How is the Government Shutdown Impacting Nonprofits and Higher Ed?

We’re now several days into the first government shutdown in nearly twenty years, and many industries—not just the Federal government—are feeling the reverberations. With Federal spending making up around a quarter of the United States’ GDP, there are many organizations, nonprofit and for-profit alike, that rely on government dollars in part to fund their activities.

How is the shutdown affecting the nonprofit and higher education industries? 

1. The IRS has suspended non-essential operations. This means that organizations filing for exempt status will have their applications (already subject to a substantial backlog) further delayed. Other organizations’ audits have been put on hold.
2. Federal grant administration is being delayed. If your organization is in the midst of a Federal grant funding cycle, the awarding of funds and processing of applications has been delayed. However, some Federal agencies, such as the NIH, completed a cycle just prior to the shutdown, so other organizations may feel confident that their future funding is secure. Nevertheless, grant administration does require agency staff—many of whom have been deemed non-essential and are thus furloughed—meaning that the day-to-day delivery of funds may face stoppages or slowed service. Smaller nonprofit organizations that lack sizeable endowments may need to consider furloughs or delaying programs until Federal grant money starts flowing more freely.
3. Higher education may face a longer-term crunch. In its contingency plan for a Federal government shutdown, the Department of Education indicated that student loan administration should continue to operate normally in the short term. But a longer shutdown lasting a week or more may start to seriously impact colleges’ and universities’ cash flow, and government employee furloughs may delay aid awards later on. Additionally, employees handling Federal work-study programs and similar campus-aid programs have been furloughed. Finally, academics may soon face paycheck delays if their research is funded by Federal grants, and many are unable to access research resources at government institutions, such as the Library of Congress and the National Archives.
4. Social services nonprofits may see an increase in demand. While many Federal government-provided services, such as Medicare, Medicaid and unemployment assistance should continue with little, if any, interruption, other programs intended to help those in need are facing interruptions. TANF has been defunded (though states can step in as a backstop), as has WIC (with Agriculture Department and state-level contingency funding unable to fund the remainder of the month). As a result, some nonprofits may expect to see more demand for their services and resources until the government is able to step back in.
5. The rollout of the Affordable Care Act (ACA) continues despite the shutdown. Health exchanges are proving popular among consumers. According to Patrick Pilch and David Friend, MD of BDO’s Healthcare practice, if the current pace of participation continues, it is likely that millions more Americans will have health insurance in 2014. This will be a boon for nonprofit hospitals, which are likely to see less uncompensated care as a result.

Overall, the government shutdown is putting considerable pressure on the nonprofit and higher education sectors, and many organizations may be facing hard choices about how to allocate resources while continuing operations. At the same time, the implementation of the ACA continues, suggesting that some nonprofits, especially those in the healthcare sector, may ultimately thrive once the dust has settled.

Has your organization been affected? How are you working to mitigate the impact of the shutdown?

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