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Since the new administration took office on January 20, 2025, nonprofits have faced a wave of regulatory, policy and tax changes. These shifts, coupled with the potential for a government shutdown on March 14, 2025, are creating a challenging environment for community-based nonprofits, federally funded human service agencies, foundations and professional and trade associations.

This article highlights key changes affecting the nonprofit sector and offers practical strategies to help nonprofits adapt and maintain financial stability.

Key policy and funding shifts

Several recent executive orders and federal policy changes have altered the nonprofit landscape:

• DEI restrictions and compliance uncertainty: The administration rolled back federal diversity, equity and inclusion (DEI) programs and extended restrictions into the private sector. Some federal agencies have issued cease-and-desist orders for DEI initiatives, leading some organizations to remove or revise public-facing DEI content. However, compliance guidance has been limited and unclear, leaving many nonprofits unsure how to adjust their policies and uphold their commitments to diversity and inclusion.
• Federal funding disruptions: A temporary pause in federal financial assistance programs — affecting over $3 trillion in federal spending — created significant cash flow challenges for nonprofits that rely on government contracts. While the pause has since been lifted, many organizations are still experiencing delays in funding disbursement and reimbursement due to administrative backlogs and staffing reductions. Uncertainty surrounding future funding streams also makes it difficult for nonprofits to plan long-term programs, maintain service levels and meet their financial obligations.
• Workforce reductions: Federal agencies have also experienced staffing reductions, leading to slower response times and limited communication with grantees. Nonprofits that rely on federal guidance for compliance, reporting and funding approval are facing prolonged wait times, making it harder to navigate regulatory requirements. The decrease in the federal workforce also raises concerns about the efficiency and responsiveness of future funding allocations and makes it more challenging for nonprofits to manage cash flow.
• Federal budget uncertainty: The March 14, 2025, deadline for passing a federal budget presents two scenarios: a continuing resolution (CR) or a government shutdown. The CR would maintain funding levels temporarily. However, uncertainty over long-term appropriations could hinder longer-term nonprofit planning. If a shutdown occurs, nonprofits that rely on federal grants and contracts could face additional financial strain and operational uncertainty.

How nonprofits can adapt to the changing environment

To navigate this new and evolving landscape, nonprofits should take proactive steps to strengthen their financial sustainability and compliance. They can:

• Diversify funding streams: Rather than relying solely on federal funding, nonprofits should explore innovative ways to sustain their missions. Consider alternative funding sources, such as private foundations, sponsorships and individual donations — in addition to new ways of doing business. Nonprofits need to adopt an entrepreneurial mindset to build more sustainable revenue streams. That could mean exploring new service models, developing new revenue strategies or launching creative partnerships that align with their core mission. And since it takes time and continued focus for any nonprofit to diversify funding, it’s important for leadership to be proactive in their efforts.    
• Strengthen performance measurement: Transparency and data are more important than ever. Implementing clear impact metrics and reporting frameworks can help nonprofits communicate their impact and demonstrate their effectiveness to funders, policymakers and the public. This is also a good time to implement stronger financial monitoring systems, such as real-time budget tracking, to respond quickly to funding delays or shifts.
• Update compliance and accountability practices: Compliance with federal grant regulations (such as Uniform Guidance) should be a top priority, particularly when managing indirect costs, allowable expenses and time and effort reporting. Review and strengthen internal controls to prepare for potential new federal oversight measures so financial processes remain compliant as regulations evolve. Regular compliance audits and policy and procedure updates can help identify gaps before they become liabilities. Additionally, nonprofits can invest in compliance training for leadership, finance and program staff to help ensure they fully understand their obligations under changing regulations.
• Enhance data privacy, security and compliance: As regulatory scrutiny increases, nonprofits should review their internal policies and safeguards to help ensure they meet new data security and privacy standards. Strengthening internal controls and risk management frameworks can help prevent compliance issues.
• Advocate for sector interests: Engaging with elected officials and policymakers can help nonprofit leaders shape regulatory discussions. Organizations should proactively communicate the economic and social impacts of their programs through site visits, storytelling, demonstrations and targeted advocacy efforts.
• Strategically manage cash flow: While federal funding delays persist, some nonprofits are considering advance drawdowns beyond their typical funding regulations. This approach is typically not recommended but may be necessary to meet payroll or keep operations running. Organizations facing urgent financial needs should document their decisions carefully, seek board oversight and consult with auditors before proceeding. In past government shutdowns, funds were eventually made available, but in the current climate, the risk of nonpayment is higher than in previous years.
• Plan for workforce changes: Ensure your HR team is informed about changes to labor laws, including wage and hour regulations, overtime requirements and evolving workplace policies related to DEI. Amid funding uncertainty, nonprofits should assess their staffing needs strategically and prepare for potential funding fluctuations. Develop workforce contingency plans to maintain stability in case of budget cuts or shifting grant priorities. Invest in leadership development and succession planning to help ensure long-term organizational resilience, even in uncertain conditions.
• Support staff members: Leaders must recognize that ongoing regulatory changes, funding delays and job uncertainty are putting significant stress on their teams. Foster a culture of transparency by openly acknowledging challenges and providing regular updates on organizational decisions, funding concerns and strategic plans. Offer professional development opportunities to help employees feel valued and empowered, even in times of uncertainty. And create safe spaces for staff to voice concerns and share solutions, whether through team check-ins, town halls or anonymous feedback channels. Investing in well-being can reduce turnover and support improve morale — so staff are motivated to fulfill the organization’s mission.

How Wipfli can help

Building resilience in this environment requires financial expertise and strategic planning. Wipfli provides comprehensive, turnkey support to help nonprofits navigate new challenges, stay compliant and find financial stability. We offer solutions in leadership and team development, finance, accounting, risk management and compliance — so your team can focus on its mission.

Let’s build stronger communities and a brighter future together. Visit our nonprofit industry page to learn more.

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