Like most corporations, nonprofit organizations face increasing uncertainty in the days ahead. Nonprofits might not have the same direct impact of supply chain challenges caused by a changing tariff landscape, but they still have to grapple with unprecedented challenges and financial pressures.
Federal budget cuts and pauses in funding programs already are having a profound impact on operations. And any nonprofit importing supplies, equipment or materials to support their missions are already facing more immediate operational cost increases.
There are also secondary impacts from vendors passing along cost increases for construction projects and renovations. To top it all off, the National Council of Nonprofits recently conducted a national survey that shows nonprofits simply cannot hire enough employees to provide vital services, creating increased competition and rising salaries, yet another economic pinch on the services nonprofits offer.
According to John Eusanio, who heads up the not-for-profit business sector for Citrin Cooperman, all these issues are sure to have an even greater impact on smaller nonprofits, many of which lack the financial reserves or funding streams of larger organizations. But all nonprofits should start planning now for the uncertainty ahead.
“Organizations providing essential services in healthcare, education, social services and the arts are facing significant reductions in federal support, exceeding 10% in many cases,” said Eusanio. “Consequently, many not-for-profits are now confronted with challenging decisions about which programs to retain and which to scale back.
“Now is the time to re-think and take stock of how you are using your grants or funding,” adds Eusanio. “It’s important to look at your financial statements and programs and dig a little deeper to find out how you are utilizing your revenue streams.”
Enhancing information on Form 990 (tax form) disclosures as well as augmenting statistical data on how your grants are being used can be very helpful.
“The more you can show how you are using funds in a positive way, the easier it will be to retain those funds, or to get funding from other resources,” adds Eusanio.
Or to strengthen old relationships and build new.
“It’s very important to continue to cultivate relationships with donors, assuming you have a nice pipeline of donors to support your mission,” says John Krizansky, a partner with Citrin Cooperman. “They should continue to highlight their mission and its impact on the community.”
When it comes to private donations as opposed to government and grant funding, there has been less of a decrease of funds, adds Krizansky.
“Individuals often believe very strongly in the mission of a nonprofit,” he says. “Many times, they have a reason to donate that is near or dear to their heart. They may have had a family member who was a cancer patient or who needed dialysis from kidney disease. These are people who generally will always support a nonprofit’s mission.”
It helps to look inward for answers, especially when it comes to the talents offered by nonprofit boards.
“Nonprofits should always leverage their board’s expertise,” says Krizansky. “Most have boards that are made up with people who have a nice mix of skill sets; some are financial, some are legal, while some are more strategic or operational. These people should get together and brainstorm to see what might be the best answers moving forward.”
Eusanio sees four emerging strategies that should help nonprofits sustain their missions in the months ahead.
“Many organizations are intensifying their fundraising efforts, particularly by building relationships with individual donors and local foundations that are less impacted by federal policy changes,” he says. “In addition, strategic collaborations are becoming increasingly important, as not-for-profits share administrative resources, combine programs, and even consider mergers to establish more sustainable structures.”
Some organizations are exploring social enterprise models to generate unrestricted revenue that can help offset federal funding losses, Eusanio adds. Digital transformation initiatives are assisting organizations in streamlining administrative functions and reducing overhead costs.
“Concerns about liquidity and long-term sustainability persist due to external actions and pressures,” says Eusanio. “As not-for-profits navigate this evolving landscape, their ability to adapt while upholding their missions will determine not only their survival but also their capacity to continue making a meaningful difference in the communities they serve.”
