Congress has until the end of the week to reach a budget deal before funding for many federal programs expires, and nonprofits expert say charities should take steps now to anticipate the threat of a government shutdown.
“Hopefully it doesn’t come to fruition, but sometimes this stuff goes right up to the wire and it is always a good idea to be prepared rather than be behind the eight ball,” said Dismas Locaria, a Washington lawyer who advises nonprofits on government contracts and grants.
A government shutdown would be politically costly for the Trump administration and Republican leaders on Capitol Hill, and many congressional observers expect a deal to be worked out.
However, partisan fights over health care and Mr. Trump’s demand that the budget bill include money for his promised wall on the Mexican border could prevent lawmakers from reaching an accord.
The nonprofit sector can’t stand by while kids in Head Start programs get sent home.
Shutdowns are taxing on nonprofits, which collectively get about a third of their revenue from government service fees, contracts, and grants. During the 2013 government shutdown, half of nonprofits that receive federal dollars reported in a survey by the Nonprofit Finance Fund that payments were stopped or delayed. Nearly a fifth of those groups said they had scaled back or shut down programs as a result, and 5 percent reported layoffs or staff furloughs.
There were examples of philanthropy stepping up, such as Houston donors Laura and John Arnold giving $10 million to keep 13 Head Start programs operating. More than 100 members of Congress pledged to give the wages they earned during the shutdown to charity. Donors were quick to contribute to an emergency fund established by the Fisher House Foundation, a charity serving veterans, to cover death benefits for families of military employees who died during the shutdown.
The Chronicle asked Mr. Locaria and other experts what nonprofit leaders can do to prepare for a government shutdown.
Assess the local impact.
Nonprofits are well-positioned to see what the effects of a shutdown might be on local communities, said Steve Taylor, senior vice president and counsel for public policy at United Way Worldwide. This includes assessing how many federal employees could be temporarily without a paycheck and what federally funded programs might come to a standstill.
“The nonprofit sector can’t stand by while kids in Head Start programs get sent home,” he said. “It is not just because it is so disruptive for the kids, but it is so disruptive for families and can make it hard for people to go to work. There is a domino effect for that sort of thing.”
Nonprofit leaders should consider means by which to cover funding gaps in case of a shutdown, such as securing a line of credit or tapping a community foundation for an emergency grant, Mr. Taylor and others said.
Get in touch with your grants and contracting officers, now.
Nonprofits need to know what federal bodies’ expectations are when it comes to grants and contracts during a shutdown. In 2013, a number of agencies sent stop-work orders to grantees and contractors, said Mr. Locaria. But several others did not, creating confusion about whether contractors and grantees should carry on with their government-funded work or bring it to a stop. Nonprofits should determine now what will be expected of them if Congress has not reached a spending agreement come Saturday.
Identify near-term deliverables.
Do you have a report due in the coming weeks? A community event or activity scheduled? Specific actions that must be taken to comply with the terms of your organization’s grant or contract? Nnonprofits in such situations should have a clear understanding of what the expectations are to complete those deliverables. If something is to be postponed, be sure you know for exactly how long.
In 2013, one of Mr. Locaria’s clients was administering a government program with a required activity that was scheduled to take place just a few days after the shutdown concluded. The nonprofit assumed that because of the shutdown, the activity would be pushed back. The government expected the nonprofit to stick to the original plan.
“Was it unfair the government held them to that schedule?” Mr. Locaria said. “Yeah, it was, but it is always good to iron that stuff out first. Did it get worked out? Yeah, it got worked out, but you don’t want to have to be worried about that stuff, because it was a hectic two days until we got the government to agree to delay it for another week.”
Record all expenses.
If a nonprofit chooses to operate through a shutdown, it should meticulously record all related costs and expenses. Nonprofits that went that route in 2013 were paid retroactively. But there could be certain costs the government will not reimburse, and nonprofits need to be able to distinguish between expenses they will or will not be able to recoup.
During the 2013 government shutdown, half of nonprofits that receive federal dollars said payments were stopped or delayed.
Groups that are forced to stop a program or service during a shutdown and start it back up afterward should track all additional costs, Mr. Locaria said. This also applies to nonprofits’ subgrantees or subcontractors.
“There may be additional labor hours to get stuff accomplished right before the shutdown,” he said. After the shutdown, “it may take additional manpower to get things going, so you want to be able to keep track of all that information.”
Talk to lawmakers.
Members of Congress often look at budget fights in the aggregate, said Mr. Taylor, not at what they mean at the local level. Nonprofit leaders can be hugely influential in explaining how federal spending plays out in a lawmaker’s district or state.
“It is easy to have a big political fight in the aggregate about some top-line number,” Mr. Taylor said. “It is a lot harder to have a political fight when people in your community are being negatively impacted by it, whether you are a Republican or a Democrat.”
Talk to your staff.
The prospect of a shutdown is stressful for nonprofit employees who could themselves face a furlough or layoff should their organization’s government revenue go away. Kristin Giantris, managing director of consulting at the Nonprofit Finance Fund, which makes loans to nonprofits, said senior leaders need to have a frank dialogue about their organization’s financial position and discuss how to communicate that information to the broader staff.
“I know you can’t make promises, but you certainly can indicate that you are taking control of the situation, that you’re considering as many options as possible, and that you are thinking ahead of events,” Ms. Giantris said.
The means to share that information should fit with the culture of the organization, she added. “I know at our organization we would have a conversation probably about it, and then ensure there were different people across the staff who would be available.”
Correction: An earlier version of this story said Kristin Giantris is the managing director of the Nonprofit Finance Fund. She is the managing director of its consulting business.
