Navigating Economic Uncertainty: Strategies for Nonprofit Resilience

In this article:

• Evaluating the Donor Base
• Scenario Planning
• Focusing on Essential Programs
• Partnering Strategically
• Keeping Stakeholders Informed
• Deciding With Confidence
• How We Help

Economic volatility threatens not only nonprofit organizations but also the communities they serve. Funding uncertainty may disrupt essential services, particularly for vulnerable populations who rely on healthcare, housing, and social support programs. As costs rise and providers consolidate, access to care may become more limited, leaving individuals and families with fewer options at a time when their needs are growing.

These challenges require nonprofits to reassess strategies and explore new ways to sustain critical programs. Leaders may want to ask: What if key donors shift their giving priorities? Which services are most at risk, and how can we protect those that are essential? Should we reevaluate capital projects and explore alternative funding sources? Could partnerships with peer organizations improve efficiency and expand reach? Addressing these questions now can help safeguard vital services, ensuring that those who depend on them are not left behind.

Evaluating the Donor Base

Nonprofits could transform challenges into opportunities by proactively evaluating their fundraising strategies. Economic downturns often lead to tighter philanthropic giving, with foundations narrowing the scope of grants and individual donors scaling back contributions. Should a significant economic downturn occur, nonprofits may face increased competition for fewer resources. To navigate this, AAFCPAs advises that nonprofits evaluate their donor base and assess the concentration of funding sources. Relying on a small number of major donors creates vulnerability. Diversifying the donor base by seeking new funders, expanding outreach, or launching planned giving campaigns may help offset this risk and provide a more stable financial foundation.

Scenario Planning

As nonprofits work to strengthen their funding base, they should also consider the external factors that could complicate operations. Tariffs, supply chain disruptions, and material shortages, for instance, might further strain finances, especially for those managing capital projects. Increased operational costs coupled with decreasing contributions can create a dual financial burden. This means nonprofits must balance managing short-term expenses with long-term goals. Reassessing capital projects is one possibility.

With rising costs, nonprofits may need to pause or scale back certain initiatives, balancing short-term financial caution with long-term strategic goals. Scenario planning is a crucial tool. Rather than waiting for financial stress to materialize, nonprofits should proactively assess potential vulnerabilities and consider cost-containment measures. In addition, it may be helpful to revisit current cash flow forecasts to consider the impact of potential slowdowns or reductions in payment funding. By forecasting multiple financial outcomes, nonprofits can prepare for various scenarios and turn potential risks into opportunities.

Focusing on Essential Programs

As economic uncertainty affects nonprofit funding, organizations may need to evaluate their programs to identify those most vulnerable to potential cuts in federal and state funding. A thorough assessment of revenue sources and operational expenses is critical to this process. Leaders should prioritize core services that align with their mission and community needs, particularly when resources are limited. In some cases, nonprofits may need to consolidate or reassess non-priority programs to maintain financial stability. In addition to prioritization, nonprofits should explore cost-saving measures that do not compromise essential services.

Partnering Strategically

Economic downturns also present opportunities for collaboration within the nonprofit sector. Organizations facing similar challenges, whether in funding, supply chain disruptions, or regulatory constraints, may be able to pool resources, reduce costs, and enhance efficiency. By forming strategic partnerships, nonprofits can mitigate risks and work toward common goals, strengthening resilience through unity.

Strategic collaborations can also enhance service delivery. For instance, nonprofits serving similar communities can coordinate outreach and programs to avoid duplication, maximizing the impact of resources and boosting their ability to serve constituents.

Keeping Stakeholders Informed

Clear and transparent stakeholder communication including that with staff, donors, board members and volunteers, and the community becomes crucial during periods of financial uncertainty. Keeping stakeholders informed about challenges and your response to them builds trust and garners support for difficult decisions. Focusing on how at-risk programs align with the organization’s mission can help strengthen backing even when tough decisions are necessary.

Deciding With Confidence

Collaboration is essential during periods of uncertainty, but nonprofit leaders must also exercise caution. Economic volatility and policy shifts can generate a great deal of noise, leading to rushed decisions based on unreliable information. Moving too quickly may also result in unfavorable outcomes. It is important to take a step back, evaluate the credibility of sources, and avoid hasty decisions.

Nonprofits should allow time for thorough assessments, as waiting a day or two often provides valuable perspective, especially in rapidly changing circumstances. Trusted financial and legal advisors, government updates, and other established resources can provide the guidance necessary to navigate uncertainty with confidence, ensuring decisions are made based on solid, reliable information.

While economic uncertainty may pose significant challenges, it also presents an opportunity for nonprofits to reimagine their strategies, tap into new resources, and find creative solutions. Through thoughtful planning and a proactive approach, organizations can transform potential obstacles into avenues for growth and long-term success. By embracing a strategic mindset, nonprofits can strengthen their foundation, emerge more resilient, and continue fulfilling their missions with confidence.

How We Help

AAFCPAs provides support to diverse nonprofits in navigating the complexities of financial management, compliance, and operational efficiency.

We provide specialized guidance in areas like grant compliance, funding strategies, financial planning and analysis, data analytics, and cash reserves and endowment management, helping nonprofits maximize resources while maintaining a foundation for long-term sustainability. Our proactive approach to tax-exempt status, board governance, and technical accounting ensures nonprofits remain compliant, minimize risks, and position themselves for future success. Additionally, alongside our extremely deep bench, we have a vast network of nonprofit clients nationwide and across the globe including close connections with banks, attorneys, HR consultants, insurance agencies and other professionals. We can facilitate meaningful introductions as appropriate to create new opportunities for collaboration and growth.

Visit our dedicated resource page for insights, strategies, and updates to help organizations navigate government funding uncertainty. Explore guidance, actionable solutions, and the latest developments affecting your funding landscape.

These insights were contributed by Joyce Ripianzi, CPA, Nonprofit Partner, Outsourced Accounting & Fractional CFO, Matthew Hutt, CPA, CGMA, Partner, and Lauren M. Duplin, CPA, Partner & Consulting CFO. Questions? Reach out to our authors directly or your AAFCPAs partner. Subscribe to get alerts and insights in your inbox.