This article provides an accurate translation with an analytical summary of the main points in the article Grassi Advisors titled:Financial Priorities for Nonprofits in 2026: Aligning Resources with Mission, published on its specialized nonprofit blog.

The aim of publishing this content in The Third Bank | Knowledge Enrichment Encyclopedia for the Nonprofit Sector is to provide the latest global insights on managing the financial priorities of nonprofits, while aligning them as much as possible with the nonprofit sector context in the Arab world. All literary rights are reserved for the author and the original source, and this text is published with a clear intellectual reference to the original article without claiming authorship.

Nonprofits are entering 2026 with a renewed focus on how to allocate and invest their resources in a volatile economic environment, where expenses that once seemed routine, such as expanding programs, developing technical systems, or hiring staff, now need to demonstrate a clear and direct connection to mission outcomes and impact.

Faced with difficult trade-offs about where to direct time, efforts, and resources, many organizations are starting to concentrate on the highest-impact initiatives and retreating from those that do not achieve similar results. By clarifying their financial priorities and enhancing their financial management practices, nonprofits can direct their resources more purposefully, ensuring that every dollar spent ultimately reaches the individuals and communities they serve.

The Main Pressures Shaping Nonprofit Financial Priorities

The Leadership Report in the Nonprofit Sector 2025–2026, a survey of over 200 leaders in this sector, indicates the financial pressures impacting decision-making today. Concerns related to the economy have significantly risen; 44% of leaders expect it to worsen, compared to 28% the previous year.

Nonprofit executives highlighted several challenges reshaping financial priorities:

Rising Costs: Eight out of ten organizations reported increases in costs, ranging from 13–15%, levels that far exceed the inflation rate of 2.9%.

Funding Volatility: The funding landscape is unstable; 44% of organizations reported increases in funding, while 29% experienced decreases.

Federal Funding Shifts: The majority of organizations (56%) rely on federal funding, with “significant cuts” mentioned nearly twice as often as “significant increases,” complicating budgeting and cash flow management. In this context, leadership teams are re-evaluating how to direct their limited resources and which expense items contribute the most to advancing the mission and achieving impact.

Key Financial Priorities for Nonprofits in 2026

The report outlines the areas that nonprofit leaders are focusing on in response to these challenges and identifies key areas they plan to prioritize in terms of resources and efforts.

The bar graph of the most important financial priorities for nonprofits shows the highest degree of focus directed towards expanding revenue-generating activities, followed by reducing expenses and growing reserves. Conversely, fewer organizations prioritize reducing or increasing debt or relying more on endowment returns.

Expanding revenue-generating activities tops the priorities of nonprofit leaders in 2026, indicating a proactive approach to addressing financial challenges. At the same time, many leaders recognize the importance of managing costs, shifting their focus towards reducing expenses. For many organizations, the most suitable strategy will be a mix of both approaches: balancing cost management with strategic investment in revenue generation and core programs aligned with their mission.

Based on responses from nonprofit leaders and best financial practices, eight strategies emerge that nonprofits should consider when setting their priorities for 2026:

Expanding revenue-generating activities

Nonprofits are working to reduce their reliance on unstable funding sources by aligning their strengths with market and community needs. Partnerships with businesses, expanding the services and products offered, and digital-first initiatives in fundraising help organizations create stable revenue streams that support their core mission-related work.

Reducing expenses through a strategic cost review

Leadership teams are reconsidering how to allocate their limited resources and are working on aligning spending with actual needs. They are conducting thorough reviews of their budgets, identifying areas of expense duplication, and trimming expenditures leftover from past rapid growth phases. Among the key cost items that need to be re-examined are:

Human capital costs: Given that salaries often lag behind private-sector rates, regular reviews of compensation and benefits help balance financial sustainability on one hand and employee well-being and retention on the other, which is a top priority for 62% of leaders.

Facilities and recurring costs: Current expenses, such as utility bills, software subscriptions, and maintenance work, should be evaluated to ensure that resources are used with a clear purpose and at the highest levels of efficiency.

Centrally managed functions: Assessing the potential to integrate some administrative or programmatic functions can reduce duplicated spending, enabling staff to focus more on work directly tied to the mission.

Events: Time, effort, personnel, and budget investments should be directed toward events that yield a clear return, whether through generating revenue, enhancing donor engagement, or achieving measurable community impact.

Growing reserves and strategically using debt

Building a healthy operational reserve (preferably covering three to six months of expenses) is a top priority for many organizations, as it provides a crucial safety barrier in the face of disruptions. Leaders are also engaged in thoughtful discussions about how to use debt strategically to support infrastructure improvements and expand programs that contribute to revenue generation.

Implementing Rolling Forecasts and Scenario Planning

With economic uncertainty ranking high on the list of concerns, rigid annual budgets restrict an organization's ability to respond to changing conditions. Rolling forecasts and scenario planning allow nonprofits to continuously update their assumptions throughout the year, enhancing financial visibility and maintaining an ongoing alignment between resources and priorities.

Enhancing Technical and Data Infrastructure

As organizations seek to expand their capabilities and improve efficiency, 48% are investing in advanced data analytics and artificial intelligence. Integrated systems that automate tasks, enhance data clarity, and support informed decision-making contribute to achieving higher efficiencies, increased productivity, and enhanced organizational capacity to measure and demonstrate impact.

Partnerships and Collaboration to Enhance Efficiency

Organizations are forming partnerships with entities that share their messages or complementary audience segments to reduce overhead costs and expand collective impact, which may include joint program implementation, sharing administrative functions, or collaboratively seeking shared funding opportunities.

Leveraging External Expertise

With 62% of leaders prioritizing talent attraction and retention, outsourcing certain specialized functions like finance, human resources, and IT allows organizations to access top-level expertise without the costs of full-time employment. Fractional CFOs provide high-value guidance in areas such as forecasting, scenario planning, and financial reporting, helping organizations improve their financial discipline and performance.

Benchmarking and Continuous Improvement

More than half of organizations are now using comparative data to assess their effectiveness. Regular reviews of liquidity ratios, reserves, and administrative expense ratios support continuous improvement and help leaders measure progress over time. This commitment to ongoing refinement ensures that financial strategies remain in constant harmony with mission, values, and long-term goals.

Mission-Linked Financial Decision Making

The overarching compass for any nonprofit in its financial priorities should be the principle of alignment: linking what the organization excels at, what provides it with ongoing funding, and what moves its mission forward in the strongest possible way. When every financial decision is seen not as an isolated choice but as part of a continuous process of aligning resources with the mission, nonprofits become better equipped to navigate today’s challenges with confidence, keeping the essence of their work centered around the individuals and communities they serve.

In summary, this reading reveals that financial challenges are not a temporary incidence but a true test of organizations' seriousness in aligning their resources with their mission. Cost management, diversifying revenue sources, building reserves, and investing in data and technology are all tools rather than ends in themselves; their true value emerges when harnessed to serve beneficiaries and maximize impact. Although this text draws on global expertise, the essence of the principles it offers in financial governance, discipline, and foresight is valid for organizations to inspire their systems and policies, and to reconsider their financial priorities as part of their mission strategy, not just a spreadsheet of numbers.

Translated article with modifications from grassiadvisors