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How Nonprofits Forge Ahead When Faced with Potential Cuts to Foreign Aid

Teen girls in Zaporizhia, Ukraine participate at a calligraphy workshop
Teen girls in Zaporizhia, Ukraine participate at a calligraphy workshop, learning to write symbols on a paper with brush and black gouache.

The Trump Administration's 2018 budget proposal suggests big changes to foreign aid, and cuts to support of many nonprofit and nongovernmental organizations (NGOs) in the United States. How would these changes affect the goals of these institutions?

Khaldoun AbouAssi, assistant professor at American University's School of Public Affairs is an expert in public and nonprofit management. Recently, he published an article in the journal Public Administrative Review, which focuses on how nonprofit organizations make decisions in a changing resources environment, especially when they have to respond to donor demands.

Q: What are the Trump Administration's proposed budget implications for nonprofits?
"In general, we are noticing more government scrutiny and less funding; that does not necessarily apply across the board since some entities in the nonprofit sectors, such as religious or faith-based organizations, might be less impacted or even positively impacted. But, if you are an organization like Planned Parenthood or even a nonprofit in the arts, then the impact could be substantial. Again, it is not just the budget cuts but also how the Administration deals and works with the nonprofit sector, through policies and legislation, contracts and grants."

Q: What sort of reactions from nonprofits can we expect should proposed cuts occur?
"We are actually witnessing different reactions. After the 2016 election, some nonprofits witnessed a peak in individual donations; the donations were directly tied to the results of the election and came as signals of support to the work of some organizations that focus on women's health or LGBTQ issues or civil rights, due to the fear that the new administration would scale back rights and cut funding. I believe this trend has stabilized now. But, we also should expect more advocacy work and collaboration among the nonprofits to face the rising tides, including budget cuts.

"Earlier this year, I predicted that foundations would start to redefine their space and roles. I also thought that we would witness an increase in private funding to offset the drop in government contracts and grants to the nonprofit sector. And that's what we are seeing now. The Packard Foundation, for instance, increased its 2017 grantmaking budget by $22 million, with concerns about scientific research being defunded and scientific knowledge discounted. At a much larger scale, The Ford Foundation announced a $1 billion increase in mission-related investments earlier this year. This is important because foundations usually use around 5 percent of their assets to support the causes or work of nonprofits, but advocates have been pushing for more. While Ford is not the first to go down this road, it sets a positive example for others to follow."

Q: So, these are positive signs for nonprofit work?
"In principle, yes. I am concerned about are the international development and NGOs worldwide taking a financial hit. There are discussions about merging the United States Agency for International Development (USAID), which is the foreign support arm of the U.S. government, with the State Department. This would tie aid to national security priorities, leaving many other issues - famine, health, clean water, human rights - without the much-needed support. In addition, the State Department budget proposal mentions eliminating 30 to 35 of USAID's 100 field missions in developing countries. Third, many health programs abroad will be hit by approximately 25 percent and the Bureau for Food Security will lose 68 percent of its funding. Overall, we are expecting that the State Department and USAID will lose around $10.2 billion compared to last year's budget.

"There will be a shortage in funding to a certain degree and a gap between demand and supply for services. Countries such as China and United Arab Emirates (UAE) will likely step in to fill this gap. China has already been investing heavily in Africa over the past few years and UAE foreign aid continues to increase - by 43 percent from 2014 to 2015, for example. Still, assistance in many developing countries is carried out by international organizations and nonprofits. For many of these organizations, USAID is the major source of funding for programs and activities. This is the main concern amidst shifting interests of donors and my skepticism of the ability of private donors or foundations to fill the big shoes of USAID."

Q: What can these nonprofit organizations do?
"This is not a new phenomenon or trend. Nonprofit organizations often rely on external funders, and regularly face instability in the flow of funding. They're used to dealing with volatile demands. Finding ways to diversify their funding streams and be strategic in working together should help if they should face funding cuts. This will, however, require a strong conviction in the 'agency' these organizations enjoy to make broader choices and strategic decisions. There is an assumption that nonprofits, especially in developing countries where philanthropy and giving are weak, cannot function without donor funding. If your organization is dependent on a donor, then you are more likely to follow the demands or interests of the donor.

"This is an oversimplification of the situation, and in my most recent article, we argue that nonprofits behave not only based on how dependent they are on other organizations, but also on what kind of relations they have and where do they position themselves and can leverage these positions within and outside a donor network. That is why nonprofits should consider the likely outcomes of the combination of their resource or funding strategies with their network or relations strategies."