as seen by the growing number of pay transparency laws being implemented across the country. In turn, pay equity has become a critical priority for employers.” Full Article – Akerman LLP
Educate Managers on FMLA/ADA Overlap “Time and again, I see managers conflate the two, and thereby create liability issues for the organization. A recent DOL opinion letter exemplifies how this issue can arise, particularly when an employee requests to limit the employee’s daily work hours.” Full Article – Levy Employment Law, LLC
NLRB Proclaims the Punishment Arrows in its Quiver “If the NLRB finds that you have committed an unfair labor practice (and maybe more than once), just what can it do? In Noah’s Ark Processors, a three-member panel of the board recently took an opportunity to pronounce available punishments for repeat labor offenders, and it was not shy.” Full Article – Bradley Arant Boult Cummings LLP
The EEOC’s “Best Practices” for LGBTQI+ Employment Equity “Sometimes, in addition to the recitation of federal sector cases, the EEOC will include an in-depth article on a particular topic of interest. Although these digests (and the articles they contain) are geared towards the federal government, the EEOC’s approach to certain employment issues can also be helpful for private employers.” Full Article – Shawe Rosenthal LLP
What Tiger Woods’ Foot Can Teach Employers About Managing Employees’ Medical Conditions “Golfing icon Tiger Woods had to withdraw from the Masters tournament in Augusta, Georgia, last week due to a painful foot condition called plantar fasciitis (which causes a stabbing pain in the heel or foot). Video footage showing Tiger limping during his third round of play, after re- aggravating the condition while competing in the tournament.” Full Article – Ford Harrison
EEOC, FTC, and Other Federal Agencies Release Joint Statement on Confronting Bias and Discrimination in AI and Automated Systems “On April 25, 2023, officials from four federal agencies released a joint statement pledging to increase “enforcement efforts to protect the public from bias in automated systems and artificial intelligence” (“AI”). The agencies taking part in this effort include the Equal Employment Opportunity Commission (“EEOC”), the Federal Trade Commission (“FTC”), the U.S. Department of Justice (“DOJ”), and the Consumer Financial Protection Bureau (“CFPB”).” Full Article – Proskauer Rose LLP
STATE & INTERNATIONAL COMPLIANCE
In addition to the RISQ Review, RISQ Consulting also provides a resource that features changes and updates to State and International Compliance measures. We’ve included brief summaries of each item below, and also provided links to the original articles if you’d like to read further.
NEW JERSEY
New Jersey’s Temporary Workers’ Bill of Rights is First in the Nation to Require Equal Pay for Temporary Workers
“This new law, the most expansive of its kind in the nation, provides ‘temporary workers’ with new rights and protections, including the right to receive pay equal to that of regular employees.” Full Article
– Ford Harrison
CALIFORNIA
On-Call/Standby Time: Do We Really Have to Pay Employees When They Are Not Working?
“Disputes regarding whether employees are entitled to be paid for time spent engaged in certain activities are increasingly common, and claims alleging that employees should be paid for time spent ‘on call’ or ‘on standby’ are prime examples.” Full Article
– Hopkins & Carley
California Lawmakers Vote in Favor of Defamation Protection for Sexual Assault Survivors
“Following the #MeToo movement, experts noted an uptick in defamation lawsuits against accusers. These lawsuits are typically brought by the accused and seem aimed at rehabilitating their reputations and, some would say, silencing the victims.” Full Article
– Frankfurt Kurnit Klein & Selz P.C.
INDIANA
Indiana Bans Physician Non-Competes for Primary Care Physicians, Adds Restrictions for Others
“Indiana’s legislature has passed an amendment, Senate Enrolled Act No. 7. Senate Enrolled Act No. 7 would invalidate a significantly broader category of physician non-compete agreements entered into on or after July 1, 2023. Governor Eric Holcomb is expected to sign the bill into law.” Full Article
– Jackson Lewis P.C.
NEW YORK
CLIENT ALERT: New York Department of Labor Finalizes Updates to the State’s Model Sexual Harassment Prevention Policy
“The updated model policy was developed consistent with a law that went into effect on October 9, 2018, which requires New York employers to either adopt and disseminate written sexual harassment prevention policies that meet or exceed the minimum standards set forth in Section 201-G of the New York Labor law or adopt the model policy published by the NYDOL.” Full Article
– Morgan, Brown & Joy LLP
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Mental Health in the Workplace, Part 2
By Alison Nelson, Employee Benefits Account Manager
In case you couldn’t tell from this article I wrote last year, mental health is something I am very passionate about. I aspire to contribute to the destigmatization of mental health, especially in the workplace, in whatever capacity I can. When I recently read this article stating that only 19% of employees used their mental health benefits in 2022, I was saddened, but not shocked by that statistic. The article goes on to say:
“A new report by One Medical and Workplace Intelligence, which surveyed 800 employees and 800 human resources (HR) professionals, found that, not only did over nine in 10 (91%) employees tell surveyors mental health was negatively impacting their productivity, but the usage of benefit offerings already in place by employees was extremely low. Less than a fifth (19%) of employees said they used their mental health care benefits in 2022.”
