Nonprofit Leaders Answer: What is a Contingency Plan Your Nonprofit Has for Unexpected Funding Cuts?

Diversifying Revenue To Ensure Stability

At the DC LGBTQ Community Center, we know that funding can sometimes be unpredictable, so we’ve put a plan in place to make sure our programs keep running no matter what. We rely on a mix of grants, donations, sponsorships, and events, so we’re not dependent on just one source of income.

We also keep an emergency reserve fund to cover essential operations if there’s a shortfall. If we ever need to tighten our budget, we focus on maintaining core programs while temporarily scaling back less-critical activities.

On top of that, we can quickly rally our community and donors, and we work closely with local partners to share resources when needed. This way, even if funding changes, we can keep supporting and uplifting the LGBTQ+ community in Washington, DC without missing a beat.

— Paul Marengo from The DC LGBTQ+ Community Center

Aligning Budgets With Expansion Vision

In nonprofits I’ve been employed with, on the board of, or consulted with, I try to have organizations develop three budget models each year.

One, the status quo, usually a slight increase from the prior year. This is usually the board-approved budget.

I also seek to develop a hypothetical budget with a significant reduction in revenue, usually 20%. Your’s could be more or less.

I also work on a budget with a significant increase, maybe 20%. The significant increase starts to consider the question “what would we do with an unexpected windfall?”

Years ago, while meeting with a family-run foundation to make a request, the foundation leader wrote a number on a napkin and pushed it across the table, asking “what would you do with this?”

The number had an extra zero on what we asked. Fortunately, we had thought about what would happen if we had the funds to expand.

—  Brad Webb from Greater Impact Consulting LLC

Eliminating Chaos Through Financial Readiness

The Urban School Food Alliance switched to project-based funding a few years ago. We discuss ideas and the how to get it done — even with outside stakeholders to make sure it is a reasonable project and there is interest in the work.

Our second step is to tell everyone involved the “plan” and “it will start if and when we find the funding for it.” We stopped doing things if we do not have the funding up front, making for a much better environment. No more chaos.

Many other organizations look to us for information and insights on school meals, and we now tell them that, if they want a consulting session with us, it needs to come with funding.

Too many other organizations get a grant and then come to us for the insight and advice. We have decided to understand the value we bring to the table.

We also started a savings account to make sure we had three months of operating funds — including salaries — in that account for any crisis that might happen. That gives us a cushion for staff to find other jobs if necessary.

— Katie Wilson, PhD, SNS from Urban School Food Alliance

Prioritizing Core Program Continuity

If we ever face an unexpected funding cut, our first priority is making sure our core programs continue without disruption. We keep a modest operating reserve, regularly review which expenses can be paused without affecting clients, and make sure staff are cross‑trained so we can stay flexible if roles need to shift.

At the same time, we move quickly on the revenue side by reaching out to our most-engaged funders, increasing individual donor outreach, and accelerating grant applications already in progress so we can stabilize and keep moving forward.

— Alex from Community Bridge

Prioritizing Consistent And Transparent Updates

One leadership habit that has made the biggest difference for our nonprofit is consistent, transparent communication. This means not only sharing updates regularly, but also explaining the “why” behind decisions, especially during times of change or uncertainty.

By making communication a routine rather than a reaction, we’ve built stronger trust across staff, volunteers, and stakeholders. People feel more connected to the mission when they understand how their work fits into the bigger picture, and that clarity has reduced confusion, improved collaboration, and increased overall engagement.

Equally important is creating space for two-way communication. Transparency isn’t just about broadcasting information, it’s about listening intentionally and acting on what we hear. Regular check-ins, open forums, and feedback loops have helped surface ideas and concerns that might otherwise go unnoticed.

Over time, this habit has strengthened our culture, making it more inclusive and adaptive. When people feel heard and informed, they are more committed, more innovative, and more willing to step up as leaders themselves.

— Paul Marengo from The DC LGBTQ+ Community Center

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