The COVID-19 pandemic has caused unique challenges for both non-governmental organizations (NGOs) specifically and the broader nonprofit world. Thinking back to February and March 2020, it seemed like the world changed almost overnight. While the world focused on protocols like social distancing and stay-at-home orders, by necessity, NGOs around the world went into overdrive. Though the pandemic disrupted many plans and programs, constituent needs escalated quickly. NGOs quickly shifted priorities and adapted to meet new requirements.
To better understand how COVID-19 issues have impacted nonprofit organizations, Sage Intacct conducted its annual Nonprofit Technology Trends Survey. More than 500 nonprofit finance leaders, including executive directors, CFOs, and CEOs, answered the survey. Their organizations represented various nonprofit classifications, including NGO, human services, education, healthcare, and faith-based organizations.
In this article, we’ll explore similarities and differences between NGOs and the nonprofit industry overall regarding the economic and programmatic impacts of the pandemic and organizations’ responses to rising challenges.
Biggest impacts of COVID-19 at NGOs
When we asked nonprofit leaders to list the five biggest impacts of COVID-19 on their organizations, NGOs and other nonprofits place COVID-related program disruptions in the top position. Shifting to remote work and still finding ways to innovate in a virtual environment were also top challenges. Organizations had to find ways to decrease in-person services, including delivering as many programs virtually as possible.
As you can see in the comparison chart below, NGOs had most of the same struggles experienced by the nonprofit industry in general. However, a couple of differences stood out. First, NGOs were more impacted by a loss of volunteers during the pandemic. And while 40% of organizations surveyed noted decreases in funding as a ‘Top 5’ challenge, it did not make the cut amongst NGOs, which experienced much more reliable funding throughout 2020.
Funding and donors
Across many subsectors of the nonprofit industry, revenue declined in 2020. Where 80% of nonprofits overall saw funding hold steady or increase during 2019, nearly 58% of organizations experienced a decrease in funding in 2020. Although funding trends were negative, there were several bright spots—especially for NGOs and international nonprofits.
Many organizations saw increases in government funding and grants from foundations last year. That may help explain why 44% of leaders at NGOs and international nonprofits were able to increase revenue in 2020, compared to just 21% of nonprofit survey respondents overall. In fact, NGOs reported an increase across every area of giving, including foundations, individual donors, corporations, and government. Likewise, NGOs and international organizations were more likely to expand their donor base during the pandemic. Compared to only 27% of overall organizations, 56% of NGOs reported expansion in their donor base.
Programs and services
As need exploded globally during the pandemic, NGOs and international nonprofits saw the greatest demand for programs last year of all the nonprofit classifications. Among nonprofit organizations overall, programs had expanded in 2019 but then declined in 2020.
Nearly half (49%) of all nonprofit organizations saw a decrease in program participation, and four in ten organizations had decreased the number of programs they offered. This isn’t surprising given the challenges of executing traditional in-person programs this year. However, NGOs experienced the opposite effect. By contrast, 56% of NGOs saw an increase in participation in programs and the number of programs.
Shifting technology needs
In many cases, NGOs have experienced challenges that could be overcome more effectively by adopting cloud technology and increasing automation. When asked about the biggest internal frustrations facing their organizations today, NGO finance leaders identified:
- Lack of real-time visibility into key metrics and performance
- Inefficiencies and delays due to multiple, disparate systems
- Concerns and challenges for audit due to COVID-19
- Lack of collaboration between finance and development
- Lack of process automation and organization efficiency
In all these top challenges, you can see a need for greater automation and efficiency within the finance function. The first, second, and fifth frustrations were shared by nonprofit organizations in general and reflect the need to have accurate, up-to-date financial and outcome data that is easily accessible and shareable across the organization.
The third and fourth concerns were unique to the NGO and international organizations. Having a cloud financial management solution could ease the pains of preparing for an audit during COVID-19 and beyond by enabling real-time reporting from programs around the world, tracking features such as audit trails, local currency conversions, and easier consolidations for multi-entity NGOs. Cloud financial management with standard API integration can also increase the communication and collaboration between finance and development by helping both teams visualize the synthesis of financial performance data with funding information.
Conclusion
As we move ahead in pandemic recovery, NGOs have an opportunity to become more resilient for future challenges by embracing digital transformation. Incorporating a modern, true cloud financial management solution into a thoughtfully adopted ecosystem of best-in-class cloud business systems can empower greater efficiency and adaptability. Equipped with real-time data about financial performance, program expenses, constituent need, and outcome metrics, NGO leaders will be able to execute data-driven decisions more quickly the next time a major disruption occurs. For more information, download the 2021 Nonprofit Technology Trends Report.
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