If you lead a nonprofit organization that receives federal funding, the ground has shifted beneath you. The question is no longer whether your funding landscape will change, but how quickly you can adapt to a reality that has already arrived.
Since January 2025, the Department of Government Efficiency (DOGE) and the broader federal policy agenda have restructured how the government awards, monitors, and in many cases terminates grants to nonprofit organizations. The FY2026 federal budget proposal calls for a 22.6 percent reduction in domestic discretionary spending -- roughly $163 billion in cuts (Center for Nonprofit Excellence, 2025). For organizations that deliver services in education, health, housing, workforce development, and community resilience, this is not an abstract policy debate. It is an operational emergency.
At Giddings Consulting Group, we have spent the past year working with nonprofit leaders and boards who are navigating exactly this crisis. What we have seen, consistently, is that the organizations that survive -- and even grow -- through funding disruptions are the ones that act decisively in the first 90 days. They do not wait for clarity from Washington. They build their own.
This article is a practical playbook for doing exactly that.
The Scale of the Problem: Federal Funding Cuts by the Numbers
What DOGE Has Cut So Far
The scope of federal funding disruptions since early 2025 is staggering. DOGE took over the federal grants website Grants.gov in April 2025, wresting control of the system that posts billions of dollars in grant opportunities (Washington Post, 2025). Through the "Defend the Spend" initiative, new review layers were added to the Payment Management Services system, which processes 70 percent of all federal grant disbursements (Center on Budget and Policy Priorities, 2025).
The specific cuts are severe: the National Science Foundation terminated $1 billion in already-awarded grants; AmeriCorps saw nearly $400 million in active grants slashed, shutting down over 1,000 programs and eliminating more than 32,000 positions; TRIO educational opportunity programs had $660 million in funding withheld, affecting more than 2,000 programs (Council for Opportunity in Education, 2025); and FEMA resilience programs worth nearly a billion dollars were cut suddenly.
Across all sectors, the administration canceled or froze roughly $425 billion in federal funds in the first months of 2025.
Which Nonprofit Sectors Are Hit Hardest
The Urban Institute's nationally representative survey of 2,737 nonprofits, published in October 2025, found that one in three nonprofit service providers experienced a government funding disruption in the first four to six months of 2025. Specifically, 21 percent lost a grant or contract outright, 27 percent faced delays or funding freezes, and 6 percent received stop-work orders (Urban Institute, 2025).
The hardest-hit sectors include:
Education and Youth Services: Frozen TRIO grants and reduced Department of Education funding have disrupted programs serving first-generation college students, adult learners, and K-12 support services.
Health and Human Services: Organizations delivering mental health services, substance abuse treatment, and Medicaid-related programs have been particularly affected, with large social service agencies bearing a disproportionate share of disruptions.
Community Service and Workforce Development: The AmeriCorps cuts alone eliminated a significant portion of the national service infrastructure that many local nonprofits relied on for staffing.
Food Security and Agriculture: Programs channeling local food to school lunch programs and food banks -- valued at $600 million to nearly $1 billion -- faced abrupt terminations.
Disaster Relief and Emergency Preparedness: FEMA community resilience grants were cut, leaving both nonprofits and local governments without resources for disaster readiness.Intermediary organizations -- the larger nonprofits that act as bridges to federal support for smaller community groups -- saw $95 million in grants eliminated (Government Executive, 2025). This means smaller organizations that never received federal dollars directly are also losing access to the pass-through funding that sustained them.
The Ripple Effect on Local Communities
As NPR reported in April 2025, even nonprofits that do not rely on federal funding are feeling the ripple effects. When a workforce development program shuts down, employers lose a talent pipeline. When a community health center reduces hours, emergency rooms see higher volumes. When after-school programs disappear, parents lose childcare.
The Urban Institute survey found that 21 percent of affected nonprofits were already serving fewer people by mid-2025, and 29 percent had reduced staff. At the end of 2024, 52 percent of nonprofits planned to hire in the coming year; by mid-2025, that number had dropped to 38 percent (Urban Institute, 2025).
