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The last several days, following the federal freeze on grants and loans, have been quite a whirlwind and mix of emotions ranging from anger, confusion, anxiety and even panic for nonprofits and government agencies around the country as well as those that they serve. Programs providing vital services such as housing, healthcare, domestic violence support, aging services, and even suicide hotlines had been forced to pause or shut down until funds were restored.
This disruption highlights the vulnerability of organizations that rely on grants and donations to sustain operations to serve an even more vulnerable population. It also calls attention to a gross responsibility we have as a country to better support and strengthen these organizations who go above and beyond to put those in their communities on a pedestal to, without reservation or bias, ensure their safety, their support for a better future, and provide services to provide for an individual’s and family’s whole care.
According to data from Urban Institute’s Nonprofit Sector Reports1, approximately 30-40% of U.S. nonprofits receive some form of government funding, including federal, state, and local grants or contracts. The nonprofit sectors that are more likely to depend on federal funding include:
- Human Services Organizations (e.g. housing, food assistance, workforce development)
- Healthcare & Public Health Nonprofits
- Disaster Relief & Emergency Services
The Trump administration said the freeze was intended to provide time to review fund allocation, halt funds to programs that Trump has sought to eliminate, and, overall, control federal over-spending.”2
The National Council of Nonprofits, along with public health and small business leaders, filed a successful lawsuit to block the directive. Although the funds have been made available again to most, this back and forth has caused great confusion and anxiety amongst nonprofits on the future of fund availability and allocation.
For context, federal grants follow a structured process before reaching nonprofits. Here’s a high-level breakdown of how funds are distributed:
Appropriation & Authorization
Congress approves funding through the federal budget process. Congress has control over the $6.75 trillion federal budget. Funds are allocated to federal agencies like the Department of Health and Human Services (HHS), Department of Housing and Urban Development (HUD), etc.
Federal Agencies Distribute Funds
Agencies release grant opportunities through portals like Grants.gov. These can be formula grants (automatically allocated based on a set formula) or competitive grants (awarded based on applications).
Pass-Through Entities (State & Local Governments, Intermediaries)
Some grants go directly to state or local governments, which then distribute funds to eligible nonprofits. Others go to intermediary organizations (like United Way or regional development agencies) that re-grant funds to smaller nonprofits.
Direct Federal Grants
Some nonprofits apply for and receive funds directly from federal agencies without state involvement.
Trump said at the White House “we are merely looking at big parts of the bureaucracy where there has been waste and abuse.” If that is the case, nonprofits need to be thinking proactively, evaluating their own use of funds and impact of services provided to ensure that any future changes in funding allocation is not scary or unattainable for them. Ways in which nonprofits can explore security is to find ways to reduce dependence on external funding sources, ensure financial stability, and gain greater flexibility to serve their communities – no matter what policy changes occur. By diversifying income, nonprofits reduce dependence on external funding sources.
Over the next several weeks and months, more will unfold on how Trump will address his plans to reevaluate funds granted to nonprofits and how funds will be allocated and measures. One thing is certain: in the reactive world of Health and Human services, nonprofits will need to be proactive in their data collection and management. The Trump administration is business-focused and will be looking to see return on their funding investment. They’ll want to see metrics that showcase outcome effectiveness, providing measurable results that reflect program success and impact and they’ll want to see financial accountability, demonstration transparent and responsible use of federal funds.
The Next Generation of Health and Human Services
Whether your organization relies on federal funding or not, we may be experiencing a turning point in the nonprofit sector. This could be the catalyst that moves nonprofits away from paper-based data collection and manual reporting into a technology-focused and metric-driven world. Nonprofits are continuing to serve more but with the same resources. By leveraging solid, forward-thinking technology solutions, they’ll be able to more efficiently and effectively provide services to our communities and to make data-informed decisions to provide whole-person care to individuals and families for strengthened long-term solutions. And they’ll be able to do this with the human resources they have while leveraging technology to better support those individuals.