Why don’t employees utilize their mental health benefits? According to Business Wire, it may be because employees undervalue their mental health and tend to reserve benefits for more urgent needs. In other words, people tend to prioritize their physical health over their mental health. I hypothesize that this is, in part, due to the differentiation between physical healthcare and mental healthcare. They are often discussed as two completely different disciplines, but, in truth, mental health IS health.
According to the Mental Health Foundation, “one in three people with a long-term physical health condition also has a mental health problem, most often depression or anxiety.” Physical health and mental health are two sides of the same coin and should be treated as such. If an employee can call out sick when they have the flu, they should also be able to call out sick due to an anxiety attack.
Employees should be able to take mental health days, and one way an employer can encourage that is by implementing a separate mental health policy. Having a separate bucket of mental health days can help encourage employees to recharge without forcing them to choose between taking a day or powering through a panic attack, just in case they spike a fever and need a sick day down the road.
This survey conducted by Breeze in 2022 indicates a number of interesting things, but most notably:
- 63% of employees have taken a mental health day in the last year
- Nearly half of all people who took a mental health day fibbed to their employer on why they needed the day off out of fear of being judged
- 50% of employees left their jobs in 2021 for mental health reasons, including 68% of millennials and 81% of Gen-Z
Adding a mental health policy to your business’ employee offerings is a great way to support employees and show that you care about their entire wellbeing. There is also the additional benefit that employees who take mental health days are less stressed, which results in long-term productivity. No one should feel embarrassed about taking a mental health day. Having a specific policy in place for mental health is a step in the right direction to end the stigma. Here is a great article that lists some other ways employers can implement a mental health policy to support employees and end the stigma. Remember, mental health IS health.
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Is It a Race? Am I Winning?
By Teri Tibor, Employer Services Account Specialist
I came to a startling revelation this year. I realized that I was sprinting as fast as I could through everything on my to-do list. I don’t mean actually running or speeding, just anxiously rushing through every task I have on a daily basis in an attempt to feel caught up or on top of things. The end result was less like a runner’s high and more like high anxiety.
I noticed that I had little to no memory of what I had done that day and didn’t really get anymore done than I would have if I had approached it at more relaxed pace. I also realized that the people and things that I cared the most about suffered for this.
The consequences of this self-imposed unyielding pace were detrimental. It took a toll on my health and my relationships. I had been living in fight or flight mode for a long time and it was no longer sustainable. 2022 had been a tough year; I lost my oldest friend two months after I started my new job. Then, in the midst of a busy fourth quarter and the holidays, our family had the chance to buy a house and we made the move on Christmas Eve. It was a great opportunity, but not without ample stress.
My typical schedule left no room for rest or relaxation. I have never taken an actual vacation in my entire life. My family and I do go camping in the summer and I liked to think of those trips as mini vacations. Yet, they are just for the weekend and can sometimes feel more stressful than relaxing.
I also realized that I almost never did things for myself. Apparently, they call this self-care. I always had too many other things I deemed more important. You know, the important things in your life like your kids, your family, your pets, your job, your home and all the necessary chores and general upkeep of all the afore mentioned. But just managing these things alone was not leading me down a path I enjoyed. I wanted to do more than just survive as I ran through life.
So, I decided to change directions. It hasn’t been as easy as I hoped to change my outlook and day to day behavior to reach this more enjoyable path, but a new path requires new and healthier habits. I know it will take time like anything worth doing, so for now, I am practicing this strange new concept of self-care. I think of it like buying new sneakers, a fancy water bottle, good athletic shorts, and putting together a rocking playlist. Because if I’m going to be running through life, I might as well enjoy the run.
Here are a few things I found helpful for me:
https://communitychiroak.com/ – I have been seeing Dr. Peter Ryan for 17 years. He is awesome and has saved me from needing spinal surgery.
https://www.chryswell.com/ – Tammy Smith is amazing and has helped me with mind and body healing.
https://solsticebodyworkak.com/ – Jamie Newsom Eaton is wonderful and does lymphatic drainage massage and barefoot massage.
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