When government funding is in question, nonprofit leaders who rely on this funding often face difficult decisions about their organization’s future. The uncertainty can feel overwhelming, but your board of directors plays a crucial role in guiding your nonprofit through these moments with strategy and confidence.

During our recent webinar, Building Stronger Nonprofit Boards: Increasing Capacity to Maximize Social Impact, Kerri Mollard, CEO of Mollard Consulting, shared practical steps for nonprofit boards to assess risk and prepare for potential funding cuts. In case you missed it, here’s a quick summary of her advice:

Assessing Risk: Know Your Funding Sources

Before making decisions, boards need to understand their organization’s financial position. Kerri recommends starting with a detailed presentation at the next board meeting to break down how much of your revenue comes from federal, state, county, or local government sources.

A common oversight is not recognizing that many state and county funds originate at the federal level. If federal funding slows or stops, it could have a ripple effect on your budget. To evaluate the level of risk, use a dependency quotient: a metric that measures how much of your revenue is at stake if federal funding changes.

Consider these questions:

1. What percentage of revenue comes from government sources? If federal funding stops entirely, how much of your budget would be affected?

2. What is the potential impact of processing delays? Government agencies facing staff reductions may take longer to process payments, leading to cash flow problems. If Medicaid payments have been slow in the past, they may be even slower if administrative staffing is reduced.

3. How much cash is available in reserves? Review the balance sheet to determine how many months of operations can be sustained if funding is delayed or reduced.

Understanding risk is the first step, but the board must also determine how to manage financial disruptions. Kerri suggests several ways to strengthen the organization’s financial position:

• Access to a line of credit - If funding delays occur, does your nonprofit have the ability to borrow temporarily to maintain operations?

• Board giving commitments - Have all board members contributed? Can they make a special one-time gift to help stabilize cash flow?

• Alternative funding strategies - A long-term fundraising plan is essential, but it should be built after assessing risk and financial needs.

Some organizations may be tempted to cut programs or staff immediately, but Kerri advises against making drastic changes too soon. Given the unpredictable nature of federal policy, it’s possible that funding suspensions could be temporary or reversed. Cutting programs prematurely could hurt both the organization’s mission and its ability to serve the community in the long run.

Strengthening Board Engagement

A proactive and engaged board is one of the best assets a nonprofit can have during times of uncertainty. Board members must take an active role in understanding financial risks and working alongside leadership to find solutions. Kerri emphasizes that boards should focus on governance and strategy rather than micromanaging day-to-day operations.

Board members can contribute by:

• Advocating for the organization’s funding needs at the local, state, and federal levels

• Helping to diversify revenue streams by leveraging their networks for fundraising

• Supporting the executive director and staff in strategic planning discussions

Rather than reacting out of fear, nonprofits should take a measured approach based on data and strategic planning. Kerri recommends that boards regularly revisit financial assessments and scenario plans to adapt as circumstances evolve. The goal is not just to survive a potential funding crisis, but to emerge stronger, more resilient, and better prepared for future challenges.

By taking a proactive approach and ensuring board members are fully engaged, nonprofits can navigate uncertainty with clarity and confidence.