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How can nonprofits adapt to changes in federal funding?
While the most common and well-known method of income for nonprofits is from donations, there is also a percentage of nonprofits that receive some or even most of their income from federal grants. The types of nonprofits most likely receiving federal funding are organizations in healthcare, education, research or environmental services. These organizations provide important work for the government for continuation of societal programs that otherwise would not be offered to the full extent that they are.
Current events
In late January of 2025 the White House Administration put out a memo of an executive order calling for a pause on all federal funding. This was a major concern for nonprofits who rely heavily on federal funding, with many having to cut programs and lay off staff. As of most recently the federal funding cuts are being aimed at higher education institutions. Funding for these institutions goes towards a variety of programs including student aid, faculty salary, overhead costs and research projects making advancements in science and medicine.
An example of this currently happening is at Harvard University. Harvard is being denied $2.3 billion in federal funding, which will greatly affect their ability to continue educational programs and conduct critical scientific research.
What to do next
Review grant language:
If organizations feel like they are likely to be targeted during these cuts, they can begin by reviewing grant language and looking for key words such as diversity, equity and inclusion initiatives. Additional reasons for being targeted are universities or institutions conducting protests or pro-Palestinian activity which the administration has deemed to be terrorist rhetoric. Changing these specific policies could allow for the continuation of certain funding at certain institutions.
- Increase fundraising: Some organizations do not have the option of saving their federal funding, or ultimately do not feel like it is appropriate to stand down to the government's orders. In this case organizations should begin by increasing fundraising efforts to make up for the lost funds. This could include reaching out to previous supporters as well as additional large foundations with an emergency call for help for additional support for funding key programs.
- Form partnerships: While increasing fundraising will be helpful, it might not prove effective in the long run specifically for organizations that heavily rely on federal funding. Nonprofits may find it helpful during these difficult times to work together and share ideas and resources to provide all organizations involved with additional support.
- Escalate staff engagement: Focusing on all personnel positions will be key especially during hardships such as this. Encouraging participation and allowing staff at all levels to step outside their role and contribute in areas where they otherwise wouldn’t can lead to new ideas and growth for the individuals involved and organization as a whole.
Remain Calm:
It is important for nonprofit leaders during difficult times such as these to take the changes gradually as they come and to stay composed. For organizations that are not being hit just yet, it is important to be prepared but also okay to take a wait- and-see approach. For organizations that are being heavily hit, such as Harvard University, there are ways to fight back such as staying true to their mission and filing lawsuits against the administration for their unlawful control of funding.
While these are and continue to be unprecedented times for nonprofit organizations, it is crucial to be prepared for possible cuts and determine the best way to continue the organization's mission should it happen. For some this could mean changing grant language, for others it could mean aiming to move away from federal funding and towards being donor dependent and/or actively suing the White House administration. How a nonprofit organization determines to proceed is based on their specific circumstances, and whether they heavily rely on federal funding or have grants that are being targeted by the administration. As these changes continue to unfold, nonprofits must work together and remain resilient to continue their missions and ability to provide crucial services to society.
Kelly Blake is a 2025 graduate of the Masters of Nonprofit Leadership and Management program at Arizona State University, and works as a research administrator at the Marine Biological Laboratory in Woods Hole, Massachusetts. The organization focuses on oceanographic research and in this role, she assists researchers with applying for grant proposals to fund their research. She has a Bachelor of Science in Animal Science and hopes to combine her passions for animals and nonprofit organizations by someday working at an animal nonprofit.
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