Nonprofit organizations are facing a rapidly evolving environment where funding uncertainties, increased service demands, and staffing challenges intersect. 

In light of these trends, BTQ Financial surveyed over 100 nonprofit leaders on the top finance challenges they face, and the strategies that can help address them.

BTQ’s Andrew S. Perumal, Partner and Director of Client Operations, and Sisil John, Senior VP of Finance, sat down to discuss the survey’s findings and highlight how BTQ is working with nonprofits to address and reduce those challenges.

Survey Scope

Nonprofit leaders including CEOs, executive directors, founders, and COOs contributed their insights on critical financial challenges. Annual budgets represented in the survey ranged from $3 million to $200 million.

The survey captured feedback from a diverse range of nonprofits, from small community-based organizations to large national providers.

Despite organizational differences, leaders reported a common set of financial management issues.

The Nonprofit Landscape

Today’s nonprofits navigate a “perfect storm” of rising service demands, funding complexities, and political uncertainties. 

For many, maintaining financial health is a balancing act of mission delivery and risk management.

Key Statistics

• Essential Services: 83% of Americans consider nonprofit services—such as social services, education, and housing—to be essential.
  
• Financial Risk: Between 60%–80% of nonprofits could face serious financial danger if federal grants are disrupted.
  
• Policy & Funding Concerns: 70% of nonprofit leaders worry that the current political climate will negatively affect their organizations.

It’s clear these programs aren’t just “nice-to-have”,  they serve an essential role in their communities. However, the hard truth is that a majority of nonprofits could find themselves at serious financial risk.

Major Financial Management Challenges

Six critical themes emerged from the survey regarding the top financial management hurdles:

1. Financial Sustainability & Risk Management: Leaders need better tools and bandwidth to proactively plan.
   
2. Accurate & Timely Financial Reporting: Multiple funding sources and reporting requirements cause complexity.
   
3. Audit Readiness & Regulatory Compliance: Ongoing prep is needed year-round, not just during audit season.
   
4. Scaling Finance as Organizations Grow: Systems and processes often fail to keep up with rapid changes.
   
5. Consistent Financial Processes: High staff turnover or remote setups can lead to inconsistent record-keeping.
   
6. Low Operating Reserves: Many nonprofits run with limited or nonexistent reserves, leaving no margin for error.

“Many leaders are actively trying to assess their financial sustainability and manage risk, but often without the tools or bandwidth to do it in a proactive way,” observed Perumal.

Hiring and Turnover in Finance

High turnover in finance roles disrupts operations, causing knowledge loss and delays. According to the survey, only 28% of respondents reported that turnover in the finance function was “rare,” whereas the majority deal with frequent or occasional staffing gaps.

Key Takeaways

• Frequent Turnover: 72% of organizations noted occasional, frequent, or very frequent staff turnover in finance roles.
  
• Continuity Gaps: Finance staff turnover can lead to inconsistent reporting processes and institutional knowledge loss.
  
• Leadership Strain: Executive directors and CEOs often step in to fill finance roles during vacancies, detracting from strategic tasks.
  
• Compliance Risks: Delays in audit preparation and compliance efforts become more likely when teams are short-staffed.

Systemic Issues in Nonprofit Finance

While turnover is a major concern, the survey data reveals deeper underlying challenges, ranging from lengthy monthly closes to frequent budget reforecasts, that suggest process or infrastructure gaps.

“It’s not just a hiring challenge… these challenges reflect something more foundational—nonprofits need more scalable, strategic finance operations.”

Key Findings

1. Longer Month-End Closings: An average of 19 days to close the books, with some organizations taking 30+ days.
   
2. Frequent Cash Flow Problems: 74% of leaders experience cash flow issues, underscoring the need for stronger financial planning.
   
3. Budget Reforecasts: Over half of organizations reforecast frequently, highlighting the difficulty in maintaining stable financial projections.

“An average of 19 days to close the books isn’t just a staffing lag—it’s a sign that processes and systems may not be fully optimized or resilient.”

Outsourcing Finance: A Growing Solution

Although 100% of surveyed nonprofits outsource at least one function (e.g., IT, legal), only 30% currently outsource finance – despite the many benefits a specialized finance partner can provide.

