Navigating federal awards funding during a federal grant pause is daunting. Whether you’re a seasoned nonprofit leader or just starting to explore government funding, understanding the way the federal government works can transform your funding strategy. Here’s what you need to know: 

1. Where Does Federal Government Funding Come From? 

Taxes are the primary source of federal funding, with individual income taxes making up almost half of the federal government’s revenue. The total federal revenue projection for recent years was nearly $5 trillion.  The President develops a budget proposal each year, but Congress must approve the final appropriations. Nonprofits are eligible for some of the appropriated funds because they can efficiently deliver goods or services Americans need and want. 

 

2. Types of Federal Government Funding for Nonprofits 

Nonprofits aren’t limited to just one funding avenue. The federal government offers multiple ways to receive support: 

  • Competitive Grants: Awards nonprofits must compete for by proving their ability to solve specific problems
  • Earmark Grants: Specific funding allocations designated by Congress for particular projects
  • Formula Grants: Funding distributed to state or local governments based on predetermined calculation formulas
  • Cooperative Agreements: Funding with ongoing government partnership and input
  • Federal Contracts: Government hiring nonprofits to deliver specific goods or services

 

3. Compliance is Crucial 

Receiving federal funding isn’t a free pass – it comes with significant responsibilities. Set your nonprofit up for success: 

  • Utilize your accounting systems to track detailed funding requirements 
  • Read award agreements carefully to understand what is required 
  • Maintain accurate time tracking, spending, and reporting 
  • Document due dates and assign responsibility for the completion of programmatic and financial reports 
  • Continuously and meticulously prepare at the transactional level for potential audits 

 

4. The Nonprofit Sector is Bigger Than You Think 

Most people do not realize how much they’ve engaged with nonprofits. Nonprofits are an integral part of the American landscape: 

  • About 5% of all businesses in the U.S. are nonprofit organizations
  • Approximately 10% of the U.S. workforce is employed by nonprofit organizations
  • According to data from AmeriCorps and the U.S. Census Bureau, approximately 60 million Americans volunteer for nonprofit organizations each year. That’s about 4-5 five times the number of people employed by nonprofits!  
  • Nonprofits impact virtually every aspect of society, from healthcare to social services to education 

 

5. Strategies for Uncertain Times 

In a challenging funding environment, nonprofits should: 

  • Stay informed through resources like the National Council of Nonprofits 
  • Diversify income sources 
  • Conduct scenario planning 
  • Maintain communication with funding agencies 
  • Be patient and persistent 
  • Document all communication attempts 

Pro Tip: Your Form 990 isn’t just a tax document – it’s a marketing tool! Use it to tell your organization’s story and showcase your impact. 

Remember, federal funding is about solving societal problems. If your nonprofit has a mission that improves communities, you have a strong case for support.  

 

Leverage Experts 

At YPTC our expert team specializes in guiding nonprofit organizations through their grant procurement and management journey. Don’t let funding challenges hold your mission back. Contact us today for a free consultation and take the first step towards transforming your organization’s future!