Why Most Nonprofits Are Not Ready
The Government Dependency Trap
Here is the uncomfortable truth: government funding has been treated as stable, recurring revenue for decades, and that assumption has made organizations structurally fragile.
According to the Urban Institute, government funding made up 42 percent of total revenue for service-providing nonprofits that experienced disruptions in 2025. Over 35,000 nonprofits -- about a third of all government grantees -- rely on government grants for more than 50 percent of their total revenue (Philanthropy Roundtable, 2025).
This level of concentration would be considered a serious risk in any other sector. No financial advisor would tell a client to put half their portfolio in a single stock. Yet thousands of nonprofit leaders have built their operating models around exactly this kind of dependency. When federal funding is disrupted, organizations do not just lose a revenue line -- they lose the operational capacity that revenue was funding.
As we have written in our analysis of fundraising trends for 2026, the organizations weathering this moment best began diversifying years ago. For those that have not, the time to start is now.
Warning Signs Your Organization Is Over-Exposed
Before you can build a plan, you need an honest assessment of your vulnerability. Here are the indicators we use when evaluating financial risk exposure:
More than 30 percent of your revenue comes from a single federal source. This is the threshold where a single funding decision in Washington can threaten your ability to operate.
You have fewer than three months of operating reserves. The National Council of Nonprofits recommends 3-6 months of operating expenses in reserve. Over half of nonprofits report having less than three months of cash on hand, and nearly 20 percent have less than one month (National Council of Nonprofits, 2025).
Your individual donor base generates less than 20 percent of your revenue. Individual giving remains the largest source of charitable support in the U.S. -- $392.45 billion in 2024 (Giving USA, 2025). If your organization is not tapping into this stream, you are leaving resilience on the table.
You have no earned revenue or fee-for-service programs. Organizations with diversified revenue models, including program-generated income, are significantly more stable over time.
Your board does not actively participate in fundraising. If your board sees its role as purely governance, your organization lacks the volunteer fundraising infrastructure needed to pivot quickly.
You have not updated your strategic plan in more than two years. As we discuss in our state of strategic planning research, strategic plans that do not account for funding volatility are not strategic plans -- they are wish lists.If three or more of these describe your organization, you are significantly over-exposed to federal funding disruption. The good news is that every one of these conditions is addressable.
The Revenue Diversification Framework: Seven Alternative Funding Streams
Organizations with diversified revenue portfolios experience less financial volatility over time (Chang & Tuckman, Journal of Public Administration Research and Theory). Nearly 97 percent of nonprofits now plan to diversify their revenue in the coming year (NonProfit Times, 2025).
Here are seven alternative funding streams, in order of typical speed-to-revenue.
1. Individual Donor Cultivation at Scale
Individual giving is the largest source of philanthropic support in the United States -- an estimated $392.45 billion in 2024, representing two-thirds of all charitable giving and growing 5.1 percent after inflation (Giving USA, 2025).
The opportunity here is not just annual appeals. It includes:
Monthly giving programs: Recurring donors provide predictable revenue and have significantly higher lifetime value than one-time donors.
Mid-level donor cultivation: Donors giving $1,000-$10,000 annually are often the most underleveraged segment. They have capacity and interest but rarely receive personalized attention.
Planned giving: Legacy gifts and bequests represent substantial long-term revenue potential, particularly as wealth transfers accelerate.
Donor-advised funds (DAFs): DAFs maintained $251 billion in assets in 2024 and are an increasingly important channel for major gifts (Giving USA, 2025).The key shift is from transactional fundraising (events and appeals) to relational fundraising -- building a community of committed supporters who give because they believe in your mission.
2. Corporate Partnership Development
Corporate giving reached over $44 billion in 2024 and the trend is toward deeper, more strategic partnerships rather than transactional sponsorships (Double the Donation, 2025). Companies want partnerships that deliver measurable community impact, employee engagement opportunities, and authentic values alignment.
