AI in Nonprofits

AI RISK IN NONPROFITS Balancing Innovation and Risk August 2026

Artificial Intelligence (AI) is being used more than ever in nonprofit organizations, and that usage is only accelerating. While AI is improving efficiency in fundraising, communications, and administration, it also comes with significant risk.

As adoption increases, the gap between AI use and risk oversight continues to widen—creating exposure that can impact donor trust, regulatory compliance, and financial stability.

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Growth Without Guardrails Through its analytics and automation, AI is being used to create and extend leads in business. That growing trend extends to nonprofits with 92% using AI in daily operations.

While adoption is high, formal governance and safeguards continue to lag behind. That imbalance is where risk begins to surface, making proper training for staff and volunteers essential and reinforcing the benefit of implementing quality control systems early on.

Foundations

78% 70%

Communications

84%

Nonprofits

Communications

0

Internal Productivity

63%

Development/ Fundraising

61%

20

40

60

80

Nonprofits and education are joined by health care and life sciences, financial services, media and communications, and manufacturing as the five industries AI impacted the most in 2025.

Advances in AI for Nonprofits

How Nonprofits Are Using AI

Internal Productivity

Where AI Is Driving Impact

100

With many nonprofits operating with limited staff, AI is helping fill critical gaps. It supports repetitive tasks, enhances grant writing, and improves decision-making. Used thoughtfully, AI allows organizations to redirect time toward mission-driven work that can lighten the administrative burden.

However, efficiency should not come at the cost of oversight. The same tools that save time can also introduce risk and errors at scale if left unchecked.

Why AI?

These concerns highlight a critical point, with most organizations recognizing the risks but fewer having formal processes in place to manage them effectively.

AI is helping nonprofits work smarter, evidenced by how they view their time savings:

AI is helping nonprofits work smarter:

82%

56%

43%

44%

35%

8%

Drafting, Editing, and Proofing Copy

Brainstorming and Planning

Summarizing Documents

Moderate

Significant

None

Whereas the biggest risks nonprofits believe they face with AI are:

(emails, news releases, website content, appeals, acknowledgments)

26%

21%

46%

36%

Data Analysis

Donor Research

Accuracy

Data Privacy

Understanding Threats While nonprofits have traditionally focused on property and liability risks, AI introduces a different type of exposure, which is one that is faster, less visible, and often harder to control.

These risks are not theoretical. They are already impacting organizations across industries.

• Cyber Threats and Data Breaches: AI tools can increase exposure if sensitive data is entered into unsecured systems or platforms.

• Media Liability and Intellectual Property Rights: AI-generated content can unintentionally replicate copyrighted material or create misleading messaging.

Have a Plan AI needs to be monitored regularly, which is why careful preparation through clear policies and procedures is essential, beginning with training staff and volunteers on usage and risks. Personally identifiable information should never be entered into public AI tools, as it could lead to identity theft, financial fraud, or privacy violations.

The human element, through staff guidance, also helps protect against errors, poor quality work, branding issues, and misinformation. Without proper AI quality control, organizations risk producing biased results, reinforcing harmful stereotypes, and sharing inaccurate information.

Reduce Risks Ideally, nonprofits have a plan in place before using AI and understand exactly where it fits within an organization. AI is not a “set it and forget it” tool, but rather, a resource that requires oversight, accountability, and clear intent. Consider taking these actions to reduce risk exposure: Establish Rules: Create a brief, easy-to-read policy for AI by defining who can use these tools and under what conditions to prevent inconsistent or risky application. Clear ownership and simple documentation create accountability as usage expands across teams.

Vendor Vetting: Third-party providers introduce additional layers of risk that must be clearly understood upfront. Decisions made at the vendor level may often determine long-term exposure.

Openness and Transparency: Donor trust depends on how well organizations communicate their practices and safeguards.

Proactive transparency strengthens confidence and reinforces long-term relationships with donors and stakeholders.

Protect Yourself: Determine coverage needs that address emerging exposures that may not be captured in traditional insurance policies. At the same time, fast response protocols help contain issues before they escalate.

Have Safeguards in Place: Sensitive data should never be entered into open platforms where control is limited. As data practices come under greater scrutiny, disciplined handling will become a baseline expectation.

Educate and Inform: Clear guidance on acceptable use reduces confusion and limits avoidable mistakes amongst staff and volunteers.

Organizations that prioritize awareness tend to operate with greater consistency and confidence.

Perform Audits: Regular reviews help identify inaccuracies, bias, and potential data concerns before they spread. Ongoing oversight ensures alignment with both internal standards and external expectations.

Conclusion Organizations that integrate AI with clear governance, disciplined data practices, Organizations that integrate AI with clear governance, disciplined data practices, and defined accountability can scale their impact with greater confidence. As adoption accelerates across the nonprofit sector, expectations around transparency, accuracy, and risk management will continue to rise, separating those who are prepared from those who are exposed.

Insurance plays a vital role, but it is only one layer of protection. The strongest position comes from combining oversight, training, and strong coverage to protect both mission and reputation as this technology becomes a permanent part of how nonprofits operate.

Let’s Talk About This To address any concerns or questions you might have regarding the landscape of AI and its effect on nonprofit insurance, our brokers and consultants are always available to help reduce or avoid potential risks to your organization, evaluate solutions that offer desirable benefits, and align with your budget and goals. Learn how Higginbotham can help you.

Sources 1. V irtuous Software, 2026 Nonprofit AI Adoption Report: What 346 Nonprofits Revealed About AI in Fundraising 2. The Center for Effective Philanthropy, AI with Purpose 3. Workday, 5 Industries Where AI is Having an Impact Today, 2025 4. Philanthropy.org, AI and Nonprofits; Poll Results 5. NonProfit PRO, February 17, 2026

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