Key Takeaways:
- Charitable nonprofits are facing rising operating costs, volatile markets, and growing uncertainty around charitable giving, foundation funding, and government support.
- Finance committees should stress-test budgets, revisit reserve tiers, and review their Investment Policy Statement in light of current conditions.
- Short-term liquidity and long-term investment discipline both matter. The right balance depends on your organization’s specific circumstances.
- An investment adviser experienced in supporting nonprofits can help your leadership team make informed decisions rather than reactive ones.
This article focuses specifically on charitable nonprofits, foundations, and direct service organizations whose funding depends on donations, grants, and program revenue. If you are a membership-based organization, check out our association-focused article here. For a deeper look at how the conflict is affecting the markets and broader economy, read our most recent economic update surrounding the conflict in Iran from Raffa’s Chief Investment Officer.
What Nonprofit Leaders Should Be Evaluating Right Now
Recent military escalation in the Middle East has disrupted global energy markets and created economic uncertainty that is being felt well beyond the region. Oil prices have risen sharply, gas prices are climbing, and the ripple effects are reaching across the economy, including within the nonprofit sector.
Whether your organization runs on individual donations, foundation grants, government funding, or program fees, the economic pressure is real. Nonprofits that take stock of where they stand now and make thoughtful adjustments will be in a much stronger position than those that wait and react later.
This is not the first time the sector has faced sudden disruption. COVID forced charitable nonprofits to rethink fundraising, program delivery, and financial planning almost overnight. Many organizations came through that period stronger, with better digital tools, more diversified revenue, and a clearer understanding of their financial position. They may have taken steps such as decreasing overhead, improving productivity, improving their event strategy, and forming partnerships. Those lessons and capabilities are assets right now. Organizations that used that period to build stronger financial discipline are better positioned today than those that went back to the way things were before.
Why Nonprofit Funding Is Becoming Less Predictable
The biggest challenge for charitable nonprofits right now is not just that funding may decline, but that it is becoming harder to predict. Donations may shift. Grants may be delayed. Government support may be restructured. When several of those things have the potential to happen at the same time, it changes how your organization needs to plan.
Individual Giving
Individual giving is a real strength for the nonprofit sector, but when household budgets tighten, it is often one of the first areas donors reconsider. Per Giving USA 2025, Americans gave $592.5 billion to charity in 2024, with individuals accounting for about two-thirds of that total.
That generosity is encouraging. Unfortunately, when people are paying more at the gas pump and the grocery store, and when the broader economy feels uncertain, charitable giving can be one of the things that gets reconsidered. Some donors may give less. Others may take longer to decide or become more selective about where their money goes. During periods of humanitarian crisis, giving also tends to shift toward relief-oriented causes, which can draw attention and dollars away from organizations whose missions feel less immediately urgent. This does not mean people stop being generous. It means the competition for their attention and support intensifies, and the organizations that stay visible will be in a stronger position than those that go quiet.
It is also worth paying attention to the shape of your donor base, not just the total. When economic pressure builds, smaller and mid-level donors tend to pull back first, which can leave organizations more dependent on a smaller number of larger gifts. That kind of concentration makes revenue less predictable and more vulnerable to the decisions of a few individuals. If the current economic uncertainty continues over the coming months, organizations that have stayed engaged with their donors and maintained a broad base of support will be better positioned than those that have not.
The good news is that the fundamentals of strong fundraising do not change in uncertain times. Communicating your impact clearly, making it easy to give, and maintaining consistent touchpoints with your donors can make a difference. If your fundraising plan was built before the conflict began, it is worth revisiting those numbers with your finance committee to make sure they still hold.
Foundation & Institutional Funding
Foundation funding is generally more stable in the short term, but it is connected to how the markets are performing, and that connection can show up in future grant cycles. When financial markets are choppy, the value of foundation endowments can be affected, and over time that can influence how much grant funding is available.
If the current volatility continues, some foundations may slow their timelines or become more selective in the quarters ahead. That does not mean funding will disappear. It means planning ahead matters more than usual. Do not assume last year’s funding levels will carry forward automatically.
The best way to stay well-positioned is the same in any environment: maintain strong relationships with your program officers, be clear about the outcomes your organization delivers, and make it easy for funders to see the value of their investment in your work.
Government Grants & Contracts
Federal funding for charitable nonprofits was already under significant pressure before the conflict began. According to the Grassi 2025-26 Nonprofit Leadership Report, more than half of nonprofits depend on federal funding, and among those organizations, significant reductions were reported far more often than increases. Proposed cuts to domestic spending, combined with rising defense costs and deficit concerns, add another layer of uncertainty for organizations that rely on government support.
It is important for nonprofits to begin reducing their reliance on federal funding and to explore other revenue streams. The longer the current fiscal environment persists, the more important that diversification becomes. Either way, it is a good time for your finance committee to look at what happens to your budget if government funding is reduced or delayed, so you have a plan in place before it becomes urgent.
