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Nonprofit Investing Survey Results: Spending policy trends in 2021

This perspective provides an overview of spending rates and methodologies that nonprofits currently use and key considerations made by investment committees to determine their future spending strategies. With the impact of the COVID-19 pandemic, revenue streams were shut down causing a higher demand for liquidity. Some organizations benefited from their long-term investment pools/endowments and donors graciously stepped up to the plate. 

Our survey responses uncover organization spending strategies.

View the full poll results.

The percentage of organizations that are expecting to increase spending has doubled in the last five years.

In an effort to gauge the spending outlook, we asked each organization if they expected to increase, hold steady or reduce spending in 2021. According to the nonprofits surveyed, most organizations (48%) do not plan on making spending changes. There was a significant increase, however, in the percentage that are evaluating whether the spend rate should be higher, now 38% of the respondents, up from 19% in 2016.

Nonprofits report a broad range of current spending rates.

The range of averages varies by type of organization. Private foundations show the highest average spending rate of 5.59%. Other organizations have average spending rates between 4.08% and 4.93%.

Most nonprofit organizations use one of three strategies to determine their annual spending rate.

FAST FACT: Only one in ten (10%) of those polled said their organization is considering changing the methodology used for their spending policy.

A moving average methodology with three-year smoothing formula is the most popular among survey respondents, but does it mean that it’s the right spending approach for your nonprofit? If your organization reviews its spending policy annually, but has not made a change in more than five years, how do you know when the time is right to adjust your spending? Often, you can answer these questions through an analysis of past and future spending scenarios.

More results from the Nonprofit Investing Survey:

The SEI Nonprofit Management Research Panel completed a comprehensive survey of executives and investment committee members in North America to gauge their views on a numbers of critical components of their organization. The poll was completed by 102 participants, representing nonprofits with endowments ranging in size from $25 million to more than $1 billion. The poll was conducted in January 2021 and will be released in a series of chapters. No clients of SEI were polled.

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Kendra Kaake, CFA, ASA, ACIA, FRM

Director of Investment Strategy