Federal funding is being pulled from nonprofits across the nation as the Trump administration seeks to limit federal spending by eliminating grants. Many nonprofits rely heavily on donor support, fundraisers, and, critically, federal funding.

Some nonprofits are already feeling the sting.

In Missouri, the International Institute furloughed 20 of its 24 workers after the Trump administration suspended funding for refugee resettlement agencies. 85% of the Institute’s budget came from the federal government.

In Miami, a gun violence prevention non-profit lost $2 million in grants from the Justice Department. Executive director, Lyle Muhammad, told CBS news that he soon wouldn’t be able to pay his 50 employees, some of whom have stopped suicides and gunplay.

“Thousands of lives have been saved,” Muhammad said.

In South Dakota, the National Court Appointed Special Advocates Association lost $15,000 after the termination of grant awards. The nonprofit advocates for children who have been placed in state care due to suspected abuse or neglect in state court hearings.

The grants represented about 5% of the nonprofit’s budget, meaning they won’t need to fully shutter their doors. However, they will need to pursue other funding options to close the gap.

Some nonprofits are fighting back, launching lawsuits against the Trump Administration as a result of the funding cuts. But for many nonprofits, a long legal battle with the federal government is out of the question.

Today, we’re discussing how nonprofits can prepare for a potential loss of federal funding and how they can explore other funding options.

While many nonprofits have already been impacted by federal cuts, some have yet to see their funding slashed. For those nonprofits looking to understand their exposure, taking a clear-eyed view of their risk is the first step.

Here’s how nonprofits can assess their risk and start making preparations if federal funds dwindle or dry up entirely.

Step 1: Assess Risk

Nonprofits represent a diverse group of organizations, with various missions that serve a variety of populations across the country. The Trump administration has taken a politicized view of federal funds, cutting grants to organizations they decide don’t align with the administration’s political objectives.

Below is a list of the various categories of nonprofits who may find themselves in the Trump administration’s crosshairs.

• Nonprofits that serve refugees and immigrants. The Trump administration suspended federal funding to refugee resettlement agencies in January, and a series of executive orders have cracked down on immigration. Nonprofits that directly serve refugee or immigrant populations have likely already seen their federal grants terminated. But nonprofits that serve immigrants or refugees in less direct ways, for example, by providing food assistance, housing, or job training, may see their funds cut as well.

• Nonprofits that promote diversity, equity, and inclusion. The Trump administration is at war with anything deemed “woke.” Nonprofits that address these issues or serve diverse populations will likely find their federal funding pulled.

• Nonprofits in the arts. The National Endowment of the Arts (NEA) has already cut funding for numerous theaters, presses, and other arts organizations across the country. Last week the off-Broadway institution, Playwright’s Horizons, announced on Instagram that a $25,000 grant they were awarded six months ago had been rescinded. The Public Theater, who produces New York’s iconic, free, Shakespeare in the Park series, had a $35,000 grant rescinded that was set to fund this summer’s production. Theaters and arts institutions around the country have been impacted, and additional waves of funding cuts are likely.

Step 2: Scenario planning

If you believe your organization will likely see its federal funds eliminated, it’s time to strategize. It’s easy to move to worst-case-scenario thinking when things feel uncertain, but it’s best to plan with a cool head and consider multiple options. Organizations should develop at least 3 plans for the next fiscal year—a scenario in which all federal funding is cut, a scenario in which 50% is cut, and a scenario in which 25% is cut.

The future is unknown, and making multiple plans ensures that your team has a starting point for restructuring funds if needed. Some important questions to consider when making your plans:

• How much of your organization’s total budget comes from federal funds? If your organization only relies on federal grants for 2% of its budget, you’re in a very different situation than organizations whose operating budgets are 75% federally funded. The higher the percentage that comes from federal grants, the greater your organization’s exposure to risk. If your org relies on the federal government for more than 20% of its operating budget, now is the time to start seeking alternative funding options through private donors or city and state funding.

• What are your top priorities: retaining staff, not cutting back on services, maintaining quality, or something else? If you are not able to raise money from other sources to cover a funding gap, your organization won’t be able to operate at its current level. That means your team will need to make some very difficult decisions about where you can cut back. Since these choices often feel impossible, try framing the issue around your priorities. If you end up needing to pull back, cut costs on lower priority items so you can still deliver on your top issues.

• How can you think outside the box? A decline in federal funding doesn’t mean the end of all external support. Nonprofits facing an operating deficit from a lack of federal funds have other options. Consider seeking additional state or city funding, holding fundraisers, tapping into community networks, and an extra commitment to donor outreach. If your organization wants to expand but lacks the funds, try building a volunteer network. As more baby boomers retire over the next few years, many will be seeking volunteer opportunities in their local communities. Nonprofits may also want to try partnering with organizations that are unlikely to be targeted by the federal government. Churches, synagogues, and other religious organizations are less likely to find themselves on the receiving end of the Trump administration’s cuts. Partnering with religious groups that are doing similar community work is one way to continue your nonprofit’s mission.

When the future is uncertain, it’s easy to spiral. Taking a moment to analyze your risk and conduct scenario planning can help keep anxiety at bay. There’s no doubt that this is a tough moment for nonprofits, but with the right approach, they can ride through the chaos.

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The information contained in this site is provided for informational purposes only, and should not be construed as legal advice on any subject matter.