When a Federal Grant Suddenly Ends

Political changes can lead to changes in laws, policies, and rules. In the first few months of 2025, many federal grants and contracts have been terminated. Thousands of federal employees have been fired. The functions of complete agencies have been eliminated. There continues to be uncertainty about the future of many federal grant programs. While the legal status of these actions may still be unknown, nonprofits must decide how to move forward.

 

Regarding government-funded programs, nonprofit leaders are or may be facing tough decisions. A review of options is required. As always, your organization’s mission needs to be front and center.

 

If you learn and have confirmed that your federal grant is canceled, here are a few options:

1. Modify/reduce program services.

• Can program services be modified but still be effective?
• Are you able to bridge the gap until additional funding is secured? If so, for how long? Do you have adequate cash flow for this period?
• Could or must staffing levels be reduced?
• Review and revise the program budget. 

2. Find replacement funding.

• Use organization reserves, if available.
• Communicate with your other private funders and donors. Show the value of services. Explain how your program helps people in your community. Describe the outcomes, both for clients and the broader community.

3. Terminate the program, if necessary.

• Unfortunately, sudden loss of grants and contracts can result in program termination completely.
• Are resources available to reduce activity for a smooth transition leading to closure, creating as minimal impact as possible on the community served?
• How can the negative impact of ending services be minimized?

We are seeing the impact of policy changes on federal grantmaking. While this article addresses government grants ending due to political changes, there are other situations where a grant ends before expected. Those will be addressed in a related article: Losing a Grant.

 

Diversification of funding, strategic planning, continual assessment, and building reserve funds can help us weather a storm.  Communication with our constituencies is always helpful. (Watch for upcoming related article: Communicating About Federal Grant and Contract Cancellation, Pauses and Uncertainty.)

Patty Wolfe is an independent consultant to nonprofit organizations.

 

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