INSIGHT

Navigating federal funding uncertainty: Strategic approaches for nonprofit resilience

Shannon Winter, Daniel Figueredo • April 22, 2025

Industries: Nonprofit

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Recent developments in the federal funding landscape have created significant challenges for nonprofit organizations across the country. In January 2025, the Office of Management and Budget (OMB) issued a memorandum instructing federal agencies to pause disbursements of federal financial assistance. Although this order was officially withdrawn two days later, the aftermath continues to affect thousands of programs and organizations that depend on these critical funding sources. The nonprofit community is now bracing for additional Executive Orders from the Trump administration to coincide with Earth Day and focused on certain nonprofits, including environmental organizations. 

At BPM, we understand the importance of maintaining financial stability during uncertain times. This article outlines practical strategies to help nonprofit leaders navigate the current federal funding landscape and build greater organizational resilience. 

Understanding today’s federal funding challenges 

The federal funding environment has become increasingly complex, with ongoing legal challenges and policy shifts creating a landscape of uncertainty. Many organizations are experiencing delays in fund disbursement, while others face potential reductions or even eliminations of previously secured grants. 

As the Urban Institute recently reported, between 60% and 80% of nonprofits that rely on government grants would be at risk of financial shortfall if significant funding changes occur sobering statistics that underscores the importance of proactive planning. 

What nonprofit leaders need to know 

Before implementing specific strategies, nonprofit leaders need to understand several critical aspects of the current situation.  This knowledge will assist in more effective decision-making and response planning.  Here are key areas to consider: 

Impact assessment and risk evaluation 

Understanding your organization’s vulnerability is imperative to effective planning: 

• Conduct a grant dependency analysis to identify what percentage of your budget relies on federal grants 
• Categorize grants by funding agency, program type, and expiration date 
• Evaluate which services or programs are most vulnerable to funding changes 
• Develop multiple budget scenarios to weigh the effects of different funding levels 
• Create actionable contingency plans for each scenario 

Accounting implications to consider 

The uncertainty about federal funding has important accounting and financial statement ramifications: 

• Ensure you have evaluated your grant revenue recognition under Generally Accepted Accounting Principles (GAAP) for conditional or unconditional grant reporting
• Evaluate the collectability of grant receivables and adjust allowances if necessary 
• Assess whether additional financial statement disclosures regarding risks and uncertainties are needed, including subsequent event disclosures 
• Consider whether concentration disclosures related to revenue sources are required 
• Evaluate liquidity and availability of resources disclosures in light of current uncertainties 
• Determine if substantial doubt exists about the organization’s ability to meet obligations as they come due 

Action steps for nonprofit resilience 

Financial management tactics 

Implementation of strong financial practices becomes critical during periods of uncertainty: 

• Establish or increase emergency reserves to provide a financial safety net 
• Develop detailed cash flow forecasts that outline best-case and worst-case funding scenarios 
• Identify discretionary spending that can be temporarily paused if necessary 
• Implement robust grant tracking systems to monitor timelines, requirements, and deliverables 
• Review your cash position regularly and understand your monthly cash needs 

Funding diversification strategies 

Organizations that rely heavily on federal awards and funding should prioritize developing alternative resources: 

• Explore alternative funding sources such as foundation grants, corporate partnerships, and individual donations 
• For public charities, evaluate how you will plan to continue to meet the public support test as you expand your funding base, as there could be limits on non-governmental funding sources when calculating public support 
• Develop fee-for-service models or membership programs to create steady revenue streams 
• Form strategic alliances with peer organizations to collaborate on joint funding initiatives 
• Emphasize unrestricted funds when pursuing alternative revenue to maximize flexibility 
• Consider social enterprise projects that align with your mission while generating income 

Compliance and risk management protocols 

Maintaining impeccable compliance with grant requirements offers important protection: 

• Review grant agreements to ensure expenditures align with requirements 
• Maintain detailed documentation of all grant-related activities and expenditures 
• Ensure you have good tracking of donor restricted balances and that you are not spending restricted funds to satisfy cash flow needs  
• Strengthen internal controls related to federal funding 
• Conduct regular internal compliance reviews 
• Stay informed about changing regulations that may affect your grants 

Information gathering and advocacy initiatives 

Being proactive with information gathering and advocacy can help safeguard essential funding: 

• Monitor announcements from government agencies for policy changes 
• Maintain open communication with federal grant officers 
• Join coalitions focused on nonprofit policy advocacy 
• Meet with legislators to educate them about your organization’s community impact 
• Share data-driven stories that demonstrate the value of your programs 

Building sustainable organizational strength 

While addressing immediate challenges, also focus on long-term sustainability: 

• Foster financial transparency with all stakeholders 
• Engage your board of directors in financial oversight and contingency planning 
• Invest in staff training on grant management and compliance 
• Review and potentially restructure programs to reduce dependency on vulnerable funding sources 
• Build stronger relationships with diverse funding partners 

How BPM can help 

At BPM, we understand the unique challenges nonprofits face in this uncertain funding environment. Our team can assist your organization with: 

• Developing comprehensive contingency plans 
• Strengthening financial management practices
• Supporting grant compliance efforts 
• Navigating accounting and reporting challenges 
• Supporting sustainable revenue diversification strategies 

By taking proactive steps to address federal funding uncertainty, nonprofit organizations can continue to fulfill their vital missions while building greater resilience for the future. 

This article contains general information and does not constitute accounting, tax, or financial advice. Organizations should consult with their advisors regarding specific circumstances. 

Please attend our nonprofit webinar on Key Legislative & Policy Updates for Nonprofits: Compliance, Funding & Donor Privacy in 2025 on April 29, 2025