Eighty-two percent of nonprofits say they’re using artificial intelligence (AI), with financial tasks being the most commonly reported use. This is among the takeaways from the 2024 Nonprofit Standards Benchmarking Survey, conducted by accounting and advisory organization BDO, which takes stock of the finances of the US nonprofit sector and other key trends, including the growing use of AI.
Based on a survey of 250 nonprofits, including foundations, international NGOs, public charities, higher education institutions, and health and human services organizations, the report states that 44 percent of nonprofits surveyed said they use the technology for forecasting, budgeting, and payment automation. The next most common use of AI, cited by 36 percent of nonprofits, was for program optimization and impact assessment.
The use of AI in the nonprofit sector seems to be concentrated on internal administrative tasks.These findings align with the State of Nonprofits 2024, a survey from the Center for Effective Philanthropy (CEP), which finds that “more than half” of nonprofits use AI and that internal productivity is the most common use. CEP’s study also notes that less than 10 percent of nonprofits have official policies around using AI.
While the primary obstacles to AI adoption cited in the Benchmarking Survey are lack of knowledge, infrastructure, and funds, approximately one-third of responses pointed to employee resistance and ethical concerns as barriers. It bears noting that the respondents to the survey were managers, not lower-level employees, who might be more concerned about AI-based job displacement.
The use of AI in the nonprofit sector seems to be concentrated on internal administrative tasks rather than programmatic ones. However, it’s the latter function that generates more enthusiasm among many AI supporters. One recent report on AI and nonprofits identifies uses like real-time tracking of energy consumption and data synthesis to build customized education curriculums in developing countries.
Nonprofits focused on shoring up their finances in 2024.
Deploying these types of tools on a wide scale, however, require considerable financial resources and entail some risk—and this seems unlikely at a time when nonprofits are prioritizing financial stability.
The Nonprofit Sector’s Financial Stability
The survey also provides a picture of what nonprofits are doing to ensure their future financial stability.
Nonprofits focused on shoring up their finances in 2024, prioritizing stability after a rocky few years and an uncertain economic and political road ahead, the survey shows.
The report finds that most nonprofits (52 percent) increased their revenues in their most recent fiscal year. At the same time, one-quarter of nonprofits said their revenues held steady, while 23 percent saw lower revenues.
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This represents a modest improvement from 2023, when 44 percent of nonprofits reported increased revenues. This suggests that revenues are stabilizing somewhat after the volatile years following the initial COVID-19 outbreak. In 2021, several nonprofits reported lower or flat revenues; meanwhile, in 2022, more than three-quarters saw higher revenues.
The more striking shift in 2024 is how nonprofits have built up their budgetary reserves. Sixty-two percent reported having seven or more months of operating reserves, the greatest share with this level of savings since 2018. In the two prior years, nonprofits had operated on thinner margins, with majorities having less than six months of reserves.
These findings are reinforced in the Center for Effective Philanthropy’s State of Nonprofits 2024 report, which finds that two-thirds of nonprofits had at least six months of operating expenses available in the 2024 budget year.
One likely reason for the improved financial health of the nonprofit sector, according to the Benchmarking Survey is a “strong stock market, which may have provided a financial boost to institutional donors and grantmakers that they were able to pass, in part, onto nonprofits” (6).
Nearly three-quarters of nonprofits say they plan to “meaningfully expand or shift the scope of their missions”.
Lower Spending, Expanding Missions
The trend toward shoring up financial reserves is further reflected in a cautious approach to spending among nonprofits in 2024. According to the Benchmarking Survey, fewer organizations increased spending than in 2023 across nearly all areas, from technology to advocacy. The two categories that saw particularly big drops in investment compared to 2023 were advocacy, and fundraising and donor relations.
It’s possible that, after making investments in these areas in recent years, nonprofit leaders are now comfortable with the capacities they have. The lower levels of spending could also reflect continuing uncertainty around the economic and political climate, including a high-stakes presidential election: “Nonprofits may be choosing to hold onto their funds until they have a greater understanding of their organization’s future priorities and how the economic and funding landscape may shift following the presidential election” (18).
Some nonprofits are pivoting toward new programs and talent. These two areas saw an increase in investment compared to 2023, with 52 percent of nonprofits saying they plan to spend more on new programs, and 40 percent of nonprofits saying they spent more on hiring. The latter may reflect an attempt to course-correct after persistent struggles with burnout and hiring in recent years.
Looking ahead, nearly three-quarters of nonprofits (73 percent) say they plan to “meaningfully expand or shift the scope of their missions” in the next 12 months.