Outsourced Finance Benefits

• Strategic Expertise: Access to professionals skilled in FP&A, grants management, and compliance.
  
• Reduced Burden on Leadership: Leaders can refocus on mission-driven activities.
  
• Systems Optimization: Finance partners often streamline or provide their own financial tools and technologies.
  
• Scalability: Partners can help organizations effectively manage growth or navigate sudden funding cuts.

“Working with a strategic finance partner, if it’s done right, delivers the structure, visibility, and capacity nonprofits need… without burning out their teams.”

Top Reasons Nonprofits Use Finance Partners

Among the organizations currently working with a third-party finance partner, the survey responses highlighted the most common motivations:

1. Leadership Focus: More time for executives to handle mission-driven work.
   
2. Streamlined Processes: Partners help establish consistent, effective accounting workflows.
   
3. Timely & Accurate Reporting: Critical for compliance, audit prep, and strategic decision-making.
   
4. Specialized Expertise: Access to experts in grants, audits, revenue recognition, and more.
   
5. Cost Savings: Outsourcing can reduce overall finance function expenses (including systems and staffing).

“One of the biggest reasons is more time for leadership to focus on mission-driven activities… It’s really not just about the numbers.”

BTQ’s Finance as a Service (FaaS) Model

BTQ specializes in providing comprehensive Finance as a Service (FaaS) tailored for nonprofits. 

The comprehensive approach extends beyond typical accounting support, providing strategic insights and continuous operational improvement.

Their support spans from day-to-day transactions and reporting to strategic analysis, grants management, and even medical billing.

• Customizable Support Models: Full-service finance or stand-alone options
  
• Core Service Areas: Day-to-day accounting and transaction support, strategic CFO-level guidance, grants and contracts management, and medical billing (revenue cycle management).
  
• Long-Term Partnerships: 86% of BTQ clients have been with the firm for 5 years or more.
  
• Proactive Finance: Emphasizes forward-looking strategy and risk mitigation.
  
• Scalable Solutions: Clients range from $1 million to $200 million in annual budgets.

As Perumal says, “BTQ’s motto is: it’s your mission to create a better world, and ours is to help.”

Key Takeaways for Nonprofit Leaders

Nonprofits must address systemic challenges, both operational and staffing-related, to remain resilient. 

Reflecting on the broader themes, these core insights capture the essence of the challenges and opportunities identified:

1. More Than a Hiring Issue: Financial struggles often point to deeper process and infrastructure gaps that require a strategic solution.
   
2. Partnerships Provide Stability: A trusted finance partner can bring stability, expertise, and structure, freeing leadership to focus on mission.
   
3. Readiness for Growth or Change: Building scalable processes ensures nonprofits are prepared for funding fluctuations and expansion.
   
4. Added Value of Specialized Teams: Fractional CFOs and dedicated finance experts can bolster compliance, audits, and strategic planning.
   
5. Underused Outsourcing: Despite outsourcing in IT or legal, many nonprofits still overlook finance outsourcing—even though it can significantly boost organizational capacity.

“Now more than ever, nonprofits really need a strong financial and accounting partner in their corner… people that understand the landscape and can help build flexibility and planning.”

When Should You Consider Bringing in a Finance Partner?

For nonprofits unsure about outsourcing and the ideal timing for bringing in a finance partner, many of BTQ’s clients “come to us at a critical inflection point—when they experience issues with cash flow, internal crises, or leadership changes.”

If your organization struggles with timely closes, ever-changing compliance rules, or staff turnover, consider exploring a finance partnership with BTQ. 

We have tailored and scalable solutions to help strengthen operational efficiency and mitigate risk, so you can focus on what truly matters: advancing the mission and serving your communities.

We recently outlined steps nonprofits can take to manage federal funding delays and uncertainty. Now, a related, and potentially longer-term,  trend is emerging: increased attention on how nonprofits manage and report on public funds.

While some of this scrutiny is already underway, much of it may evolve over the coming year as agencies adjust to new priorities, legal rulings, and policy directives. 

For nonprofits managing federal grants and contracts, it’s an ideal time to ensure that financial systems, compliance practices, and documentation workflows are ready for a new level of visibility.

