Based on the AICPA Not-for-Profit Section’s May 2026 industry developments webcast, nonprofit leaders are navigating a challenging and fast-changing environment.
The sector remains a critical part of the U.S. economy—nearly 1.9 million nonprofits contribute more than $1.5 trillion annually and employ about 10% of the private-sector workforce—but current economic conditions are prompting boards to take a more cautious approach to planning.
While GDP growth rebounded in early 2026, the webcast noted that much of the increase was driven by temporary factors, including government back-pay following the late-2025 shutdown and continued AI-related activity. Broader consumer demand remains uneven, reinforcing the need for conservative budgeting and ongoing financial monitoring.
Inflation continues to be one of the most immediate pressures. As of April 2026, CPI increased 3.8% year over year, with particularly sharp rises in energy (17.9%) and gasoline (28.4%). For nonprofits, these increases directly impact key areas such as facilities, transportation, food and program delivery. As a result, midyear reforecasting has shifted from a best practice to a critical management tool.
Labor market conditions add another layer of complexity. Unemployment was 4.3% in April, with 115,000 nonfarm jobs added. At the same time, federal government employment has declined by 348,000 jobs since October 2024, and labor force participation remains at 61.8%. Nonprofits continue to compete for talent against higher-paying sectors; however, displaced federal workers may present a valuable opportunity, bringing mission-aligned experience in grants management, policy and program operations.
Federal funding remains a key area of focus for finance committees. Approximately $240 billion in government grants flows to nonprofits each year, more than double the amount of combined foundation giving. Recent disruptions have been significant: by January 2026, 15,887 federal grants totaling approximately $49 billion had been terminated. Additionally, early 2025 survey data indicated that one in three nonprofit service providers experienced funding disruptions, including grant losses, payment freezes or stop-work orders.
Even organizations without direct federal funding are feeling the effects. Increased competition for private funding, combined with reduced agency staffing, is contributing to slower processing times, lost points of contact and delayed payments across the sector.
The overarching theme for 2026 is that nonprofits are not facing a single isolated risk, but rather a convergence of challenges, including economic pressure, funding instability, workforce constraints and legal uncertainty. These factors have direct implications for liquidity, operating reserves, internal controls and overall mission capacity.
In this environment, finance leaders play a critical role in strengthening organizational resilience. Practical steps include developing both base-case and stress-case budgets, making liquidity a standing agenda item for leadership and boards, formalizing reserve policies and proactively documenting key decisions.
For advisors and nonprofit leaders alike, this period presents an opportunity to strengthen planning processes and governance practices. By focusing on clear forecasting, transparent board reporting and strong compliance frameworks, organizations can better navigate uncertainty while continuing to advance their mission.
About Schneider Downs Not-for-Profit Services
Our Not-for-Profit industry group is committed to providing exceptional service and expertise to a community of clients who serve our regions tirelessly each day. We provide valuable insight to not-for-profit organizations of all sizes and their boards through our assurance, tax, advisory and technology consulting services and not-for-profit fund accounting software.
To learn more, visit our Not-for-Profit Industry Group page.