Organizations that leverage strong case management and reporting databases like CaseWorthy, Inc.’s (CaseWorthy) solutions for health and human services and home and community-based services agencies, have a better chance of organizational longevity and a stronger impact on their community. Our customers tell us the cost of manpower is a constant concern for nonprofits; they can’t simply hire more people to serve the growing number of individuals served. CaseWorthy can help nonprofits manage grants more efficiently by providing robust data collection, compliance, and reporting tools and support their diversity of revenue with billing solutions for reimbursable solutions. Here’s how:
Compliance & Reporting
• Built-in Compliance Checks: Ensure spending aligns with federal regulations (e.g., allowable expenses, reporting deadlines).
• Automated Reporting: Generate reports showcasing performance metrics required for funders.
Case Management & Service Tracking
• Tie Funding to Services: Connect grant funding to specific client services and demonstrate impact.
• Purpose-Built AI: Make data-informed decisions using AI-focused technology built specifically for human service agencies.
Audit-Ready Documentation
• Paperless Records : Maintain a digital audit trail for all expenses, service delivery, and client outcomes.
• Time & Effort Tracking: Log staff time spent on grant-funded activities to support payroll reporting.
Integration with Financial & CRM Systems
• Sync with Accounting Software : Integrate with systems like QuickBooks or MIP for seamless financial tracking.
• CRM & Donor Management : Manage relationships with funders and partners.
Assess Internal Processes Before Seeking Solutions
A key takeaway from the recent federal actions should be to evaluate not just an organization’s sources of funding but also your internal processes and tools. Look for ways to better support your case and care management teams. Boosting their access to data and leveraging data-informed intelligence to offer recommendations, gives them the ability to do what they love in serving others. As the number of individuals needing help in our communities grows each year, your teams are working harder to give them the same support they’ve always provided. A quality, purpose-built, and technology-focused tool for data collection and management will allow them to help the growing number of individual’s in need of services while feeling supported in that effort.
Also, look for ways to better showcase the impact you’re having, setting your organization apart from a competitive landscape of agencies also looking for funding or that are looking to move away from government funding they currently rely on. Overall, look for ways to not only be prepared for a changing funding climate but look for ways to leverage tools and technology of today to reinforce your mission to serve your communities and improve outcomes now and sustainably in the future.
Here are a few key strategies to consider as you evaluate your organization’s funding and internal processes:
Diversify Funding Sources
• Private Donations: Enhance efforts to attract individual and corporate donors to reduce reliance on federal funds.
• Foundation Grants: Seek grants from private foundations that align with your mission.
• Earned Income: Explore opportunities to generate revenue through services, products, or events.
Strengthen Financial Resilience
• Reserve Funds: Build or maintain financial reserves to manage cash flow disruptions.
• Cost Management: Review expenses to identify areas for cost reduction and identify areas to spend more effectively by upgrading tools for more efficiency without compromising service quality.
Enhance Compliance and Transparency
• Internal Audits: Regularly conduct internal audits to ensure adherence to funding requirements and identify potential issues early.
• Transparent Reporting: Maintain clear and accurate financial records to build trust with stakeholders and funders.
Community and Stakeholder Engagement
• Collaborative Partnerships: Build alliances with other organizations to share resources and advocate collectively. Leverage technology to coordinate referrals and service delivery, ensuring whole-person care service delivery.
• Transparent Communication: Keep stakeholders informed about potential impacts and organizational responses to funding changes.
By implementing these strategies, nonprofits can better navigate uncertainties and continue to fulfill their missions despite potential funding fluctuations. The changes this week have exposed great risk to nonprofits’ resources and their ability to sustain support of those in our communities unless we learn from those risks exposed and take change into our own hands.
The Future of Nonprofits Depends on Innovation
In an era of shifting funding landscapes and increasing demand for services, nonprofits can no longer afford to rely on outdated systems and manual processes. Sustainability isn’t just about securing the next grant—it’s about building operational resilience, empowering staff, and maximizing impact. Without best-in-class technology like CaseWorthy’s solutions and CaseWorthy’s purpose-built AI tools, organizations risk higher employee turnover, overwhelmed teams, and an ever-growing vulnerable community in need of support. The nonprofits that thrive will be the ones that embrace modern solutions, streamline their operations, and future-proof their missions. The time to evolve is now—because the communities we serve can’t afford to wait.