To attract corporate partners, your organization needs:
Clear impact data: Sponsors want audience insights, engagement metrics, and impact reporting demonstrating how the partnership drives results.
Customized partnership packages: Generic sponsorship tiers are no longer competitive. Companies want tailored opportunities aligned with their specific ESG, community investment, or workforce development goals.
Employee engagement integration: Companies want their employees to participate in the impact, not just fund it. Volunteer days, skills-based partnerships, and board service opportunities strengthen these relationships.3. Earned Revenue and Social Enterprise Models
More than half of all nonprofits are engaged in some form of income generation, and private fees for service constitute the largest single category of nonprofit revenue nationally -- over a trillion dollars annually (Stanford Social Innovation Review).
Social enterprise models allow nonprofits to generate revenue through mission-aligned activities:
Training and consulting services: If your organization has expertise in workforce development, program design, or community engagement, other organizations and agencies may pay for it.
Curriculum and content licensing: Program models, training curricula, and evaluation frameworks developed with federal funding may have market value.
Social enterprises: Mission-aligned businesses that employ program participants and generate revenue simultaneously.
Facility rentals: If your organization has physical space, renting it for events or co-working can generate consistent income.The key is to start with what you already have. Most organizations are sitting on assets -- expertise, relationships, space, intellectual property -- that could generate revenue with modest investment.
4. State and Local Government Funding
While federal funding faces cuts, many state and local governments are stepping in to fill gaps, redirecting their own resources and creating new funding opportunities (Thompson Grants Intelligence, 2025).
Strategies for accessing state and local funding include:
Building relationships with state legislators and local officials who are aware of the federal funding gaps affecting their constituents.
Monitoring state budget cycles for new appropriations targeting areas where federal funding has been cut.
Positioning your organization as a solution to problems local officials are facing (homelessness, workforce shortages, public health crises).
Collaborating with other local nonprofits to present unified funding requests that demonstrate community-wide impact.5. Foundation and Family Office Grants
Many foundations have explicitly committed to increasing their grantmaking in response to federal funding cuts, recognizing their role as a backstop for essential services.
To successfully pursue foundation funding:
Align your proposals with foundation priorities, not just your organization's needs. Foundations fund outcomes, not operations (unless they explicitly fund general operating support).
Invest in your impact measurement capacity. As we detail in our impact measurement framework, foundations increasingly want evidence that their dollars create measurable change.
Build relationships before you need money. Foundation officers follow organizations doing visible, effective work. Your reputation is your pipeline.
Consider family offices and high-net-worth individuals creating philanthropic vehicles outside traditional foundations. These funders are often more flexible and faster-moving.6. Fee-for-Service and Program Revenue
Fee-for-service models directly monetize your core programs rather than creating adjacent income streams:
Government contracts for service delivery: Even as grants are cut, agencies still need services delivered. Positioning as a contractor rather than a grantee can provide more stable revenue.
Third-party reimbursement: For health or social service organizations, Medicaid, Medicare, and private insurance reimbursement can replace grant-funded service delivery.
Sliding-scale program fees: Many education, workforce, and wellness programs can charge fees on a sliding scale, generating revenue while maintaining access.
Membership models: For advocacy and professional development organizations, membership dues provide both revenue and engagement.7. Community-Based Fundraising and Mutual Aid
The mutual aid movement that emerged during the COVID-19 pandemic demonstrated that communities can mobilize significant resources outside traditional philanthropic channels:
Peer-to-peer fundraising campaigns that empower community members to raise money from their own networks.
Community investment models such as community loan funds that allow local residents to invest directly in neighborhood organizations.
Grassroots events and campaigns that build community ownership alongside financial support.
Collaborative fundraising with other local organizations to reduce competition and increase total community resources.This stream is often overlooked, but it builds something grant funding never can: a base of community members who feel personal ownership of your mission.
