How Can Nonprofits Remain Resilient Amid a Government Shutdown?

Background

The federal government is in a partial shutdown that began on October 1.  Essential services continue, but many agencies have furloughed employees and delayed operations, which can slow reimbursements and pause certain program activities. Below, we offer advice for nonprofits navigating the impacts of the federal government shutdown.

Which Nonprofits Are Most Impacted?

If your organization receives federal grants or contracts, a shutdown will likely have a direct impact. Nonprofits providing services in areas like social services, housing, education, healthcare, or research are often the first to feel disruptions when reimbursements or program funding are delayed.

If your nonprofit relies primarily on private donations, foundation funding, or fee-for-service programs, you may not experience an immediate financial impact. However, you could still be affected indirectly. This may include increased community need, higher demand for services, or delays in receiving federal data that affect reporting and planning.

If you are an organization seeking tax-exempt status from the federal government, you may need to adjust your timeline. Unfortunately, processing applications for tax-exempt status is not considered essential by the federal government. As a result, it may take significantly more time for your application to be reviewed and ultimately approved.

Review Contingency Plans

Each federal agency is required to maintain a contingency plan outlining what operations continue during a lapse in appropriations. Nonprofits with federal grants or contracts should review their funding agency’s most recent plan to understand:

• Which programs or activities are deemed “essential”
• Which staff or functions may be furloughed
• How communication will be handled during the shutdown

If your organization does not have a copy of the agency’s plan, request one and review it with your program and finance teams. For nonprofits needing additional guidance, consider bringing in an advisor familiar with federal funding compliance to assist with funding agency contingency plan review.

Assess Your Financial Exposure

Take time to evaluate which programs could be disrupted and how a pause in reimbursements might affect your cash flow. Create or update cash flow projections to estimate how long you can sustain operations without federal payments.

Consider whether you can use unspent carryover funds, program income, or reserves to maintain continuity. If your organization has multiple funding sources, identify areas where flexibility may help bridge temporary gaps.

If your nonprofit partners with an outsourced accounting or advisory team,  now is the time to lean on their expertise. Your advisors can create projections for different scenarios to ensure operations continue to run smoothly amidst the uncertainty.

Clarify Guidance for Contractors and Grantees

Before and during a shutdown, communication from federal agencies might be limited. Be proactive by contacting your grant or contract officer to confirm whether your work should continue. Obtain written documentation of any instructions or approvals, as this may be important for compliance or audit purposes later.

Some grantees with unobligated balances may be allowed to continue operations temporarily, but keep in mind that reimbursements will likely be delayed until the government reopens.

Maintain Compliance and Documentation

It is important that your nonprofit continues to follow your grant and contract terms carefully. Avoid incurring new costs that are not already obligated, and document all activities and expenses in detail. This recordkeeping will help ensure compliance and provide clarity if questions arise after funding resumes.

If your organization is uncertain about allowable activities during a funding lapse, consider consulting your auditor, legal advisor, or grants management expert.

Use Downtime Productively

If your operations slow due to funding delays, use the time to strengthen your organization internally. Some ideas include:

• Catching up on reporting or compliance tasks
• Training staff
• Updating systems or data tracking processes
• Reviewing policies and internal controls
• Engaging in stakeholder outreach and/or advocacy

Turning this period into a strategic pause can help your organization emerge stronger when federal operations resume.

We’re here to help.

Shutdowns are disruptive, but the nonprofits that plan ahead financially and operationally can better navigate uncertainty and protect their mission. The Wegner CPAs advisors are here to support you through the federal shutdown and beyond. Reach out to learn more about how we can help.