What Could Be Driving the Next Wave of Scrutiny?

1. Federal Agencies May Re-Evaluate Funding Oversight

• Executive actions and shifting policy priorities suggest that agencies may increasingly assess how public funds are awarded and monitored. This could lead to closer alignment between spending and national policy goals, with nonprofits expected to document not just compliance, but impact.

2. The Single Audit Threshold Is Increasing — But Oversight May Shift

• With the Single Audit threshold rising from $750K to $1M (for fiscal years beginning October 1, 2024), smaller grantees and contractors may fall outside formal audit requirements. However, this could shift oversight to more discretionary or targeted reviews, including desk audits, site visits, or document requests from funding agencies or pass-through entities.

3. Pass-Through Entities May Increase Subrecipient Monitoring

• State and local governments (often acting as pass-through entities) are under pressure to demonstrate compliance with federal funding requirements. 
• Nonprofits serving as subrecipients on grants or contracts may experience increased monitoring, even in the absence of federal mandates.

4. Maintain Strong Compliance & Communication Practices

• Stay in close contact with program officers at federal and state agencies to track policy changes and funding updates.
• Review subrecipient agreements to ensure compliance with reporting and financial oversight requirements.

Questions Nonprofits Should Be Asking Themselves

1. Do we have the financial clarity to answer questions from funders quickly and accurately?

• Are our general ledger and reporting systems set up to clearly distinguish between federal and non-federal funds across both grants and contracts?
• Can we track allowable costs, indirect rates, personnel allocations, and match requirements at the project or funder level?

2. Are our internal controls not only documented, but actually working as intended?

• Do we have clear approval workflows for disbursements, procurements, and contract billing?
• Are we confident that our processes for time allocations, subawards, and cost allocation are being consistently followed and tracked appropriately?

3. If a funder or auditor asks for documentation today, are we ready?

• Is our backup documentation for drawdowns, invoices, and cost justifications organized, up-to-date, and easily retrievable?
• Have we conducted any internal reviews or walk-throughs to test our preparedness?

4. Are we prepared for more informal or discretionary oversight?

• Even if we’re under the new Single Audit threshold, are we ready to respond to funder inquiries, reconciliations, or desk reviews?
• Do we understand the unique compliance expectations tied to each grant or contract – especially those with newer or more politically visible funding streams?

Looking Ahead

Increased scrutiny, whether formal or informal, is becoming part of the new normal for nonprofits managing federal funds. 

Those with disciplined systems, real-time visibility, and clear documentation will be well-positioned to navigate reviews and maintain funding with confidence.

How BTQ Financial Can Support You

BTQ Financial delivers finance, grants, and contracts management services through an integrated model that combines strategic oversight with cost-effective processing. 

We help nonprofits:

• Maintain funder-aligned GL structures for grants and contracts
• Track expenditures and compliance
• Organize documentation for rapid response to funder inquiries
• Prepare for audits, desk reviews, or increased subrecipient monitoring

As scrutiny increases, your finance systems must do more than just function — they must demonstrate readiness, resilience, and reliability.

Federal funding has long been a critical revenue source for nonprofits. However, recent legal and policy shifts have introduced delays, uncertainty, and administrative challenges – particularly for organizations receiving funds through state and local pass-through grants.

While it is difficult to predict how long this uncertainty will last, proactive financial management can help nonprofits maintain stability and avoid disruptions.

With over 20 years of experience helping nonprofit organizations achieve financial excellence, BTQ Financial recommends nonprofits take the following steps to navigate federal funding uncertainty.

1. Identify Exposure to Federal and Pass-Through Funding

• Review all current and pending grants to determine whether federal funds are the ultimate source, even if received through a state or local agency.
• Confirm with funders whether any expected disbursements are at risk of delay.

2. Prioritize Cash Flow Management

• Submit outstanding drawdown requests immediately to minimize delays.
• Update cash flow forecasts regularly—consider shifting from quarterly to monthly or weekly projections.
• Develop a contingency budget outlining tiered spending reductions in case of prolonged funding delays.
• Engage your board in scenario planning discussions to prepare for different funding outcomes.

