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Running on Reserves: Four Moves Nonprofits Should Make Before 2027

Writer: Andre P. Llewellyn
Andre P. Llewellyn
6m
7 min read

A practical framework for the final quarter of 2026: protecting mission, money and people as nonprofits plan for the year ahead.


Introduction

As 2026 draws to a close, nonprofit leaders are building budgets, renewing contracts and setting priorities for 2027. At the center of those conversations is a difficult question: how do you plan for the year ahead when you cannot rely on the next quarter?


Last year, I watched nonprofit organizations navigate what felt like a landscape without landmarks. Leaders were trying to make sense of shifting federal priorities, determine which programs might be affected by funding reductions, and make decisions about the future with very little visibility into what was coming next.


A year later, the initial disruption has evolved into a more persistent organizational challenge in which nonprofits are turning more heavily to their reserves. Those funded largely through state and city contracts are typically reimbursed only for allowable costs, which leaves little room to build a surplus. Their reserves are more likely to be unrestricted donations, a line of credit or cash stretched between delayed reimbursements. Whatever form they take, nonprofits are drawing on them to maintain operations, postponing hiring decisions, reconsidering programs and asking already-stretched employees to absorb additional responsibilities.


While reserves can provide temporary financial flexibility, they cannot compensate indefinitely for structural funding challenges, federal or state financial contraction, or an operating model that is no longer aligned with available resources.


This distinction matters. The organizations best positioned to navigate this environment will not be those focused solely on surviving the immediate disruption. They will be those willing to reassess how they operate, where they invest and how they sustain their mission within changing financial realities. In this article, I explore four strategic moves nonprofit leaders can make in the final quarter of 2026 to protect their mission, financial stability and organizational capacity going into 2027.


The Reality: When Reserves Become an Operating Strategy


The financial pressures facing nonprofits are not simply anecdotal. The Center for Effective Philanthropy's (CEP) State of Nonprofits 2026 reports that 39% of nonprofit CEOs ended their most recent fiscal year with a deficit, compared with 22% in 2022.


Source: Center for Effective Philanthropy, State of Nonprofits 2026, Fig. 7 (380 nonprofit CEOs surveyed February 2026)


The implications extend well beyond the balance sheet:


  • Foundation funding is tighter. Almost 60% of CEOs say foundation grants have been harder to secure since January 2025, and 44% report reduced foundation funding (CEP, 2026, pp. 16–17).

  • Government funding is a single point of failure. Candid estimates that 14,015 nonprofits could run out of cash within three months if government grants stopped, putting nearly 2.8 million jobs at risk.

  • The workforce is absorbing the shock. Nonprofits cut 28,696 jobs in 2025, more than five times the 5,640 cut in 2024, according to Challenger, Gray & Christmas data reported by Wiss.


The organizational response is equally telling. According to CEP, 88% of CEOs are pursuing new funding sources, 44% are considering using reserves, and 34% are considering reductions in programs or services. Each response is understandable. Without a broader strategy, however, they become what I described in Beyond Workarounds as improvisational operations: short-term adjustments that, over time, become embedded in organizational culture and gradually erode capacity.


Therefore, a crucial challenge is not simply finding new funding. It is determining whether the existing operating model remains viable.


Four Moves to Make Before 2027


1. Understand Your Financial Runway


On a flight to Atlanta this summer, our plane sat on the runway while crews worked through a mechanical issue, and passengers were invited to deplane if it could not be resolved. Most travelers can now relate to that experience: taxiing, waiting and not knowing whether the plane will take off. Many nonprofits are sitting on that same runway, and the most important question is how long they can remain there.


Knowing your current financial position is important. Understanding how long that position can sustain operations is even more important. Most fiscal managers can project spending based on budget actuals. Fewer can articulate how many months of operations those funds represent, either because reporting lags behind spending or because of a disconnect between program leaders and the fiscal team. In many agencies, directors and program administrators manage program expenses, such as supplies, participant incentives and events, in a silo, without consistent review of actuals or joint planning with the fiscal or grants manager. Even fewer can measure what the loss of their largest grant would mean for continuity, hiring and program costs.


The executive director and the fiscal or grants manager, working with program leaders, should start by calculating available operating cash by funding source and identifying areas of disproportionate dependence. Then develop three scenarios:


  • The anticipated operating budget

  • A partial reduction or interruption in government funding

  • The loss of the largest single funding source


Each scenario should also map the year's potholes: the drop-off points where cash typically dips, such as grant end dates, gaps between contract renewals and delayed reimbursements. Program leaders are often the first to see these coming, which is why they belong in the conversation.


Equally important is establishing predetermined thresholds. At what point should leadership initiate a hiring pause, reassess program expenditures or convene the board? Decisions made before financial pressures become acute are more deliberate, and far easier to implement thoughtfully.