The 90-Day Pivot Plan
Knowing the options is not enough. You need a structured timeline. Here is the 90-day pivot plan we use with our clients.
Week 1-2: Emergency Financial Assessment
Objective: Understand exactly where you stand, without optimism or denial.
Map your complete revenue picture. List every revenue source, amount, renewal date, and likelihood of continuation. Flag any source connected to federal funding, directly or through pass-through grants.
Calculate your real cash runway. How many months can you operate with the cash you have today? Not projected cash -- actual cash in accounts.
Identify fixed vs. variable costs. Know which expenses you can reduce quickly and which are locked in.
Model three scenarios: (a) All at-risk federal funding lost within 60 days. (b) Federal funding reduced by 50 percent within 6 months. (c) Federal funding continues but with significant delays and new compliance requirements.
Brief your board chair and finance committee. Share the analysis before the full board meeting. No surprises.Week 3-4: Stakeholder Communication Strategy
Objective: Control the narrative before uncertainty does it for you.
Draft talking points for every audience: staff, board, funders, program participants, media. Each audience needs different information.
Communicate with current funders proactively. If you need bridge funding or modified timelines, ask now -- not when you are in crisis.
Notify program participants of any service changes with clear timelines and alternative resources.
Brief your staff with appropriate transparency. As we discuss in our guide to retaining nonprofit talent, uncertainty without communication drives your best people out the door.
Prepare a public statement if your organization is visible locally. You want to be a credible voice, not a victim.Month 2: Revenue Pipeline Activation
Objective: Generate pipeline activity across at least three new or expanded revenue streams.
Launch or expand your individual giving program. If you do not have a monthly giving option, create one this week. If you have one, build a campaign to grow it by 25 percent.
Identify and approach five corporate partnership prospects. Focus on companies with local presence, mission alignment, and existing community investment programs.
Submit at least three foundation grant applications. Focus on foundations that have signaled interest in filling federal funding gaps or that fund general operating support.
Explore fee-for-service opportunities. Meet with your program team to identify services that could generate revenue from government contracts, insurance reimbursement, or participant fees.
Activate your board for fundraising. Every board member should have a specific, time-bound fundraising assignment. More on this below.Month 3: Strategic Plan Recalibration
Objective: Align your strategic plan with the new funding reality.
Revise your strategic plan's financial assumptions. As we outline in our equity-centered strategic planning guide, a good plan must be built on realistic projections, not hopeful ones.
Reprioritize programs and services. Make intentional decisions about where to invest and where to reduce, based on mission impact and financial sustainability.
Set 12-month revenue diversification targets. How much, from whom, by when.
Move to monthly financial reviews. In volatile environments, quarterly reviews are not frequent enough.Board-Level Response: What Your Board Should Be Doing Right Now
The board's role in a funding crisis is to govern strategically, fundraise actively, and provide the executive director with the support and accountability they need. For a deeper dive, see our guide to nonprofit board development.
Emergency Board Meeting Agenda
If your board has not convened a special session on the federal funding landscape, schedule one this week:
Financial briefing (30 min): Present current financial position, at-risk revenue, cash runway, and three-scenario analysis.
Revenue diversification overview (20 min): Present alternative funding streams and timelines.
Board fundraising commitment (30 min): Each board member commits to specific fundraising actions. Not a discussion -- a commitment session.
Governance implications (20 min): Does the current board have the skills and relationships needed for the new funding environment?
Next steps and cadence (10 min): Agree on monthly update frequency and information needs.Redefining Board Fundraising Roles
In many organizations, board fundraising is treated as optional or limited to attending the annual gala. That model is insufficient in the current environment. Every board member should commit to at least two of the following:
Make a personally meaningful financial contribution. Foundations and major donors check board giving rates, and 100 percent participation is expected.
Identify and introduce three prospective donors or corporate partners. Board members have networks that staff cannot access.
