(Photo via Pexels)
While philanthropic foundations are making changes to support nonprofits that are reeling from attacks made by the Trump administration, most leaders acknowledge the foundations have not been very effective, according to new data release by the Center For Effective Philanthropy (CEP) in Cambridge, Massachusetts.
The study, “Evolving Foundation Responses to a Sector in Crisis,” is based on survey responses from leaders of 183 foundations and 329 nonprofit organizations. It is the third CEP report tracking the impact of the federal funding priority changes.
Data in the new study shows a majority of foundations have not increased their payout rate, and just 12% of foundation CEOs assess their response as very effective. Only one-third (33%) reported a higher-than-typical payout rate, a striking contrast to foundation responses during the pandemic.
While 90% of respondents at foundation said their organizations provided at least some form of assistance beyond the grant, the most common types are professional development (47%), building partnerships (45%), and fundraising assistance (40%).
The data in CEP’s new study also shows that the beyond-the-grant support foundations are offering is frequently not a match to what nonprofit leaders say they need. Further, open communication between funders and grantees is a significant challenge, with only a minority of nonprofit leaders believing they can be completely honest with their funders about the challenges they face.
Meanwhile, data in earlier CEP reports showed nonprofit leaders are struggling with increased demand for services and financial uncertainty and are seeking greater support from their funders.
The foundation leaders whose responses are included in the study represent independent and community foundations that give $5 million or more annually. The nonprofit leaders participate in CEP’s “Nonprofit Voice Project,” a nationally representative panel of U.S.-based nonprofits that receive at least some foundation funding.
Nonprofits have faced an existential crisis since January 2025, when the Trump administration began a series of actions targeting the sector: freezing federal funds, terminating grants, investigating nonprofits, censuring specific causes, holding congressional hearings, and threatening to revoke their tax-exempt status, among others. Previous CEP reports — “A Sector in Crisis” and “State of Nonprofits 2026” – highlighted that nonprofits face increasing financial distress as a result, with many pausing operations or closing.
“Nonprofits lead crucial work — from feeding the hungry to providing afterschool care — and communities are leaning more heavily on these organizations to fulfill basic needs,” said Elisha Smith Arrillaga, Ph.D., vice president, Research, at CEP. “If ever there was a moment for philanthropy to be in deep partnership with communities, it’s now. And although some funders have risen to the challenge, this data makes clear that nonprofits need more open and honest conversations with their funders to meet their communities’ needs.”
Other data in the show shows:
* Foundations are making changes in response to the crisis. Nearly all (93%) made at least one change to the way they approach their work. The most common changes are concentrating funding in needed areas (62%), collaborating with other funders (53%), and increasing their engagement in policy or advocacy (48%).
* Many foundations report risk aversion. Among those who feel less than very effective, just more than half (53%) report feeling constrained by some form of risk aversion. Nonprofit leaders see it, too, with only 12% saying their funders were willing to take risks that “very effectively” met their needs.
* Nonprofits struggle to communicate openly with funders about their challenges. Nonprofit leaders report holding back with funders (58%) and are less than completely honest about their challenges. This is most commonly due to fear of jeopardizing future funding (68%) or simply a lack of opportunity to engage with funders (64%). These communication challenges limit funders’ ability to know what nonprofits need most.
Foundations cannot fill the funding gap left by the federal government. But the failure to increase the payout rate amidst such dire financial circumstances stands in stark contrast to 2020, when foundations significantly increased their payout during the pandemic. At that time, nonprofits also faced rising demand for services and received increased funding from both government (via forgivable PPP loans) and foundations (via increased payout).
“The communities served by nonprofits need donors to step up in response to this time of extraordinary challenge,” said Phil Buchanan, president of CEP and author of Giving Done Right. “Especially given the investment returns foundation endowments have reaped in recent years, funders can step up their giving levels without jeopardizing their ability to be there in the future for the next crisis. While some have, the overall response has lagged what the moment requires, and I hope that changes in the coming months.”