Program Service Fees
Some charitable nonprofits generate revenue through fees for programs like healthcare, education, childcare, or workforce development. When the people and communities you serve are under financial pressure, that revenue can soften at the same time more people are coming through the door.
Organizations that review their fee structures now, whether that means adjusting sliding scales, expanding scholarship or hardship options, or identifying which programs can be partially offset by grant funding, will be better positioned to keep serving their communities without absorbing unsustainable losses. If fee-based revenue is a meaningful part of your budget, this is a good conversation to have with your finance committee sooner rather than later.
When Demand Rises and Resources Do Not
Many charitable nonprofits face a reality that most other organizations do not: when the economy gets harder for the people you serve, more of them show up at your door, at the same time your costs are rising and your funding is under pressure.
This is already happening. Even before the conflict began, eight in ten nonprofits reported cost increases of 13 to 15 percent, well above headline inflation, per the Grassi 2025-26 Nonprofit Leadership Report. If your organization delivers direct services, you may already be seeing the other side of this. When household budgets get tighter and federal assistance programs face uncertainty, more people tend to turn to the organizations in their communities for help. That increased demand, on top of costs that were already rising, is what makes this environment so challenging for charitable nonprofits.
The conflict’s effect on energy prices adds another layer on top of what was already difficult. When fuel costs rise, it shows up across your entire operation. Transportation costs more. Food and supplies cost more. Utilities cost more. For organizations that depend on donated goods or purchased inventory to deliver services, the pressure is not just on the budget. It is on your ability to serve. Food banks may find that donations cover less of what they need. Health organizations may face delays on essential materials. The gap between what your community needs and what your organization can deliver may get harder to close.
Unlike a business that can raise prices, most charitable nonprofits cannot pass those costs along. The communities you serve are often the same ones feeling the squeeze, and the work you do is what helps them get through it.
- Staffing: When the cost of living goes up, your team feels it too. Compensation budgets set before the conflict may not reflect what it takes to keep good people, especially with nonprofit salaries often lagging behind the private sector. Additionally, in an environment where your staff is serving more people under more pressure, burnout becomes a real risk. Losing experienced staff during a difficult period is not just a hiring cost, but a capacity constraint on your ability to deliver on your mission.
- Volunteer engagement: Board members and finance committee volunteers often have demanding professional lives of their own. When their own worlds get busier or more stressful, their bandwidth to serve your organization can shrink.
- Vendor costs: Technology subscriptions, service contracts, and operational supplies may all come up for renewal at higher prices. Reviewing these agreements proactively and identifying cost saving opportunities is better than absorbing increases by default.
Nonprofits navigated a version of this same dynamic during COVID. Demand surged, in-person fundraising vanished, and organizations had to figure out new ways to operate almost overnight. Many came through it stronger. The reserves they built, the revenue they diversified, and the systems they put in place are very helpful during times of economic uncertainty.
Organizations that identify where costs have shifted, evaluate which revenue streams are most at risk, and bring that picture to their finance committee early will have more options. That evaluation naturally leads to the bigger financial questions that follow, including whether your reserve strategy and investment policy still reflect where your organization stands today.
What Finance Committees Should Be Evaluating
For charitable nonprofits, the questions are not just financial, but about whether your organization can continue delivering on its mission. It is an operating environment where funding, demand, and costs are all moving at the same time, often in different directions. Taking a step back to look at the full picture is important, and working with an external advisor experienced in serving nonprofits can add additional insight, a layer of experience, and context.
Stress-Test Your Current Budget
Most charitable nonprofits set their 2026 budgets well before the conflict in Iran took hold. Finance committees should be looking at what happens to the budget under different scenarios: What if operating costs stay elevated? What if fundraising comes in below projections? What if a key grant is delayed? Running through those scenarios now gives you time to adjust before small issues snowball into bigger ones.
Revisit Your Reserve Strategy
If your organization sets aside reserves in different tiers, whether for near-term operations, intermediate needs, or long-term sustainability, this is a good time to check whether those amounts still make sense given where things stand today.
For charitable nonprofits with restricted funds, this gets a little more nuanced. Restricted money cannot be used for general operations, even when cash gets tight, which means your unrestricted reserves are what keep the lights on during rough patches. In uncertain environments, donors and funders sometimes restrict their giving more tightly, earmarking dollars for specific causes or programs. That is understandable, but it creates a tension: the money may be there, just not in the form your organization needs it most. Having a clear picture of how your restricted and unrestricted reserves work together is especially important right now.
If your organization depends on grants, there is also the gap between when a grant is awarded and when the money actually shows up. That timing matters as much as the total dollar amount, because a cash flow gap can force difficult decisions even when funding is technically secured. Making sure your reserves account for that timing is important.