Host or attend a cultivation event. A small dinner or site visit with a prospective funder puts faces and credibility to your mission.
Advocate with elected officials. Board members with relationships to state legislators or local officials can open doors to public funding opportunities.Scenario Planning for Multiple Funding Outcomes
Effective boards do not plan for one future -- they plan for several. Develop operational plans for three scenarios:
> Scenario A: Federal funding recovers within 12 months. What investments in diversification do you maintain even if federal funding returns? (Answer: all of them.)
> Scenario B: Federal funding is permanently reduced by 30-50 percent. What does a sustainable operating model look like? Which programs continue, which are restructured, which are sunset?
> Scenario C: Federal funding is eliminated entirely. Can you survive on non-federal revenue alone? If not, what is the minimum viable organization?
The purpose of scenario planning is to reduce decision time when the future arrives. Organizations that have already discussed Scenario B can act within days when it materializes.
Protecting Your Team Through the Transition
Your staff are your most important asset and the most difficult to rebuild once lost. Indiscriminate personnel cuts can destroy organizational capacity in ways that take years to recover from.
Transparent Communication Frameworks
The biggest mistake leaders make during financial uncertainty is withholding information. Staff know when something is wrong. Silence drives anxiety, rumor, and resignation.
Share what you know, when you know it. "Here is what we know today, here is what we do not know yet, and here is when we will have more information" is always better than silence.
Be honest about the range of outcomes. People can handle difficult news better than they can handle uncertainty.
Explain the decision-making framework. Staff want to know *how* decisions will be made, not just what decisions will be made. Sharing your criteria (mission impact, financial sustainability, equity) builds trust even when the decisions are painful.
Create channels for questions. Open office hours, anonymous question submissions, or regular all-hands meetings give people a way to be heard.For a comprehensive approach to keeping your best people through difficult times, see our guide on retaining nonprofit talent.
Retention Strategies When Budgets Tighten
When you cannot offer raises or new positions, retention depends on non-monetary factors:
Professional development: Free and low-cost training, mentoring, and cross-training opportunities show commitment to your people's futures.
Flexibility: Remote work options and flexible scheduling cost little but matter enormously for retention.
Mission connection: Reconnect your team to the impact of their work. Share stories from program participants. Celebrate wins.
Career pathing: Show high-potential staff a future in the organization. As we explore in our piece on succession planning, building your leadership pipeline is a strategic imperative, not a luxury.
Equity in any reductions: If cuts are necessary, protect frontline staff who deliver services. Reduce management overhead before cutting direct service capacity. Explain your rationale openly.Measuring Impact Without Federal Reporting Requirements
An unexpected consequence of losing federal funding is losing federal reporting requirements. For many organizations, this is an opportunity to build better measurement systems that attract private funders.
Shifting from Compliance Metrics to Outcome Metrics
Federal grant reporting focuses on outputs: how many people served, how many hours delivered. These numbers satisfy compliance requirements but rarely tell a meaningful story about impact.
Private funders want to understand outcomes: What changed in people's lives? What difference did the program make? How do you know?
The shift requires:
Defining clear outcomes -- actual changes in knowledge, behavior, conditions, or status for the people you serve.
Selecting indicators specific enough to be measurable but meaningful enough to matter.
Collecting data systematically through pre/post assessments, follow-up surveys, and qualitative methods.
Communicating results in ways that resonate with different audiences: stories for donors, data for foundations, both for board members.Building a Measurement Framework That Attracts Private Funders
For a detailed guide, see our impact measurement framework. The essential elements include:
A logic model or theory of change that connects your activities to intended outcomes.
A small number of priority metrics (3-5) that you track consistently and report publicly. Focus on the metrics that best capture your impact.
Benchmarking data that puts your results in context. Funders want to know not just what you achieved, but how it compares to similar programs.
Longitudinal data showing trends over time. Even two or three years of consistent measurement demonstrates seriousness about impact.
