April 22, 2025 - Not-for-profit organizations across the country are grappling with unprecedented challenges as they adapt to recent federal funding cuts and newly implemented tariffs. These financial pressures are reshaping their operations and the way they serve their communities, especially during a time when their programming is needed more than ever.

Federal Funding Reductions Hit Core Programs

The latest round of federal budget pauses and cuts has had a profound impact on not-for-profit organizations that rely heavily on government grants and contracts. These cuts have particularly affected smaller not-for-profits, which often lack the financial reserves or diverse funding streams of larger organizations. Organizations providing essential services in healthcare, education, social services, and the arts are facing significant reductions in federal support, exceeding 10% in many cases. Consequently, many not-for-profits are now confronted with challenging decisions about which programs to retain and which to scale back.

Tariff Implications Extend Beyond Direct Imports

While not-for-profits might not immediately notice the effects of trade policies, the recent tariff increases are likely to have cascading impacts on their operations. Organizations importing supplies, equipment, or materials for their work are already facing immediate cost increases.

International relief organizations have been particularly hard hit, with numerous federal initiatives and programs being halted. Even not-for-profits with primarily domestic operations are experiencing secondary impacts as vendors pass on increased costs. For instance, construction and renovation projects for affordable housing organizations have seen material costs rise significantly, reducing the number of housing units they can develop.

Broader Economic Uncertainty Compounds Challenges

These specific financial pressures arise during a broader period of economic uncertainty. Inflation has increased operational costs across various sectors including utilities, insurance, and wages. Simultaneously, it has reduced the purchasing power of fixed grants and contracts. Not-for-profits are being asked to do more with less. Moreover, the communities they serve are grappling with the same economic challenges, leading to an increased demand for their services.

Adaptation Requires Innovation and Difficult Choices

In response to fiscal pressures, not-for-profits are implementing diverse strategies to sustain their missions.

1. Many organizations are intensifying their fundraising efforts, particularly by building relationships with individual donors and local foundations that are less impacted by federal policy changes.
2. Strategic collaborations are becoming increasingly important, as not-for-profits share administrative resources, combine programs, and even consider mergers to establish more sustainable structures.
3. Some organizations are exploring social enterprise models to generate unrestricted revenue that can help offset federal funding losses.
4. Digital transformation initiatives are assisting organizations in streamlining administrative functions and reducing overhead costs.

The Road Ahead

Not-for-profits provide essential services that governments often cannot offer directly and that businesses find unprofitable. When fiscal policies negatively impact the not-for-profit sector, communities, particularly those with the most vulnerable populations, suffer.

As these challenges accumulate, not-for-profit coalitions are urging policymakers to reevaluate the full consequences of federal funding decisions and tariff policies.

Concerns about liquidity and long-term sustainability persist due to these external actions and pressures. As not-for-profits navigate this evolving landscape, their ability to adapt while upholding their missions will determine not only their survival but also their capacity to continue making a meaningful difference in the communities they serve.

How Can Citrin Cooperman Help

Citrin Cooperman’s dedicated professionals are continuing to monitor these federal developments closely and will share updates with our not-for-profit clients and constituents as available. Please reach out to any of our not-for-profit professionals as to how we can assist your organization in navigating these changing regulations and times.