3. Expand Funding Diversification Strategies

• Reassess relationships with private funders: Engage with foundations and donors who may offer flexible funding or bridge support.
• Explore financing options: A line of credit or bridge loan can provide short-term liquidity while awaiting delayed grant reimbursements.
• Evaluate unrestricted revenue sources: Expanding earned income strategies or mission-aligned partnerships can reduce reliance on government funding.

4. Maintain Strong Compliance & Communication Practices

• Stay in close contact with program officers at federal and state agencies to track policy changes and funding updates.
• Review subrecipient agreements to ensure compliance with reporting and financial oversight requirements.

Looking Forward

Federal funding cycles are often unpredictable, but nonprofits with robust financial systems and proactive funding strategies will be better positioned to adapt. Now is the time to:

• Strengthen financial oversight through clear reporting and compliance processes.
• Ensure cash flow resilience with frequent forecasting and diversified funding streams.
• Engage with both public and private funders to create financial flexibility.

BTQ Financial has worked alongside nonprofits for over 20 years, helping organizations navigate funding uncertainty through outsourced financial and grants management, financial strategy, and compliance oversight.

By ensuring efficient financial operations, nonprofits can focus on their mission while staying financially strong. Connect with us to discuss how we can help your organization.

Additional Resources for Nonprofits

The following resources provide updates and guidance on federal funding, compliance, and financial strategy:

• National Council of Nonprofits – Executive Order Tracker
• White House Presidential Actions Website
• Federal Funds Information for States (FFIS) – Grant Funding Updates
• Grants.gov – Federal Grant Applications Tracking
• OMB Uniform Guidance (2 CFR 200) – Federal Grant Compliance

When NYC School Bus Umbrella Services (NYCSBUS) needed to transition from a private contractor to a nonprofit organization, they faced an immense challenge: maintaining service for 9,000+ students while completely rebuilding their finance function.

“BTQ came in, looked at the outcomes we needed, put boots on the ground, and got us to the finish line,” says Matt Berlin, CEO of NYCSBUS.

The Challenge

• Transitioning an $180 million fiscal department
• Ensuring uninterrupted service for students with special needs
• Establishing credibility with city auditors and public stakeholders
• Building complex system integrations with specialized fleet management software

The BTQ Solution: Finance as a Service (FaaS)

In just 30 days, our team:

1. Implemented a comprehensive suite of financial systems
2. Assumed full CFO responsibilities
3. Created transparent reporting capabilities
4. Integrated with specialized operational systems
5. Established audit-ready financial practices

The Results

With BTQ managing their financial operations, NYCSBUS was able to redirect resources toward their mission:

• Program Innovation: Beginning to electrify their bus fleet
• Service Enhancement: Integrating machine learning technology
• Operational Efficiency: Running the entire financial system with minimal in-house staff
• Stakeholder Confidence: Providing clean audits before the Comptroller’s committee
• Mission Focus: Concentrating on improving transportation services for NYC students

How BTQ Empowers Nonprofit Program Expansion

Our FaaS model creates the foundation that allows nonprofits to innovate and grow:

1. Resource Optimization

By outsourcing finance functions to BTQ, nonprofits can reallocate resources toward mission-critical programs rather than administrative overhead.

2. Financial Clarity

Our transparent reporting provides the confidence to make bold program decisions, knowing exactly where resources stand and how they can be leveraged.

3. Scalable Operations

As your organization grows, BTQ’s financial capabilities grow with you—no need to continuously invest in building an internal finance department.

4. Risk Mitigation

Our nonprofit financial expertise helps identify opportunities and avoid pitfalls, creating a stable foundation for program expansion.

5. Strategic Partnership

We serve as thought partners in your financial strategy, helping align fiscal resources with mission objectives.

Ready to Transform Your Finance Function?

Learn how BTQ Financial can help your organization build the fiscal foundation needed to expand your mission impact. Our team of nonprofit financial experts is ready to create a tailored solution for your specific needs.

“Most SaaS companies don’t care about you. BTQ gives a damn about us.” — Matt Berlin, NYCSBUS CEO

BTQ has been empowering the most progressive nonprofit organizations since 2001 with financial management, medical billing, and accounting services that support their missions and secure sustained operations.

Contact us to learn more about how we transform your back-office function into a strategic growth engine.