Nonprofit Leaders Answer: How is Your Nonprofit Preparing for Potential Changes in Government Funding or Tax Laws?
Nonprofit leaders share the proactive steps they take to reduce risk, strengthen financial stability, and prepare for uncertain policy and funding environments.
With shifting political and economic landscapes, nonprofits are keeping a close watch on the horizon as potential changes to government funding and tax laws loom.
We recently asked the Blue Avocado community, “How is your nonprofit preparing for potential changes in government funding or tax laws?” and, as always, the responses were thoughtful, creative, and full of practical wisdom.
Here’s a summary of some of the best answers we received:
Leveraging Individual Donations Over Complex Government Grants
The New Mexico Performing Arts Society (NMPAS) relies mainly on individual donations.
We don’t apply for many government grants, other than those offered locally in cities where we perform.
In this sense, we’re not facing major cutbacks in support.
It has been our experience that the amount of work involved in applying for and reporting back to government funders is not worth the time involved.
Despite this fact, NMPAS is very interested to improve our marketing and PR plan for the upcoming 2026-2027 season and to increase the number of grant applications to foundations and non-governmental sources.
— Linda Marianiello from New Mexico Performing Arts Society
Mitigating Operational Risks From Regulatory Shifts
We are searching for overlapping funding from different sources for our programs.
This allows us to respond to random executive orders that prohibit us from providing some of the services we provide.
For example, if federal funding can no longer be used for marketing materials that may mention sexuality, then we can use an alternative funding source.
Also, due to the uncertainty of future funding, rental properties for housing programs are now on short-term leases.
This requires that we pay more each month in rent, and therefore have less housing available, but covers us if the funding is not renewed.
We have had funding that has been renewed for many years disappear.
Long-term leases allow us to negotiate a better rate, which allows us to help more people, but we cannot commit to a lease if we are uncertain if the funding will still be available next month.
— Darryl Evey from Family Assistance Program
Diversifying Revenue to Limit Financial Exposure
We’ve really focused this past year on building a more financially resilient organization.
For us, that comes down to three key priorities:
- Diversifying our revenue. We try to make sure that no single funding source accounts for more than 20% of our budget. Along with grants, we’ve invested in a strong monthly donor program and generate additional income through our local training workshops.
- Building financial reserves. A six-month operating reserve is the target. It gives us the stability to keep supporting our staff and delivering programs when funding is delayed or unexpected challenges arise.
- Staying proactive and connected. We regularly (at least try to) share impact data with our donors so they understand the difference our work is making in the community helping build trust and support over time.
Focusing on these key areas has really helped us shift from reacting to funding changes to planning for them instead.
Ultimately, having a six-month reserve and diverse revenue streams gives us the confidence and breathing room we need to continue serving our mission and community the best we can.
— Cindy M. from The Empowerment Network
Note: The opinions and product/service recommendations expressed above are solely those of the participants and do not necessarily represent those of Blue Avocado. Submissions may be edited for length and clarity.
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Blue Avocado is an online magazine fueled by a monthly newsletter designed to provide practical, tactical tips and tools to nonprofit leaders. A small but mighty team of committed social sector leaders produces the publication, enlisting content from a wide range of practitioners, funders, and experts.
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Diversifying revenue is a good strategy. It’s not a good idea to rely on government funding. It’s not just about Trump’s executive orders. Government money often comes with strings attached. Politicians can shake down your organization for campaign donations or jobs. They can try to influence your hiring decisions and Board elections. They can threaten to cut off your funds if you don’t comply with their requests (demands).