There is no one-size-fits-all answer. The right structure depends on how predictable your revenue is, what expenses are coming up, and how much uncertainty your board is comfortable carrying.
Review Your Investment Policy Statement
Your Investment Policy Statement is the document that guides how your organization invests its reserves. It lays out your goals, how much risk you are comfortable with, how your money should be divided across different types of investments, and how much you need to keep accessible. If it has not been reviewed recently, this is a good time to take another look. The environment may have changed in ways your current policy was not designed for.
An adviser who works regularly with nonprofits can help with that review, bringing perspective on what is happening in the markets alongside an understanding of the realities your organization deals with every day, like grant timing, restricted funds, and the constant balancing act between delivering on your mission and keeping the organization financially healthy.
Stay Invested And Think In Horizons
When markets are volatile, it is natural to want to move everything to cash and wait it out. But pulling out of the market after a decline often means missing the recovery that follows. History shows that some of the best days in the market come right after some of the worst. Selling when things are down locks in losses. Staying invested, or even investing when prices are lower, can put your organization in a stronger position over time.
The more helpful way to think about it is in time horizons.
- What does your organization need in the next 12 months? That money should be kept safe and accessible.
- What about the next three to five years? That may call for a different approach, one that balances some growth with some protection.
- What about the longer term? Those funds should be invested with patience and discipline, even when short-term markets are bumpy.
These are the kinds of decisions where nonprofit-specific financial guidance can make a real difference. At Raffa Investment Advisers, we have spent more than 20 years working alongside nonprofit finance committees and leadership teams, helping organizations think through reserve strategy, investment policy, and the financial decisions that come with moments like this. With more than 174 nonprofit and association clients nationwide, the perspective we bring is shaped by decades of partnership with organizations like yours.
Frequently Asked Questions: Nonprofit Financial Strategy During the Middle East Conflict
How is the Middle East conflict affecting charitable nonprofit finances?
The conflict is creating pressure in several ways at once. Rising energy and commodity prices are pushing up operating costs. Market volatility is affecting investment portfolios. The broader economic uncertainty is making charitable giving, foundation funding, government grants, and program fee revenue all less predictable. For organizations that deliver direct services, the added challenge is that demand tends to go up during economic stress at the same time funding tightens. How much any individual organization feels these effects depends on its revenue mix, cost structure, and reserve position.
Should our nonprofit adjust its investment strategy because of the conflict?
Not necessarily, and not reactively. The instinct to move to cash when markets are volatile is understandable, but it often does more harm than good. Market declines are frequently followed by strong recoveries, and pulling out during a downturn can mean missing those gains. The better approach is to review your Investment Policy Statement with your adviser to make sure your current plan still fits your organization’s needs, goals, and comfort with risk. Your adviser can help you understand the long-term impact any decision may have on your organization.
What should our finance committee be doing right now?
Start by looking at what happens to your budget under different scenarios, such as costs staying elevated, fundraising coming in softer, or a key grant being delayed. Review your reserve structure to make sure the amounts in each tier still make sense, and pay particular attention to how your restricted and unrestricted reserves work together. If your Investment Policy Statement has not been reviewed recently, this is a good time. If you are not already working with an investment adviser who understands nonprofits, consider whether that relationship could strengthen your committee’s ability to navigate what is ahead.
How can charitable nonprofits protect individual giving during economic uncertainty?
Communicate your impact clearly and consistently. Donors who see a direct connection between their contribution and meaningful outcomes are more likely to continue giving, even when their own budgets are tighter. This is also a good time to evaluate whether your fundraising approach offers enough flexibility, including options like recurring giving, donor-advised fund promotion, and targeted campaigns that meet donors where they are. Organizations that stay engaged with their donor base through difficult periods tend to recover faster when things improve.
What does Raffa Investment Advisers do for nonprofits?
Raffa is an investment advisory firm purpose-built to serve nonprofit organizations and associations. We work directly with finance committees and executive leadership on investment policy development, portfolio management, board education, and retirement plan advisory. Our approach is built around the needs of organizations with volunteer boards and staff-led operations. As of December 31, 2025, we were serving 174 nonprofit and association clients nationwide.
Dennis Gogarty, CFP®, AIF®
President & Co-Founder
Dennis Gogarty, CFP®, AIF® is President and Co-Founder of Raffa Investment Advisers, a firm he purpose-built to serve nonprofit organizations and membership associations. For more than 20 years, he has advised nonprofits and associations on fiduciary-focused reserve strategy, investment policy development, asset allocation, and governance best practices. Raffa currently serves more than 174 nonprofit clients nationwide (as of December 31, 2025). Dennis is a frequent speaker for nonprofit and association audiences and has presented for numerous organizations including the Council on Foundations, AICPA, BoardSource, and the American Society of Association Executives (ASAE).
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