Why Nonprofits Must Budget For AI: Maximizing Impact And Driving Growth 

Created By: Steve Orr and Terry Cangelosi
June 6, 2024

“Should we be budgeting for AI?” This question, posed most recently at Alliance Bernstein’s The Nonprofit Forum: Investing Internally to Thrive Externally, underscores a pivotal shift in the nonprofit sector. As tech companies continue to invest in expanding AI tools, along with the entry point for integrating AI technology into organizational workflows becoming more accessible, its potential return on investment grows exponentially. While embracing “AI on a budget” is a good introduction to the technology itself, we’re rapidly approaching the point where AI is no longer a “wish list” line item on an organization’s budget, but instead a “must have”.  

As nonprofit professionals, we know that the budgeting process can be painstakingly slow. Aligning the budget to the fiscal year, waiting for board approval, and remaining focused on driving the mission forward, is challenging enough. Making changes once the budget is approved adds yet another layer of complexity, often preventing an organization from being agile to changing tides. All of this, coupled with growing overhead costs, makes it nearly impossible to budget for things without a clear ROI. With AI’s explosive growth, nonprofits put themselves at risk of being left behind if they don’t start budgeting for – and implementing – these technologies now. 

Building A Budget for AI: Key Considerations

So how do you budget for AI while keeping overhead costs low? The belief that overhead expenses should be limited to 15-20% of an organization’s total expenditures is a misconception. As Dan Pallotta highlights in his TED Talk, this ideology creates significant problems. It suggests that overhead is not a part of an organization’s mission, leading to underinvestment in crucial areas. Pallotta argues, “…we should be investing more money, not less, in fundraising, because fundraising is the one thing that has the potential to multiply the amount of money available for the cause that we care about so deeply.” AI is one of those critical fundraising investments, enabling nonprofits to increase their effectiveness, better fulfill their missions, and drive greater impact.  

However, allocating budget to AI should be done thoughtfully. Here are several key aspects that nonprofit executives should keep in mind when preparing their budgets for AI: 

1. Strategic Alignment: Ensure that any investments in AI align with the organization’s mission and strategic goals. This includes identifying specific areas where AI can drive significant impact, such as improving donor engagement, enhancing program delivery, or optimizing operations. 
2. AI Governance and Policy: Developing a robust AI policy and governance framework is a crucial step in the budgeting process, ensuring the ethical and responsible usage of AI at your organization. AI applications should adhere to the principles of transparency, accountability, and fairness and it’s important to consider allocating budget for ethical oversight, regular audits, bias assessments, and ethical training for leadership and staff.
3. Cost-Benefit Analysis & Assessment: Conduct a thorough cost-benefit analysis to understand the potential ROI of AI investments. This includes immediate costs such as tools, training, and governance, alongside long-term benefits like improved efficiency, better outcomes, and increased revenue. If your organization lacks the capacity for this type of assessment, consider partnering with experts who can guide you through identifying AI investment opportunities and framing an ongoing budget. 
4. Phased Implementation: Start small by testing a handful of low-cost AI applications before committing to larger investments. This approach ensures that the organization can walk before it tries to run, helping to minimize risk and ensuring that resources are allocated effectively.  
5. Staff Training and Development: In addition to the cost of the tools themselves, it’s vital to allocate part of the budget for training staff on the tools. This includes both technical training for those who will directly interact with AI systems and broader training to ensure all staff understand the benefits and limitations of AI. 
6. Sustainability, Maintenace, and Evaluation: AI is not a one-time investment. Plan ongoing costs associated with maintaining and updating your AI tools and systems and assess its impact which will help guide decisions about future investments.  

By considering these factors, nonprofit leaders can make informed decisions about AI budgeting that maximize impact, minimize risks, and ensure sustainable growth. Organizations that strategically leverage AI are already seeing increased funding and growth. Now is the time to collaborate with your executive team to include AI in next year’s budget. Embracing AI will make your organization nimbler, more effective at engaging donors, and enable your staff to work more efficiently, ultimately driving greater impact. Don’t miss the opportunity to advance your mission and achieve sustainable growth through AI. 

At Orr Group, we’re enthusiastic about the future of AI and hope to share that enthusiasm with our nonprofit partners. We are ready to assist your organization in brainstorming ways to seamlessly and safely integrate AI into your fundraising and other operational efforts. Contact us to learn how we can help elevate your organization to new heights. 

Steve Orr is the Co-Founder and Managing Partner of Orr Group. Steve draws from his investment banking and finance background to bring a problem-solving approach, a focus on metrics, and an outcomes-driven perspective to the nonprofit sector.

Terry Cangelosi is a Senior Director and Head of Operations at Orr Group. Terry brings 10+ years of nonprofit operations experience to ensure the most efficient operations in Orr Group’s workflows, technology, and infrastructure. Terry is a member of Orr Group’s AI Taskforce.