A Fact Sheet from the National Council of Nonprofits

Nonprofits meet real needs in real time, in all our communities. They show up in times of great need, providing disaster relief, crisis support, and safety from danger. Nonprofits also help communities every day by providing childcare, support for seniors and veterans, job training, food and shelter. Government shutdowns threaten their ability to provide critical, urgent services to the American people.

What is a Government Shutdown?

A government shutdown occurs when Congress is unable to enact legislation to keep the government open and funded. During a government shutdown, federal agencies cannot spend or obligate congressionally approved funding. Agencies must stop all non-essential functions until Congress acts to reopen and fund the government. During this time, each agency will direct non-essential employees to stop working. A government shutdown directly impacts federal programs funded through the annual appropriations process.

How Does a Government Shutdown Harm the Nonprofit Sector?

Government shutdowns disrupt the vital work of nonprofits in local communities, preventing them from delivering the critical services the American people and their communities rely on. The longer a government shutdown lasts, the more severe the negative impacts.

• Non-essential government employees stop. During a government shutdown, federal workers deemed “non-essential” stop work. Many of these workers are charged with providing payments for government grants and contracts, including those going to nonprofits. They cannot make payments, take calls, answer emails, or provide any support.
• Payment delays increase financial risk to nonprofit organizations. Government shutdowns can cause months of delayed payments. When nonprofit organizations cannot access the federal grant and contract funding they earned, it can lead to tremendous harm to the organization’s financial health. Nonprofit organizations may need to take out expensive loans, adding unforeseen costs to their budget. Without reliable access to the funding needed to cover payroll and other expenses, nonprofit organizations may have no choice but to cut back on services, reduce staff, or even close their doors. Once an organization loses this critical infrastructure, it cannot simply reopen at the same level of service once federal funding starts to flow again. Some nonprofit organizations can be irreparably harmed, leaving their communities without the services they need.
• Without grant awards or contract renewals, critical services are disrupted. Government shutdowns risk leaving the American people without the critical services they need. For example, survivors of domestic violence receiving emergency rental assistance could face eviction from their home if the nonprofit operating a crisis response center cannot renew their contract with the federal government. While nonprofits will typically do all they can to continue providing services, this becomes impossible the longer a government shutdown lasts. Once individuals are cut off from the services and resources they rely on, the harm to individuals and costs to society can grow quickly; the domestic violence survivor may feel like they have no option but to return to their abuser, or they may be pushed into homelessness where it is far more expensive to help them regain housing.
• Project delays add unexpected costs and reduce impact. Federal funding is used across the nation to build critical infrastructure – including everything from roads and bridges to affordable housing, community centers, hospitals, and fire stations. Delays from government shutdowns increase project costs. Communities and nonprofits scramble to access costly gap financing to attempt to keep their projects on track. These added costs translate to fewer resources for other important community projects.
• When public-private partnerships are disincentivized, federal programs are less effective.  The federal government relies on partnerships with nonprofit organizations to carry out critical work that it cannot do itself. Government shutdowns strain these partnerships and discourage nonprofit organizations from applying for and receiving federal grants and contracts. Uncertainty makes nonprofit involvement risky. Without these partnerships, federal programs would be far less effective, reaching fewer people, and resulting in higher costs.
• Nonprofits act as first responders in a crisis, but they cannot address increased needs caused by a government shutdown without their own resources. When the government is shut down and millions of households cannot access the resources they need, they often turn to nonprofits to step in and full the gaps. In the face of higher demand and without federal support, nonprofits squeeze their already modest budgets or look to state or local governments or philanthropy to help serve growing needs in their community.

For more information, contact NCN Vice President of Communications Natalia Vanegas at nvanegas@councilofnonprofits.org