How to Respond to the Federal Funding Freeze Impacting Nonprofits

Be Smart, Be Strategic, Be Bold

With the administration’s Jan. 27th announcement that a freeze has been placed on federal grants and contracts, many organizations are facing funding deficits and big questions on how to make up some of the lost revenue. According to the Urban Institute, government funding makes up about 33% of the revenue that nonprofits receive annually. That’s a lot of organizations facing major drops in funding.

Diversifying Revenue Streams 

Just as nonprofits adapted to economic uncertainty during the pandemic, organizations may be able to pivot to fill some of the revenue gap left behind by the federal freeze. While the freeze may be lifted for some organizations once each grant commitment has been reviewed, we are advising our clients to keep expectations low given the political climate and other actions taking place in Washington. Below are a few options to consider:

Be Smart - no doubt your organization has many champions that you’ve cultivated over the years. Now is the time to lean into those strong relationships and ask for assistance.  

Your organization’s most important stakeholders are your current and past board members. Reach out to your leadership one by one to discuss connections to foundation executives, corporate foundations, or individual prospects willing to learn more about your organization. Provide your board members with talking points and a brief one-pager about the work you’re currently doing as well as how shifts in federal funding are impacting your work. Offer to join meetings or calls with prospects to share details on the impact to your nonprofit.

Another group to engage is your funders. Hopefully, you’ve provided regular stewardship to the program officers at foundations who currently invest in your work or are previous supporters. Request a meeting to discuss potential funding opportunities - including possible emergency grants given the extraordinary situation - and discuss the foundation’s priorities for the coming year. Also, ask if they would make introductions to other funders. Be prepared with a brief personalized slide deck that highlights the impact each foundation has provided through its investment and an outline detailing how the federal freeze impacts your programs. 

Be Strategic - With spring around the corner, you may be planning events and inviting major donors and/or gearing up for a direct mail appeal campaign. Whether you reach 100 or 10,000 during your outreach to individuals, it’s important to focus on the donors that are best suited for increases: your mid and major-level donors, those who have been giving consecutively for multiple years, and those who have made major gifts in the past. Events are a great opportunity to focus attention on the large gap in your revenue and focus on giving to a fund specifically geared towards supporting your staff and operations during this period of uncertainty. 

This is also a great time to involve your board members and program staff by having each member of your team write a note to major donors on 5-10 solicitation letters expressing thanks for past support. Where appropriate, make specific asks for increased giving to select donors who are most engaged and invested in your mission. Make sure to follow up with emails and phone calls to find a time to share details on your situation and, hopefully, secure the gift.

Does your website make it easy for individuals to make a donation through their Donor Advised Fund (DAF) or IRAs? When you direct donors to your website to make a donation, make sure to have options making it clear that donors can make a gift through their DAFs. These funds hold a lot of wealth and the likelihood of high capacity is inherent with a DAF contributor. And since the majority of DAF grants are given to nonprofits that the donor has previously supported, these individuals should be high on your priority list for more and larger gifts. The federal funding freeze provides a reason for you to engage your DAF donors and ask for larger or additional gifts in 2025.  

Exploring Public-Private Partnerships and Other New Funding Opportunities

Be Bold - The Administration’s unprecedented cuts will force some organizations to think creatively about continuing operations with significantly reduced resources. Are there organizations doing similar work in your community? You may want to consider a partnership or collaboration to attract new funders looking to turn ideas into action. Many foundations are interested in funding social-impact organizations and community leaders who collaborate on a specific project. Oftentimes, foundations will also provide access to their resource network including in-kind support and guidance on nonprofit management.  

Building Financial Resilience in Uncertain Times

Regardless of the path you choose, these are trying times, and navigating through them may mean your organization looks much differently at the end of 2025 than it did at the beginning. By reaching out to your current funders and sharing what you’re experiencing now, asking donors with the capacity to stretch to help provide additional funds, and looking for new and creative ways to continue your operations, you may be able to emerge on the other side a bit battered and bruised but still quite effective at serving your constituents and making an impact.