Catching your breath after last week’s federal funding roller coaster? Think again.
On January 27, 2025, the federal Office of Management and Budget (OMB) sent a memo to federal agencies to institute a pause in “federal funding assistance.”
Later that evening, United States District Court Judge Loren L. AliKhan issued a temporary stay of that order until February 3.
On January 29, OMB issued a succinct memo indicating that the January 27th memo was rescinded.
Later that evening, the White House issued an announcement that only the original memo calling for the freeze had been rescinded — not its effort to review federal spending.
So, if you are a nonprofit that receives federal funding, can you sleep easier now – or not? My short answer? NO. You just got a wake-up call and now is the time to listen and act to hedge your funding risk.
Remember that when federal funding is at risk, there will be a lot of nonprofit organizations going after the same alternative sources of funding. That means that state funds and those coming from foundations will be pursued by numerous organizations. Funding from corporations and individuals tends to be the area that nonprofits pursue least frequently, so focusing on them now provides an advantage.
If the pandemic taught (or should have taught) nonprofit organizations anything about their funding, it is that the best risk management strategy is to ensure that funding is diversified. So many organizations scrambled when they were no longer able to host their big fundraising event. Many museums and cultural institutions floundered when they could not generate revenue from ticket admissions. Social safety net organizations (food banks, housing assistance, etc.) received a surge in funding, while more elective organizations (museums, galleries, etc.) saw funding plunge. And when American Rescue Plan Act funds that provided stable funding during the pandemic ran out, nonprofits felt the squeeze. Friends, if you did not learn the lesson then, please learn it now: YOU NEED TO DIVERSIFY YOUR FUNDING STREAMS!
I did a quick Google search to see what kind of advice people were giving nonprofits about the federal funding pause and saw that they were encouraged to contact their members of Congress and advocate for the restoration of funds. While advocacy can be helpful, it may not help organizations meet payroll, keep staff, or fully fund their mission-critical work in the short term. Here is my list of the seven things you can do RIGHT NOW to help protect your organization from the risk of federal funding uncertainty:
- DIVERSIFY YOUR FUNDING STREAMS! I know that writing in all caps means that you are screaming – and yes, I am. Do what you need to do right now to build a stable of individual donors to support you. Research new potential funding partners – individuals, corporations, foundations – and meet with them. Always be meeting with prospects. And do not take your foot off the gas, even when your check from the U.S. Government clears your bank account.
- Issue a special fundraising campaign to mobilize your donors. Many donors are as upset as you are about the stress federal funding uncertainty places on your organization. Share what you have heroically done this week to keep the lights on. Invite your donors to feel your pain – and open their wallets.
- Tap into your reserves. Reserves are made for days like today, when emergencies crop up and you cannot pay your bills. Do not hesitate to use your reserves to cover your expenses in these extraordinary times.
- Apply for a line of credit. A nonprofit organization is a business. Businesses have lines of credit to help them navigate times when cash flow is weak. Aim to secure a line of credit that will cover your organization’s expenses for at least three months.
- Ask your board members to make an interest-free loan.This loan can provide you with additional cash flow just like a line of credit would. However, you would not have to pay any interest and could draw up terms that are beneficial both to your board members and to your organization – including the length of the term. If you decide to go down this path, ensure that the terms are documented in a memorandum of understanding.
- Cut expenses that you do not need to incur now. Do you have an open position? Hold off on filling it until you are confident you have sufficient funding. Planning a major conference? If you haven’t made any deposits, consider scaling it back or hosting it online unless it generates a lot of revenue.
- Communicate! Most donors are aware of the funding pause – but may not be aware of how the pause impacted you. Even though the pause was rescinded, your organization may still have been impacted as you created scenario maps and managed staff anxiety. Being transparent about those challenges helps strengthen trust with your donors.
While these can be challenging times for nonprofits, there’s nothing like a good challenge to push us to be the best we can be.
About this blog:
The Midcoast Charity Insider

Diane Lebson, CFRE, is CEO and Co-Founder of Evergreen Philanthropic Solutions, a Camden‑based consultancy that helps nonprofits in our community, throughout Maine, and across the country raise money and plan for their futures. She is also on the graduate faculty at the University of Maine’s School of Policy and International Affairs where she teaches courses on fundraising and nonprofit management. Diane is the author of For A Good Cause: A Practical Guide to Giving Joyfully. Her column, The Midcoast Charity Insider, focuses on issues pertaining to the business of doing good on Maine’s Midcoast.