Imagine if your salary was slashed. Would you still be able to pay rent or cover your essentials? Many U.S. nonprofit organizations have relied heavily on government funding to carry out their missions. Reduced nonprofit funding is making it difficult for organizations to continue their operations and serve their communities.

Current Federal Cuts

Funding has been cut for many public media nonprofit organizations, such as PBS and NPR. Science, Technology, Engineering, and Medical (STEM) research funding has been cut, slowing the progress of cures. At universities, PhD programs that rely on federal grants are reducing admissions and new hires.

Federal departments and agencies have received budget cuts, leading to hiring freezes and mass layoffs. While these cuts have affected many private companies with federal government contracts, they also affect many social welfare programs, including SNAP and Medicaid. Food banks have seen an increase in demand, and therefore, an increase in food donations has been needed. Hospitals have seen an increase in patients who are unable to afford treatment due to reduced Medicaid coverage.

Diversify Your Portfolio

If there is one takeaway from this post, it’s this: diversify your revenue streams. “Diversify your portfolio” is a common recommendation in the investment industry, where diversification helps to mitigate risk and volatility. Similarly, nonprofit organizations can weather funding droughts by diversifying their sources of income. Here are some ways to consider diversifying your revenue streams:

• Hire a fundraising consultant or development staff. These individuals can increase reach to donors, help identify new contribution sources, and increase awareness of your mission. They may suggest having a special fundraising event, developing monthly giving options, marketing for planned giving (such as bequests or donor-advised funds), or considering options for corporate sponsorships.
• Look for ways to create fee-for-service revenue. Consider adding a membership fee or charging for training, education, or consulting services.  Leverage existing staff and organization expertise to create new sources of revenue.
• Review investment policies. Ensure the organization earns interest by using interest-bearing accounts.  Also, work with your investment advisor to review investment options and risk tolerance in the current climate.

Reducing Expenses

Nonprofit organizations typically function on tight budgets already, but if you’re unable to increase your revenue, look towards these next steps for reducing expenses:

• Restructure Events. If your event typically does not make money, consider doing it every other year rather than annually to reduce costs, or move to a virtual format. The organization could also consider replacing one large gala with multiple smaller, focused gatherings or seeking in-kind donations to cover some costs.
• Embrace Technology.  Look for technology solutions that could create efficiencies to maximize impact with fewer resources. Technology solutions can also automate tasks, not only reducing time but also human errors.
• Seek Volunteer labor.  Look for ways volunteers might be able to assist the organization. Consider partnering with local universities and their various clubs, rather than hiring additional staff.

Contact us to discuss your organization’s options, or visit our other blog posts about weathering federal funding cuts.