Honest reporting that includes what did not work alongside what did. Sophisticated funders respect organizations that learn from their data.Organizations that build credible impact measurement systems will be significantly more competitive for private funding -- and will make better program decisions in the process.
The Long Game: Building a Funding Model That Does Not Break
Surviving the immediate crisis is necessary. But the real question is: how do you build a funding model that does not put you here again?
The Ideal Revenue Mix for Financial Resilience
There is no single correct revenue mix. But research and practice point to several principles:
No single source should represent more than 30 percent of total revenue. This is the threshold of dangerous dependency. Below it, losing any single source is painful but survivable. Above it, losing that source threatens the organization's existence.
Revenue should come from at least four distinct categories (e.g., government, individual donors, foundations, earned revenue). The more categories, the more resilient.
At least 20-30 percent of revenue should be unrestricted. Restricted funding is valuable but inflexible. Unrestricted revenue gives you the ability to respond to opportunities and crises.
Recurring revenue should be prioritized over one-time gifts. Monthly donors, multi-year grants, long-term contracts, and membership dues provide predictability that one-time gifts cannot.Building Operating Reserves
The National Council of Nonprofits recommends 3-6 months of operating expenses in reserve, with volatile organizations targeting 9-12 months. Yet over half of nonprofits have less than three months on hand, and nearly 20 percent have less than one month.
Building reserves during a crisis sounds counterintuitive, but it is essential. Practical approaches:
Designate 5-10 percent of every new unrestricted gift for reserves.
Include reserve contributions in every grant budget where indirect costs are permitted.
Set annual reserve-building targets and track progress monthly.
Establish a board-approved reserves policy defining target levels, drawdown conditions, and replenishment plans.Strategic Planning as a Survival Tool
Strategic planning is not an academic exercise right now -- it is a survival tool. Organizations with clear plans that account for multiple funding scenarios are making faster, better decisions than those improvising.
As we discuss in our state of strategic planning research, the best strategic plans share several characteristics:
They are living documents, updated annually and referenced in monthly meetings.
They include explicit financial sustainability strategies, not just programmatic goals.
They address leadership continuity, recognizing that executive transitions during funding crises can be organizational extinction events. (See our succession planning guide.)
They center equity, ensuring funding decisions do not disproportionately harm the most vulnerable communities. (See our equity-centered planning guide.)
They are built on honest data, not aspirational projections.When to Bring In Help
Signs Your Organization Needs External Strategic Support
Many nonprofit leaders are trained to do more with less. In a funding crisis of this magnitude, that instinct can be dangerous. Here are the signs your organization would benefit from external strategic support:
You are making major financial decisions without a clear framework. Cutting programs or pursuing new revenue streams based on instinct rather than analysis compounds problems.
Your board and leadership team disagree on priorities. You need a facilitated process to reach consensus before you can act.
You have not updated your strategic plan in more than two years. A pre-DOGE strategic plan is based on assumptions that no longer hold.
You lack internal fundraising expertise for the revenue streams you need to develop. If your organization has been grant-funded for decades, you may not have the skills to build an individual giving program from scratch.
Your team is burned out and overwhelmed. Asking stretched staff to also redesign the financial model is a recipe for failure and turnover.
You are facing a leadership transition at the same time. Navigating a funding crisis during an executive transition requires specialized expertise in both areas.At Giddings Consulting Group, Drew Giddings and our team bring deep experience in strategic planning, revenue diversification, board development, and organizational resilience for social impact organizations.
The federal funding landscape has changed. The organizations that thrive in this new environment will not be the ones that waited for things to go back to normal. They will be the ones that used this moment to build something stronger.If your organization is navigating federal funding disruptions and you are ready to build a strategy for long-term resilience, we would welcome the conversation. Giddings Consulting Group works with nonprofit leaders and boards who are ready to move from reaction to strategy. Reach out today to discuss how we can support your organization's next chapter.
