Nonprofit Guide to Navigating Federal Funding Shifts

The new administration’s rapid issuance of executive orders, followed by a sweeping Office of Management and Budget (OMB) funding freeze on over 2,600 Federal grant programs, plunged the nonprofit sector into immediate disruption. Though a court ruling quickly reversed the freeze, the episode signaled a significant policy shift. Nonprofits must now strategically adapt to the evolving Federal landscape. This article provides the tools your nonprofit needs to confidently navigate uncertainty and build lasting resilience. 

Preparing to Navigate Gaps from the Federal Funding Pause

Nonprofits can make the following preparations to be ready for future uncertainties:

Focus on Compliance

There will be more scrutiny on disbursed funds under the new administration and it is crucial to review terms and conditions of grant awards. Further, your organization can maximize funding by maintaining documentation of internal controls, including segregation of duties and policies and procedures. Internal controls showcase your ability to be a good steward of Federal funding now and in the future.

Risk Assessment

Proactively identify and mitigate critical risks to ensure the organization’s continued viability. Risks can include strategic risk, financial risk, operational risk and reputational risk. By modeling scenarios that show how the organization could be impacted under a variety of stressed scenarios, your organization will be better prepared to face challenges.

Retain Legal Counsel

Ensure grant compliance by engaging legal counsel to interpret current and future executive orders and protect your organization’s Federal funding. Legal counsel can offer a path to understanding the impact of executive orders on your organization’s Federal grants, which may contain ambiguous terms and clauses. Additionally, when facing potential grant challenges, legal counsel can provide vital mitigation strategies.

Communicating with the Board

Once the compliance and risk assessment processes are complete, sharing this information with the board of directors will help management and the board better understand their risk appetite and options so that the organization can confidently move forward.

Communicating with Stakeholders

Don’t underestimate the power of authentically sharing your story and your mission with key stakeholders and donors. Personalize the message to your donors and show how their funds will have a positive impact in the community.

Strategies for Building Organizational Resilience 

Organizations must balance immediate operational needs, like payroll, with long-term strategic planning to ensure mission sustainability. As you navigate uncertain times, consider what you want to accomplish during the year and how you can find creative ways to accomplish those goals. Examples of resiliency planning can include any combination of the following:

• Diversifying revenue streams – Seek new ways to optimize revenues. This can be achieved by charging for a product or service, collaborating with a community partner, membership or subscription programs, enhancing donor outreach, or a combination of these methods. Private grant funders and corporations may begin to allocate more funding to areas that are losing Federal funding.
• Expense management – Look for ways to reign in expenses, including identifying expense contracts that can be cancelled or deferred, and determining lower limits for certain credit card expenses. Identify cost-to-impact of various programs to determine where the organization is able to spend resources for the highest impact.
• Leveraging partnerships and collaborations – Partners in the community with similar missions may be less impacted by the Federal funding pause. Your community impact can be greater by partnering with other organizations.

Organizations can and should hope for the best, but they need to be prepared for the worst. Running scenarios with various funding levels and expenses will help the management and the board understand the real world impact of decisions before they need to be made. These exercises will ensure long-term stability for the organization. Johnson Lambert is prepared to assist you in navigating nonprofit funding challenges and instill confidence in your plans for the future. Contact our team today.