The Pentera Blog
What Inflation Means for Nonprofits
Charities and other nonprofits need to prepare for a variety of challenges as inflation reaches levels not seen in the U.S. for more than 40 years.
With consumer prices in the 12 months to April 2022 rising at an annualized rate of more than 8%, charities can anticipate pressure to pay more in salaries and wages as their employees face greater gasoline, housing, and food costs. At the same time, donors, also feeling the pinch of higher prices, may reduce their annual contributions, while others may simply maintain their previous giving levels—not recognizing they are effectively giving less because they are contributing with weaker dollars.
Meanwhile, nonprofits with endowments will need to achieve greater investment returns to keep their portfolio values ahead of inflation. And, if higher interest rates (used to fight inflation) cause a weaker stock market, donors with sizable stock portfolios may feel less wealthy and, as a result, contribute less.
To minimize these effects, nonprofits should waste no time being upfront with prospective donors about the effects of inflation, notes Columbia University's Gregory R. Witkowski, a senior lecturer in nonprofit management. Writing in the Chronicle of Philanthropy, he urges nonprofits to review their standard donation levels, make donors aware that maintaining the same gift level is actually a reduction in support, and highlight areas where they are still meeting needs and those where inflation is causing them to fall short.
