The operating environment for nonprofits is undergoing tremendous change. Revenue growth remains strong across the sector, yet the ground beneath organizations is shifting — federal funding policies, indirect cost recovery rules, workforce pressures, and accelerating technology adoption are converging to reshape how nonprofits plan for financial sustainability.
In a recent BDO and Planful webcast, leaders explored these dynamics and demonstrated how organizations can use modern FP&A tools to navigate uncertainty with greater clarity. Combined with insights from BDO’s 2025 Nonprofit Standards Benchmarking Survey, several themes emerge that point to a new era of strategic financial planning for nonprofits.
The Funding Landscape Has Become a Moving Target
One of the biggest disruptions nonprofits must now grapple with is the rapid shift in federal agency guidance on indirect cost rates. Multiple agencies — including NIH, DOE, NSF, and HHS — have attempted to impose or reinterpret indirect rate caps, many of which have been struck down in court or temporarily halted. These reversals create real financial exposure, especially for research-driven and federally funded nonprofits. For example, applying a 15% cap — combined with salary limitations and reclassification of fringe to indirect expenses — can result in large funding gaps. Organizations relying heavily on federal dollars can no longer assume indirect recovery will match their true operating needs.
Scenario planning and proactive risk management is one of the most critical tools nonprofits can use to navigate today’s volatile funding landscape. Even small changes in indirect cost caps, salary limitations, or fringe reclassifications can quickly compound into multimillion-dollar shortfalls — necessitating revenue diversification or cost cutting. Scenario planning allows organizations to model these outcomes in advance, quantify the financial impact, and prepare mitigation strategies, such as diversifying revenue sources, renegotiating indirect rates, or setting aside contingency funds. Static budgets or assumptions can quickly become obsolete in today’s dynamic environment. Adopting dynamic capabilities -that can model different funding levels enables a planning structure that is adaptable based on possible outcomes. By proactively analyzing best-, moderate-, and worst-case funding environments, nonprofit leaders gain the visibility needed to make timely decisions, protect mission-critical programs, and sustain financial health even in the face of external uncertainty.
The survey data from BDO’s 2025 Nonprofit Standards Benchmarking Survey confirms the sector feels these pressures acutely:
- 96% of nonprofits say they have been affected by federal policy changes.
- 46% of grantmakers have already adjusted strategic plans due to federal shifts.
- Public charities overwhelmingly report feeling prepared — but also acknowledge volatility ahead, with 94% responding to federal policy developments.
The message is clear: Nonprofits must actively model federal funding contingencies, monitor indirect cost rates, and diversify revenue streams to remain resilient.
Despite Uncertainty, Nonprofits Are Growing — But With Strategic Intent
Across all subsectors, nonprofit leaders express optimism:
- 86% of nonprofits and 80% of public charities reported revenue increases.
- 78% are experiencing increased demand for services.
- 69% plan to expand program areas in the next 12 months.
At the same time, nonprofits are building resilience by:
- Increasing operating reserves — nearly 46% maintain 4–6 months, and another 40%+ maintain more.
- Diversifying funding: tapping new donors, expanding earned income, and pursuing corporate giving.
But growth requires careful management. It is critical to understand true program costs to identify which offerings generate mission and financial returns — and which drain resources.
BDO’s framework highlights four program categories: mission programs, investing programs, supporting programs, and those requiring reevaluation. Leaders now need real-time insight into where programs fall within this matrix to guide funding requests, donor strategy, and long-term sustainability.
Relationship Between Mission and Finances
Technology and AI Are Becoming Essential to Financial Sustainability
Perhaps the most striking trend across is the acceleration of technology adoption:
- 97% of nonprofits and 92% of public charities report using AI across operations.
- 74% of nonprofits and 64% of public charities plan to increase tech spending.
- Among grantmakers, 80% plan to increase technology investments, prioritizing operational efficiency and program impact.
Yet many finance teams are still stuck in manual processes. As Planful noted in the webinar, over 70% of finance leaders say their teams spend too much time manually consolidating data, and 88% of spreadsheets contain errors. These inefficiencies make real-time forecasting nearly impossible—precisely when rapid scenario modeling is most needed.
Purpose-built FP&A platforms like Planful offer nonprofits the chance to centralize their data, automate reporting, and run dynamic scenario models that respond to the fast-changing federal and economic environment.
Strategic Partnerships Are Rising as a Growth and Risk-Mitigation Tool
Collaboration is becoming a defining strategy:
- 64% of nonprofits expect to pursue partnerships with similar organizations.
- 68% of grantmakers anticipate entering strategic partnerships in the next year.
- Public charities show similar interest, particularly in partnerships with government agencies.
Partnerships allow nonprofits to share resources, expand reach, and access new funding pools — but only if organizations have clear financial models and performance metrics to evaluate alignment and sustainability.
Build a Smarter, More Agile Future
Nonprofits have proven remarkably adaptive, using lessons learned from past crises to strengthen their operations. But agility now depends on the ability to translate complex financial dynamics into confident decisions.
Modern FP&A solutions, like Planful, help bridge that gap.
BDO is a certified Planful implementation partner, bringing extensive nonprofit, grantmaking, and public-sector experience to organizations seeking stronger planning, budgeting, and scenario-modeling capabilities. Together, we help nonprofits build the financial resilience required not only to weather uncertainty — but to advance their missions with clarity and confidence.