Uncertainty around federal funding has left many nonprofits rethinking their financial strategies. With delays in grant payments, shifting donor priorities, and broader economic ripple effects, organizations must adapt to maintain their impact.

I recently sat down with Sandy to discuss the challenges nonprofits are facing and, more importantly, the strategies they can use to move forward. Her insights shed light on how organizations can secure alternative funding, communicate their broader impact, and stay resilient in uncertain times.

Q1: How has the federal funding freeze affected nonprofits so far?

Sandy: The funding freeze has created uncertainty for many nonprofits, particularly those that rely on federal grants and contracts. Some organizations have received contract termination notices followed by rescinding the termination within several days of the termination and many others are experiencing delays in receiving funds for completed work. All these situations are making it difficult to determine if they can continue programs and retain employees.

For example, an organization we work with is still waiting on over $15 million for work completed prior to October 2024. These delays don’t just affect nonprofits—they also impact vendors, service providers, employees, and especially the communities they are providing services to. Most nonprofits purchase goods, raw materials, and services from U.S. companies and cutting government funding and contracts is impacting the private sector as well. As a result, many organizations are exploring alternative funding sources and adjusting their financial strategies to navigate this period of uncertainty.

Q2: What alternative funding sources should nonprofits consider in this climate?

Sandy: In light of the of current economic climate, nonprofits should consider several alternative funding sources to sustain their operations:

• Philanthropy: Many organizations are turning to philanthropy as a reliable funding source. It is crucial for nonprofits to effectively communicate their impact and program results. Current and potential donors are more likely to support organizations that demonstrate tangible benefits to their communities. Platforms like Charity Navigator and Candid (GuideStar) are great tools for highlighting results and impact. Candid allows organizations to add detailed information about their programs, goals, strategies, operations, and board leadership practices. Transparency into the operations and use of resource builds trust with donors. builds trust with current and prospective donors.
• Social media: Leveraging social media is also essential. It is not just about posting updates—it’s a powerful way to actively engage supporters, run virtual fundraisers, and even use simple links, texting options and QR codes to make donating easier. The key is getting creative and finding ways to reach people without spending a lot.

Q3: Are you seeing a lot of organizations slowing down hiring or scaling back operations in light of these challenges?

Sandy: Yes, a lot of nonprofits are facing significant challenges right now, especially those that rely on federal grants. This situation puts nonprofits in a difficult position: should they retain staff and hope for the best, or start scaling back operations? Unfortunately, the uncertainty of the funding cycle has already led some organizations to lay off staff, including those who manage these crucial grant funded programs.

This scenario feels a lot like the uncertainty we saw during COVID-19, where organizations had to develop multiple backup plans just to stay afloat. The biggest challenge is keeping services running while figuring out how to fund them amidst all this uncertainty.

Nonprofits are grappling with tough decisions, balancing the need to provide essential services with the reality of unpredictable funding. It's a delicate act of managing resources and planning for various contingencies to ensure they can continue to support their communities.

Q4: How can nonprofits communicate the broader impact of their work beyond direct services?

Sandy: Nonprofits need to think creatively when communicating their impact. It’s not just about the direct services they provide, but also about the broader economic benefits. For instance, a nonprofit that buys from local vendors or supports domestic industries should highlight how their work positively impacts the local economy. This transparency can help secure continued support from donors, even in times of uncertainty. It’s essential for nonprofits to communicate the full scope of their work to show the ripple effect on their communities.

Check out our blog, Stand Out in Crowded Campaigns: The Importance of Showing Donors Your Impact for helpful tips on encouraging more donor engagement.

Q5: What should nonprofits focus on right now to ensure sustainability moving forward?

Sandy: There are several areas that Organizations should focus on to ensure sustainability and keep moving forward:

Proactive communication: It's essential for organizations to communicate effectively with their stakeholders. This includes sharing updates on their impact, funding needs, and how they are adapting to current challenges.

Resource management: Efficiently managing resources is crucial. Nonprofits should explore and secure alternative funding sources. Enhancing visibility on platforms like Charity Navigator and Candid will and engage their networks through social media.

Social Media Engagement: Leveraging social media to engage supporters is vital. This can include running virtual fundraisers and sharing success stories and impact.

Impact Communication: Nonprofits must clearly communicate the full impact of their work. Highlighting how they support communities, employ local workers, and contribute to the economy can resonate with donors and stakeholders.

Transparency and Adaptability: Being transparent about their operations and adaptable to changing circumstances will build trust and demonstrate resilience. This approach helps nonprofits weather the uncertainty and maintain essential services.

By focusing on these strategies, nonprofits can navigate these challenges and continue making a meaningful impact on their communities. Stay tuned for updates as we continue to track how organizations are adapting during this time.