S Diz Consulting

When the federal government undergoes a funding lapse — commonly known as a government shutdown — the ripple effects can reach nonprofit organizations in surprising ways. For nonprofits that rely on federal grants or cooperative agreements, understanding the risks and proactive strategies is key to staying resilient.

🔍 What is a Government Shutdown?

A “shutdown” happens when Congress fails to pass the appropriations (or continuing resolution) required to fund federal agencies for the new fiscal year. Under the Antideficiency Act (1884 / amended), agencies may not legally obligate or expend funds without a valid appropriation. NCSL+3Tennessee Tech University+3UCLA Contract & Grant Admin+3
In those circumstances, many federal operations stop or scale back, non-essential staff may be furloughed, and new actions (including new grant awards or payments) may be suspended.

✅ Why Nonprofits Should Care

Even if your nonprofit doesn’t appear to be immediately affected by a shutdown, the following are routes by which your funding or operations might encounter disruption:

• New awards paused – Grant / cooperative agreement solicitations may be delayed, new awards may not be issued until funding resumes. (See: “What Does the Federal Shutdown Mean for Grants?”) Management Concepts+1
• Obligation or payment delays – Even current awards may face delays in payments, reimbursements (especially “cost‐reimbursement” grants), or processing. Tennessee Tech University+1
• Agency capacity reduced – With furloughed staff and reduced operations, technical assistance, monitoring, oversight, and correspondence may slow. For example, the Department of Education estimated 87% of its staff would be furloughed in a recent shutdown; new federal education grants would be paused. AP News+1
• State and local ripple effects – If your nonprofit is in partnership with a state agency that receives federal pass-through funds, those funds may be delayed, creating downstream cash-flow risks. NCSL+1
• Longer shutdowns = greater risk – The duration matters. A brief stop may cause manageable delays. A prolonged lapse can lead to cancelled solicitations, missed deadlines, or even rescinded awards. NCSL+1

🧾 Reliable Resources for Tracking & Planning

Here are trustworthy .gov / .org sources your organization can use to track impacts and plan accordingly:

• National Conference of State Legislatures (NCSL) – Federal Government Shutdown: What It Means for States and Programs. Updated Nov 13 2025. Covers how federal funds to states are impacted, agency contingency plans. NCSL
• Council on Governmental Relations (COGR) via UCLA – “Government Shutdown – Grant & Contract Considerations”. Practical guidance for higher education and research—but many points apply to nonprofits. UCLA Contract & Grant Admin
• Management Concepts – Article: “What Does the Federal Shutdown Mean for Grants?”. A clear review of pre-award and post-award processes. Management Concepts
• Agency contingency plans – When a shutdown looms or begins, many federal agencies publish “continuity of operations” plans that include grant office impacts. Check the relevant agency for your funding. (Referenced in NCSL and UCLA pages above.)
• Congressional or Representative FAQ pages – For example, the office of Becca Balint provides plain-language FAQs on what a shutdown means for the public. Balint House

🧭 Key Steps Your Nonprofit Should Take

Here are some recommended actions your organization can take now to mitigate shutdown-related risk:

1. Review all current federal awards – Note which grants are subject to annual appropriations vs. mandatory funding. Those that rely on annual funding are most at risk.
2. Check payment/reimbursement status – If you rely on reimbursement funding, assess your cash-flow buffer. A payment delay can quickly strain operations.
3. Monitor new solicitations – If you are planning to apply for a new federal grant, monitor the agency’s status (Are solicitations delayed? Are new awards on hold?).
4. Communicate with your federal Program Officer or Grants Officer – Ask: “In the event of a funding lapse, what’s the contingency for this funding line?”
5. Engage your board and leadership – Ensure they understand the risk, and have a plan if funding is delayed (e.g., pause hiring, reduce drawdown, plan for carryover).
6. Explore alternative funding – If federal funds are delayed, consider ramping up private philanthropy, reserve funds, or state/local sources to bridge any gaps.
7. Document delays – Keep records of any communication or delay attributable to the shutdown. This can help for audit / compliance when operations resume.

🎯 How S Diz Consulting Can Help

At S Diz Consulting, we understand the complexity that federal funding cycles and contingencies introduce. If your nonprofit is managing federal grants or preparing to submit new federal proposals, we can support you with:

• Grant portfolio review: identifying which awards are most exposed to appropriation risk
• Cash flow impact modeling: estimating the effect of funding delays and creating mitigation plans
• Proposal strategy: advising on diversification of fund sources to reduce dependency on vulnerable funding
• Board / leadership training: equipping your team to understand and respond to shutdown risk.

📝 Final Thoughts

A government shutdown doesn’t mean all federal grant funding stops—but it can cause significant disruption to new awards, payment timelines and agency staffing. For nonprofits, being proactive is the difference between weathering the disruption or being caught in a cash-flow crisis.

By using the resources above and having your contingency plan ready, you’re putting your organization in a stronger position. If you’d like assistance reviewing your federal grant exposure and building your risk-mitigation plan, let’s talk.

Thank you for being part of the S Diz Consulting community. Stay prepared and mission-focused.