Contingency Planning for Not-for-Profits: Operating in Uncertain Times
Mission-driven organizations face a time of unprecedented uncertainty. The attempted federal funding freeze in January 2025, deluge of executive orders, and ongoing examination of federal initiatives have brought contingency planning to the forefront for many not-for-profits that depend on governmental grants and contracts to fund programs and general operations.
Developing a contingency plan can start important conversations among your staff and board and can help prepare your organization for continuity of operations in the event of a crisis.
Your contingency planning should be firmly rooted in your strategic plan to ensure alignment with your organization’s foundational purpose and priorities. Your mission and values will provide a framework for consistent decision-making, especially when unplanned events arise.
Understand Key Risk Areas
For most organizations, the biggest risk area is funding. Other risk areas include program delivery, human capital, governance, or public relations.
You can use a tool such as an enterprise risk assessment or business impact analysis to understand your organization’s specific risks. This work is typically led by a senior management team, but it’s helpful to include staff, board members, and stakeholders in the process to surface external and internal risk factors from many sources.
Once you’ve identified risks, choose those that are most likely to occur and would have the greatest impact on your organization to focus your initial contingency planning phase.
Spend time planning for three to five of the most likely scenarios. Don’t shy away from planning for the worst-case scenario—even if it doesn’t occur, planning for the worst will enable productive responses to less severe events.
Within each of the chosen scenarios, develop strategies to address risks. Strategies may be targeted and operational, or broader and policy oriented.
For each strategy, identify an owner within the staff or board who will be responsible for execution and communication. Some strategies and actions will apply to a specific scenario, while others, such as a crisis communications strategy, will be applicable in all or most scenarios.
Throughout the process, identify which strategies are permanent versus which can be temporary or reversible. Regardless of the scenario, strategies should be informed by the mission and values of your organization.
Contingency Planning Considerations
When undertaking contingency planning, your organization should consider your holistic operations and operating environment. These areas can include but are not limited to the following aspects of your organization.
Programs
Inventory your organization’s current programs and identify those most at risk to external events, those most essential to mission delivery, and those critical to your organization’s overall operating revenue.
Programs supported by dedicated grants or donations may have a different risk profile than those supported by general funds. If specific program-related positions are grant funded, they will be at higher risk than those funded by general operating dollars.
Review your grant agreements and contracts to understand your short- and long-term obligations; many organizations have multi-year delivery agreements. Determine, if a program were to cease operating, what financial or other penalties your organization may be subject to and develop a specific plan for each. You may also want to ask key partners, funders, or grantees about their own contingency plans, and compare your assessment of areas that impact you both.
Finance
Review your organization’s budget to determine your short- and long-term financial obligations including salaries and benefits, lease or mortgage payments, professional services, and insurance. Review your operating reserve policy and determine how much time your organization would be able to operate without funding before you would need to take a contingency action.
As you develop your contingency plan, determine what will trigger each action within a scenario. These will vary based on the risks to your organization, but the level and availability of reserve funding is a key consideration. For example, if an individual program’s funding is suspended, it may be paused immediately or have a wind-down period, depending on funding availability, contract obligations, and program activities. Similarly, one organization may be able to operate for six months without federal funding, while another would see an impact immediately.
Staffing costs are often the largest portion of a not-for-profit’s budget. If funding is reduced or eliminated, consider different financial scenarios including reduced schedules, furloughs, and reductions in headcount. Budget for accrued vacation and sick time, severance pay, and optional services including career counseling.
If dissolution of operations is a potential scenario, recognize that accounting staff, legal staff, or contracted accounting and legal resources will be necessary for some time after program operations are suspended. Your organization will need to file a final Form 990 with the IRS and state-specific reports and filings may be required.
The organization may be subject to audit requirements as well. As part of contingency planning, take time to understand legal, financial, and reporting obligations that would accompany a dissolution scenario.
Human Resources
Understand the risks associated with staff and leadership turnover and identify roles critical to operations. Develop succession plans for key positions—those in executive roles, long-term staff, and sole contributors—to mitigate risk of unexpected turnover and identify the skills and qualifications necessary for operational continuity. Cross-training staff and maintaining updated policies and procedures is important for both succession and contingency planning.
For each scenario, develop a staffing plan that identifies roles critical to operations under that scenario. Identify backups and ensure that procedures are documented and up to date for those roles. Remember to include internal services, such as human resources, finance, IT, and legal in each staffing plan. Consider responsibilities such as signature authority, passwords, and office keys.
Technology
Your core software and hardware systems are critical to day-to-day operations and may be even more important in a crisis. Document your technology tools, assets, and processes, and identify the possible impacts of being denied access to your records or systems.
Cybersecurity is a significant risk to all organizations and should be considered in any risk assessment. Developing business continuity and disaster recovery plans will provide the necessary detail to address the impact of cybersecurity and technology risk.
Risk Management
Consider potential legal costs associated with each risk area or scenario. Review your insurance policies to determine whether coverage is appropriate.
Fundraising and Development
The most effective fiscal risk mitigation strategy is diversifying revenue sources. When an organization or program is dependent on a single source of revenue, it’s at significant risk of disruption and may have to take drastic action if that funding were no longer available.
Executing a fundraising plan that targets diverse revenue sources and unrestricted funds, which allow for flexibility and reallocation if necessary, can help your organization weather a crisis. While developing your contingency scenarios, identify potential alternate funding sources, including emergency funding, that could be used in a crisis.
Communications
Develop a crisis communications plan with both internal and external communications considerations. The plan should lay out clear protocols for who can speak on behalf of the organization, audience-specific communication strategies, and predefined channels for sharing information.
Consider the unique communication requirements of staff, donors, funders, partners, and vendors. The plan should also outline procedures for rapid response, including who’s the final decision-maker on any messaging that goes out, media engagement, internal updates, and a method for internal feedback to ensure transparency and consistency during a crisis.
Governance
In collaboration with your board’s executive committee or an ad-hoc committee, identify the decision points your board will be involved in, and what will be delegated to staff. It may be useful for your board to develop decision guidelines or a set of principles for decision-making should the full board be unable to meet.
Your board members should review and approve the contingency plan and understand their roles and responsibilities under each scenario. You may designate key board members, use an existing board committee, or require full board action for certain items.
Take Action
Once your initial contingency plan is complete, share it with your board and staff. The senior management team should revisit the plan annually, as new risks may emerge or your organization’s risk profile may change.
Depending on your organization’s risk profile and the pace of external change, you may want to review and update the plan more frequently.
We’re Here to Help
To learn more about contingency planning for not-for-profit organizations, contact your Moss Adams professional.