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By Richard H. Levey
Nearly two-thirds of nonprofit leaders say there has been increased demand for their organizations’ services, and another 16% believe greater demand is coming. This need is coupled with more than half (56%) who indicate the current environment has had a significant impact on either their ability to provide direct services, or clients’ ability to access them.
Nearly seven in 10 nonprofit leaders who responded to polling have experienced reduced funding from at least one source, whether it be the government, a foundation or an individual donor.
Some foundations are responding to the heightened concerns by making changes to their grantmaking or funding processes. They have established or increased emergency or rapid response grants, started offering new forms of assistance beyond grants, begun or increased use of unrestricted grants, or changed payout rates or the frequency of multiyear grants, thereby offering recipients greater revenue stability.
There is room for foundations to do more, especially on the community level. These findings are part of A Sector in Crisis: How U.S. Nonprofits and Foundations Are Responding to Threats, a new survey and interview-based report from The Center for Effective Philanthropy. According to the report’s authors, leaders at these foundations are less likely to believe the current climate presents significant risk to their ability to operate freely, although they acknowledge many nonprofits are experiencing a different reality.
Foundations are taking ever-increasing roles beyond providing funding. Leaders at more than six in 10 (63%) report creating new collaborations or partnerships with grantees, while almost as many (59%) are forging new collaborations or partnerships with other funders. Nearly half (47%) are offering resources for staff well-being, and 41% provide assistance with legal support.
Foundation leaders are also rebalancing the risks they believe funded nonprofits face. Just more than half (51%) are concerned about being unable to support basic needs for those their grantee organizations serve, and a similar amount expressed doubts about nonprofits’ financial stability. Another 46% mentioned legal risks, while 42% cited digital or data security risks.
Foundations notwithstanding, many nonprofits are attempting to meet financial challenges by boosting their fundraising, with 86% pursuing funding from new prospects and 77% increasing their asks from existing funders. Nearly six in 10 (57%) report dipping into reserve funds, while 44% have either reduced programming or services or cut staff positions.
Both foundation leaders and grantees believe there is room for foundations to do more to support nonprofits and the communities they serve. More than 40% of foundation heads surveyed believe the overall response from foundations is lacking, and that their peer funders could step up more.
One headwind to this might be concerns that foundation gifts will not be able to fill the gaps left by cuts in government funding, especially over the long term. Stepping up now, as one argument goes, might be seen as a potentially ongoing stopgap measure, which would be unsustainable.
In turn, nonprofit leaders are seeking additional capacity-building support as well as assistance in building skills, cultivating relationships, gaining knowledge, and acquiring resources that will enable them to better fulfil their missions. And both sides believe there needs to be better relational communication between foundations and nonprofits.
The current report helps round out a picture the CEP started creating last year with the release of Challenging Times: How U.S. Nonprofit Leaders Are Experiencing the Political Context in March 2025 and June 2025’s State of Nonprofits 2025: What Funders Need to Know.
“A little over a year ago, when it became clear the degree to which nonprofits were being explicitly targeted by this administration, we set out to try to document the impact,” CEP President Phil Buchanan told The NonProfit Times. “We did that through a survey we conducted in February of last year which revealed a huge amount of challenge and concern among nonprofit leaders about the impact of federal funding cuts, as well as threats to the nonprofit status of organizations and a general sense that this administration was seeking to intimidate organizations it did not agree with.”
The resulting March 2025 research snapshot detailed the negative impact the political climate was having on the nonprofit sector, raised the then-current issue of a lack of communication between funders and nonprofit leadership and sought changes in funding patterns, especially regarding unrestricted support. The June annual report, which also drew on the survey, widened the lens of concerns, adding staffing issues and burnout to the challenges of a polarized and unpredictable political climate while noting 2024 had, overall, been a good year financially for nonprofits, with many achieving a balanced budget or reporting a surplus.
“Our hope is that this data sparks discussion within foundation boardrooms and among donors about what can be done to minimize the damage to communities served by vital nonprofits across this country, and for that matter around the world,” Buchanan said. “Our goal is to ensure that amid all of the breaking news we don’t lose sight of the underreported realities of the really dire consequences of both funding cuts and increased demand that nonprofits are facing.
A full copy of the most recent report is available here: https://cep.org/report-backpacks/a-sector-in-crisis-how-u-s-nonprofits-and-foundations-are-responding-to-threats/?section=intro
