Foundations and Donors Can’t (and Won’t) Fill the Government Funding Gap — and What You Can Do About It

If you’ve worked in the nonprofit sector for more than a minute, chances are you’ve been told to diversify your funding streams. And it’s solid advice — no one source should be carrying the full weight of your mission.

But here’s the truth that needs to be said out loud: diversification isn’t a panacea, especially in today’s volatile economic and political climate.

Many organizations heavily reliant on government funding are feeling the pressure right now. And while foundations and individual donors are critical partners, they simply can’t replace what has traditionally been covered by public dollars — not in scope, not in scale.

Let’s break that down:

• Foundations aren’t equipped to fill structural funding gaps left by the government. They often fund pilot projects, innovation, or capacity-building — not ongoing operations at the scale most direct-service providers require.

• Individual donors are generous and vital, but growing this base takes time. It’s about relationships, not transactions. You can’t build a broad, loyal base of support overnight — especially not in a moment of crisis.
  

And while government funding isn't technically frozen across the board, things are changing daily and many organizations are finding it harder to access promised funds. Programs heavily backed by the previous administration may be restructured, reduced, or eliminated. We simply can’t afford to assume next year’s budget will look like last year’s.

So what can you do — especially if you haven’t been laying the groundwork for diversification, or if you're overwhelmingly reliant on government funding?

Have Real-Time Conversations with Your Board

If your board only meets quarterly, that may not be enough anymore. If your funding is at risk, you may need monthly — even weekly — meetings to stay agile and responsive. Keep them informed, loop them into key decisions, and treat them as strategic partners, not just overseers.

Scenario Planning Is a Must

Don’t wait for the floor to drop. Map out a few potential financial futures:

• What does your budget look like if you lose 10%, 20%, or 50% of your government funding?

• What program or staffing shifts might be needed in each scenario?

• What are your red lines — the cuts you won’t make?Getting ahead of these possibilities won’t make the decisions easier, but it will make them more manageable.
  

Stay Informed and Connected

Subscribe and pay attention to updates from the National Council of Nonprofits, Council on Foundations, and other policy trackers. Things are evolving quickly — from state allocations to federal program funding — and staying informed can help you pivot sooner.

Talk to Your Donors — Not Just About Money

Your donors may not be able to cover a million-dollar gap, but they may have insights, networks, or advocacy tools you haven’t tapped into. Invite their wisdom. Ask how they’re seeing things shift. Let them into your strategy conversations.

Make the Hard Choices Early

I recently spoke with a nonprofit leader who said they are sharing this advice with other leaders:

“You may have to do layoffs. But it’s better to be honest with your team now than to let them sit in anxiety. Give them as much lead time as you can. Assist them where you’re able. But make the hard decisions early — before they’re made for you.”

This is painful advice — but it’s responsible. Your team deserves clarity, and your mission deserves sustainability.

Bottom Line: Diversification Helps, But Strategy Saves

If you haven’t been able to diversify yet — or if it won’t be enough — that doesn’t mean you’re doomed. But you will need to lead bravely, plan actively, and act decisively.

There’s still time to make strong moves — and you don’t have to do it all at once.

Keep focusing on the work you do well. This is a moment to double down on your strengths and lean into what makes your organization essential. It doesn’t mean your mission has to change — but it might need to adapt. That could mean scaling differently, shifting the way you deliver, or narrowing your scope for a season.

You already know how to do what you do best.The next few years might look a little different — but your impact still matters.

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Frances Roen is a Georgia girl at heart, and has been graciously adopted by beautiful, snowy Minnesota. She is a forty-something daughter, friend, mom, wife, and entrepreneur, and is always on the look-out for a perfectly

fried piece of chicken.

Frances is a Certified Fundraising Executive (CFRE) with nearly 20 years of experience fundraising and has raised over $200M for nonprofits. She has held fundraising positions at The Bakken Museum, Augustana Care Corporation, and YouthLink and consulted with dozens of nonprofit clients across the globe. In these roles, she has been responsible for all aspects of fundraising including comprehensive campaigns, major and planned gifts, annual funds, events, communications, corporate partnerships, and volunteers.