The Risks and Rewards of Artificial Intelligence

A Guide for Nonprofits

Abstract

The following research paper aims to provide a preliminary guide for nonprofits considering AI implementation in their service delivery. The paper evaluates emerging lab and field research studies to assess the potential positive and negative impacts of AI use on various business segments. This research studies investigated AI use on labor productivity, accounting automation, donor segmentation, and data privacy. Emerging results indicate nonprofits may experience greater labor productivity gains from AI implementation, as well as improved accounting accuracy and donor management. However, AI use comes with the risk of AI “hallucinations,” data privacy violations, amplifying biases, and large-scale issues, such as negative environmental impacts and asymmetrical global development. This paper also presents emerging frameworks for AI governance (as of March 2026), including the EU AI Act, the California Consumer Privacy Act, and the National Institute of Standards and Technology’s AI Risk Management. Given the research and the high-stakes nature of nonprofit work, this paper recommends the following: 1) human oversight is crucial for mitigating AI risks; 2) protection for sensitive and private data should be a priority at every level and should be anonymized or redacted if using open-sourced AI models; in fact, 3) nonprofits should to opt for enterprise AI models that offer greater data protection to protect their donors and program participants; 4) any creative content generated by AI is at risk of copyright infringement; therefore, nonprofits may want to carefully consider how and when they are using AI-generated content for front-facing materials until greater defined laws are established; and 5) AI risk management includes incident reporting and regular audits to monitor for AI errors.