The threat of government shutdowns are starting to become the norm here in America. The government shutdown that began last week may have been predicted, but wasn’t expected by many – thinking our political leaders would come to agreement to prevent the shutdown from occurring. The 24 hour news stations had the doomsday clock running all day September 30th and effective midnight of October 1st, the federal government officially shut down. While many people think about the federal employees facing potential layoffs and furloughs, the effects of the shutdown reach much further and may already be impacting your nonprofit organization.
Nonprofit organizations that receive federal funding through grants and contracts will most likely see delays in payment with federal grant administration being delayed. These delays are a result of many federal agency staff administering the program being deemed non-essential and thus furloughed.
For example, during a shutdown the Department of Housing and Urban Development (HUD) may not make payments for low income housing contracts, grants to help run community shelters and many other programs receiving federal funding from HUD. For smaller nonprofit organizations that do not have strong cash reserves, the delay in payments could quickly have a severe impact. A prolonged government shutdown may impact funding from Veteran’s Administration and the Department of Education as well.
For nonprofits with affecting funding, immediate changes will need to be made in order to continue to provide the same services, with expenses likely being reduced immediately. Most nonprofit organizations have their highest expenses in their employee and staffing expenses. It is important for organizations to fully understand their employment contracts and applicable laws such as the Fair Labor Standard Acts before making decisions on how to handle the situation. The solution could be layoffs or furloughs if the shutdown lasts longer than a couple weeks. It is also important to remember that throughout the process the staff morale will be low and it is important to explain the reasons for actions taken and try to keep spirits high.
Organizations also need to keep in mind that even though funding is being delayed from the federal government, their clients are still in need of services, and demand may even increase. For example, individuals receiving benefits through TANF or WIC benefits may see delays or decreases in assistance during the shutdown. This creates an even higher demand for programs such as meals on wheels and food pantries. The organizations running those programs will be forced to juggle the needs of their clients with having the funding to support those programs.
Lastly, during the government shutdown new grants will not be accepted by the federal government. This means that if current grant agreements are coming to the end of their funding period, there could be a gap in funding from the end of the current grant period until a new grant is finally received and approved.
Organizations that are being impacted by the shutdown should keep a detailed listing of how the shutdown has added to their expenses in case a claim can be made to recover those expenses once the shutdown has ended. Also, organizations should look to other sources of funding such as private foundations and fundraisers from the general public to help keep operations afloat.