It’s Not Accounting Noise: Going Concern in the Nonprofit Space
September 10, 2026
By Andrea Beth Levy, CPA, CFE, CGMA, MBA
Continuing operations in a space of substantial doubt: going concern disclosures in a nonprofit environment.
Going concern is not a bookkeeping error, a distant accounting term, or “accounting noise”. A going concern disclosure is serious business. It serves as a formal signal raising substantial doubt about whether the organization will remain open and can keep up with financial obligations 12 months after financial statements are issued.
As mentioned by Jan McDaid, partner of the Han Group, “nonprofits face increased scrutiny around their financial health, especially in periods of economic uncertainty.” The going concern disclosure can have real consequences: funders may ask additional questions, future awards may be affected and board members may become uncomfortable with the organization’s financial position. On the flip side, auditors must remain independent and undergo peer review, which can increase the time and cost of the audit, adding additional pressure in an already pressurized environment, essentially adding fuel to the fire.+
Ongoing monitoring creates proactive leadership
If your nonprofit is facing financial uncertainty, the priority is to respond with a disciplined, documented plan. Management should be prepared to explain the root causes of the liquidity issue, show how cash will be managed, communicate clearly with the board and auditors, and identify the actions being taken to stabilize the organization.
Cash planning “days-in-cash” report: Start with a quick “days-in-cash” treasury report. Calculate days-in-cash by dividing funds available for expenses by average monthly costs — a quarterly average can smooth unusual activity while staying current. Prepare and distribute the report weekly to management and executive leaders. The goal is guidance, not perfect precision.
Protect payroll and near-term obligations: If there is concern about funding payroll, prepare a 13-week cash projection. Identify when short-term or long-term investments may need to be used, confirm compliance with reserve policies, and prioritize employees’ pay and reimbursable expenses before slowing vendor payments. The goal is to understand exactly when cash pressure becomes urgent and what decisions must be made before that point.
Monthly rolling forecasts, creating a strategy to move forward: Create a monthly forecast that begins with expected donor payments, program service fees, grant receipts, financing activity, payroll and operating expenses. Remove non-cash items such as depreciation and amortization, so the forecast reflects cash movement. A simple structure starts with beginning cash, plus incoming program service fees, donor payments, and financing activity, less payroll and operating expenses, equaling ending cash. This forecast should be supported by realistic assumptions and updated as new information becomes available. Distribute to management and board accordingly.
Intentional cost containment: What’s your current “burn” rate? The burn rate is how quickly you spend cash. Review expenses by fixed and variable cost categories, list significant vendor agreement terms and identify areas where spending can be reduced without immediately compromising mission delivery. Potential actions may include reducing software licenses, limiting conference travel, pausing nonessential events and projects, renegotiating vendor payment terms, freezing open roles, using contractors only when necessary and evaluating employee bonuses during periods of financial unrest.
Use caution with personnel decisions: Before considering reductions in force, evaluate temporary alternatives such as furloughs, salary reductions, hiring freezes or reduced hours. Terminations should be treated as a last-resort action after leadership has considered the financial, operational, legal and mission-related impact. If the company takes this route, continue to keep confidential information secret. Work with Human Resources and consider speaking to your public relations team for a statement. Do not stray from the truth or lie to employees, doing so can eliminate their loyalty and trust, not to mention your reputation.
Know your own limits and when it’s time for a break. The organization needs your competence, but it also needs your clarity and humanity intact. Build simple rituals around difficult work: take a short walk before or after emotionally heavy tasks, such as preparing final payroll for departing employees.
Communication: Management should be ready to provide auditors with a clear analysis of the conditions causing doubt, the organization’s plans to address those conditions and evidence supporting the feasibility of those plans. This may include cash forecasts, bank communications, donor commitments, vendor arrangements, board-approved plans or scenario analyses. The board should receive regular updates clearly stating the financial reality, the disclosure’s implications and the decisions required to move forward.
Can penguins fly? Penguins may have wings, but they cannot fly, no matter how hard they try. This same concept may apply to your work. It is easy to fall into the sunk-cost trap of believing that doing more will fix the problem, but sometimes it’s not true. More research, more reports or more detailed financials may not solve a liquidity issue. When economic conditions drastically change, the better response may be to accept the current reality instead of doing more. If you are being asked to spend significant time preparing detailed reports that lead to the same conclusion (cash runs out in six weeks), try to answer strategy questions without placing significant strain on yourself. In some cases, the organization needs diverse revenue structures or liquidity, not another version of the same financial report with different headings.
As CPAs and business leaders, it may be easier for us to step back and identify the changes needed: where spending should decrease and where revenue should diversify. However, those recommendations may be difficult for leaders to hear, especially if you have been consistently raising these concerns. We may see that grant funding worked in the past, but that the organization now needs to move toward a fee-for-service model. We may also notice that grant budgets underestimate the true cost of running the business and repeatedly underfund administrative departments or that hiring is accelerating without a sustainable revenue model. Remember, unless you are serving as the CEO or COO, your job is to partner with executive leaders and accept their decision-making process.
Final Thoughts
Leadership during financial uncertainty is not only a technical exercise — it is a test of presence, judgment and personal steadiness. The data matters, but so does the condition of the person reporting the results. When people feel afraid, they may become reactive, impatient, accusatory or irrational. Upset can move through a room quickly and financial leaders are often standing at the center of it. Chronic stress will literally rewire the circuits in your brain. If you are stuck in an unhealthy work environment and find yourself under significant pressure, you may be at risk of developing a short fuse. This sustained level of fear and stress experienced day in and day out depletes your emotional resources, making it probable to get mad at even minor incidents.
The work is to notice the fear without absorbing it, to hear the urgency without becoming frantic and to respond to pressure without taking on the emotional chaos around you. Self-care in this context is not indulgence; it is a boundary, a discipline and a requirement for sustainable action. A steady financial leader can listen carefully, explain the truth plainly, protect confidential information, and make difficult decisions without becoming harsh or defensive. During these periods, build recovery into the operating plan; sleep, step away regularly, eat regularly, seek wise counsel, and allow moments of stillness before making consequential decisions.
