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More than half (52%) of federally funded nonprofits are experiencing financial instability, according to new research from by social technology firm Bonterra. Meet the Moment: Navigating Funding Disruption shows how federal budget shifts are straining organizations already stretched by rising community needs.
The report lays out a roadmap to build resilience in the face of disruption.
The report is based on a survey data from 2,608 nonprofit leaders and 107 funders. It paints a stark picture: organizations are being forced to reduce staff, cancel programs, and delay initiatives even as demand for housing, disaster recovery, food security, and immigration support surges. Funders, meanwhile, acknowledge their increasing importance, but many have not yet taken action to adjust strategies in response to the changing landscape.
“The fact that more than half of federally funded nonprofits report financial instability is a flashing red warning light for the sector,” Scott Brighton, CEO of Bonterra, said via a statement. “Yet amid this disruption, we’re also seeing resilience and innovation.”
What gives Brighton hope “is the rise of the Generosity Generation — donors giving with urgency, staff showing up with purpose, and institutions investing in technology to accelerate impact. Our findings show that while the challenges are profound, nonprofits and funders have a roadmap forward if they embrace new strategies, collaborative funding, and technology-driven solutions.”
Additional findings include:
- Nonprofits are operating in “survival mode”: Two-thirds of executives report their organization struggling to stay afloat amid funding cuts, even as service demand rises 39% of nonprofits have reduced staff, 44% have cut programs, and 45% have delayed or canceled initiatives due to instability.
- Large organizations are hit hardest: Leaders at 67% of nonprofits with $25 million or more in revenue report negative impacts, compared to 39% of those with less than $100,000.
- Funders see their role growing but aren’t engaging enough: Almost half (48%) of leaders said their importance has increased, yet fewer than half are in direct dialogue with grantees about funding shifts.
- Awareness isn’t translating into action: 54% of funders acknowledged the impact of federal shifts, but only 38% feel prepared to respond, leaving nonprofits without the support they urgently need. Most (77%) admit they haven’t made changes yet, citing concern about the uncertainty and full scope of federal funding changes.
- Corporate giving programs are filling gaps: CSR initiatives provide faster, more flexible support than traditional funders, driving a 240% increase in donation value when gifts are matched via corporate platforms.
Sector at a Crossroads
Taken together, these findings show a sector at a crossroads, stretched by rising demand, destabilized by funding cuts, and waiting for funders to close the gap between awareness and action.
“There’s long been a call for nonprofits to diversify revenue and reduce reliance on any single funding stream, with the spotlight now squarely on government grants. I see this as an opportunity,” said Kimberly O’Donnell, chief fundraising officer of Bonterra said via a statement. “It’s a chance for organizations to reflect on what’s working, experiment with new approaches, and leverage technology to build more resilient, sustainable futures.”
A Roadmap for Action
The report’s authors urged sector leaders to act with urgency:
- Nonprofits should diversify revenue streams, strengthen recurring giving, and leverage technology to scale operations.
- Funders should move toward trust-based philanthropy, streamline grantmaking, and collaborate for greater impact.
The Generosity Generation (donors, advocates, and institutions) should convert moments of crisis into sustained readiness.