Takeaway: Before January, develop a one-page runway dashboard and commit to reviewing it monthly in 2027 with leadership and the board's finance committee.


2. Reassess How Programs Are Funded and Delivered


One of the most difficult responsibilities of leadership is deciding how to sustain programs when resources become constrained. For many nonprofits, the question is no longer which programs to cut. Most programs meet real needs in the community, and government funders have already reduced support for essential and non-essential services alike. Where further reductions are unavoidable, and CEP finds one in three CEOs is considering them, across-the-board cuts distribute the loss without regard to each program's importance, effectiveness or sustainability.


A more practical approach shifts the question from what to eliminate to how each program can be sustained. Rather than ranking programs by importance, leaders can prioritize by risk. Two questions guide that assessment: how secure is the program's funding, and what does it cost to sustain?


Maximum LEAP program triage matrix


Programs with at-risk funding and higher costs require attention first; leaders should prepare contingency plans or explore partnerships before a disruption occurs. At-risk programs with lower costs are strong candidates for diversified funding. Stable but costly programs warrant a review of efficiencies, while stable, lower-cost programs should be maintained well.


Takeaway: Complete a program-level assessment with leadership and the board as part of 2027 budget planning, focused on how each program can be funded and delivered, before making significant reductions.


3. Diversify Funding With Greater Intentionality


The fact that 88% of CEOs are pursuing new funding sources reflects an understandable response to uncertainty. However, diversification should involve more than a treasure hunt on Grants.gov or a proposal marathon with no finish line. Pursuing every request for proposals creates administrative demands, redirects staff attention and can introduce funding relationships that do not support long-term objectives.


Effective diversification is deliberate. Three approaches help leaders build a funding base that is both broader and more stable:


  • Strengthen existing relationships. Share your runway with current funders and ask for multiyear or general operating support.

  • Build revenue within your control. Fee-for-service contracts, training and individual giving take time to build but are less exposed to policy changes.

  • Share the load. Alliances, shared back-office services and joint applications, explored in Beyond Workarounds, reduce costs and strengthen your case to funders.


Each of these approaches answers the same test: does a new source of funding strengthen the organization's position, or does it simply add administrative complexity? A funding base built on fit, flexibility and partnership will withstand the next disruption far better than one built on volume alone.


Takeaway: Build the 2027 funding calendar by ranking opportunities by mission alignment, financial potential and time to secure, and establish clear priorities rather than pursuing every opportunity.


4. Recognize That Organizational Capacity Includes People


“The first responsibility of a leader is to define reality. The last is to say thank you. In between, the leader is a servant.” — Max De Pree, Leadership Is an Art

Financial pressures rarely remain confined to budgets. They eventually influence workplace culture, employee morale and the capacity to deliver consistent services. CEP reports that one in four CEOs believes burnout is significantly affecting their staff, up from 17% the previous year, while 46% now describe their own burnout as a very significant concern. This creates an important leadership consideration: maintaining operations is not the same as maintaining organizational capacity.


Several practices become particularly important during periods of uncertainty:


  • Tell the truth early. A short monthly update on runway, decisions and what is ahead builds more trust than silence followed by surprises.

  • Cut work, not just positions. When a role is eliminated, retire the reports, meetings and tasks that came with it.

  • Use automation to protect capacity. Documentation, scheduling and reporting are where technology returns the most time, as I discussed in Human Services & AI Adoption.

  • Support leadership capacity. Executive coaching, peer networks and engaged board members give leaders space to process difficult decisions and sustain sound judgment.


Uncertainty about funding timelines makes communication all the more important, because organizational capacity ultimately rests on people choosing to stay. When a funder delays its renewal decision until after the new grant year has begun, leaders who share what they know, and what they do not with their team, treat staff as partners rather than bystanders. That transparency allows employees to make informed decisions about their careers, and it is often what keeps experienced staff committed through the wait.


Takeaway: Treat workforce capacity as an organizational priority, and evaluate how each financial decision affects workload, well-being and service delivery.


Conclusion: Entering 2027 With Intention


Running on reserves is not a failure of leadership. In the current funding environment, it is often a responsible decision to maintain operations through unexpected disruption. However, reserves provide time, and what organizations do with that time is what matters.

Understanding financial runway, reassessing program priorities, diversifying funding and protecting workforce capacity are not isolated management activities. They are interconnected elements of a broader organizational strategy.


The organizations best positioned to enter 2027 with confidence will be those willing to distinguish between what they have historically done and what they must be structured to do moving forward. That is the difference between managing through a funding disruption and strategically positioning an organization for what comes next.


Is your organization ready for 2027? Maximum LEAP Consulting works with nonprofit leaders to examine organizational capacity, strengthen operational alignment and develop sustainable approaches to service delivery. Book a free consultation to discuss your 2027 planning and opportunities for strategic realignment.


References


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