Nonprofits: Finance

Center for Effective Philanthropy Reports "A Sector in Crisis"

02.06.26 | Linda J. Rosenthal, JD

In the first days of the COVID-19 pandemic five years ago, a comforting slogan went viral: “We’re all in this together.” A global health emergency had plunged the entire world into a shared cauldron of misery and devastation.

Within weeks, Scottish writer Damian Barr offered a tweaked version of that phrase to reflect a more sobering and selfless reality: “We are not all in the same boat. We are in the same storm. Some have yachts, some canoes and some are just drowning…. Just be kind.”

Commendably, all year long, there was an outpouring of concern and support for each other and especially for those suffering the worst. While we may not have been in the same boat, at least we were all heading in the same direction through the tempest.

Remarkably, the help came primarily from our government. See Public Policy Resources on COVID-19, National Council of Nonprofits (updated)]. There was so much relief money authorized by the bipartisan Congress, that officials couldn’t shovel it all out the door fast enough! See Seriously, Nonprofits: It’s Still Raining Money (July 7, 2022) FPLG Blog.

Funders also stepped up right away with meaningful assistance. See Foundations Respond to Crisis: A Moment of Transformation? – The First in a Series of Three Reports [Report] (November 2020) Naomi Orensten & Ellie Buteau, Ph.D., Center for Effective Philanthropy. See also, Before and After 2020: How the COVID-19 Pandemic Changed Nonprofit Experiences with Funders [Report] (2023) Katarina Malgren, Center for Effective Philanthropy [“Nonprofits are experiencing meaningful changes in the practices of funders since 2020….”]

In The Nonprofit Community Confronts the Coronavirus (2020), the National Council of Nonprofits reminded us that “[a] community’s character is on display when a crisis hits.” NCN officials observed: “[T]he emerging crisis is demonstrating humanity’s finer instincts.”

In 2020, the common enemy was a merciless epidemic that appeared out of nowhere, crash landing all over the world. At least, though, there was comfort in the atmosphere of camaraderie and concern for each other.

New Year’s Eve 2021 brought the hope of a vaccine or two just around the corner; the promise of perhaps returning to “normal.”

That was then. This is now.

Five years ago, we celebrated a year of rowing in the same direction; of coming out on balconies at 7 pm to applaud the dedicated health care professionals and first responders.

New Year’s Eve 2026 was markedly different, closing out a tumultuous year of chaos and disruption that began at the stroke of noon on January 20, 2025. We ventured out in those eleven months, not as a unified nation to applaud selfless heroes, but in groups of protestors and counter-protestors. Among these events were mass marches to oppose Project 2025 and Shock-and-Awe 2.0 and the relentless barrage of White House actions that struck at the heart of the long-standing and mutually beneficial partnership between government and philanthropy. See, e.g.: OMB Memorandum M-25-13, “Temporary Pause of Agency Grant, Loan, and Other Financial Assistance Programs” [2 pp. PDF] (January 27, 2025), explained in Federal Funding “Pause”: Five-Alarm-Fire, Doused for Now (February 4, 2025) FPLG Blog,

In 2025, the storm that raged was different than in 2020. In this new tempest, the American people were not only in different boats but they were also decidedly not rowing in the same direction. For many of us – the celebration of New Year’s Eve 2026 was tinged with deep sadness … and worry.

New Report: First Look

The Center for Effective Philanthropy is well known and regarded for its expertise with American charitable organizations as well as the foundations that historically have provided significant funding to them. In these past twelve months, with the usual flow of government dollars has been interrupted or entirely eliminated, foundation dollars are more important than ever.

By the time the sun had set on Inauguration Day 2025, the experts at CEP knew that a Project 2025-themed agenda from the White House was going to spell big trouble for our sector. They sprang into action right away, scheduling an opening round of surveys and interviews in early February that became the basis of an interim report – a CEP Research Snapshot. See Challenging Times: How U.S. Nonprofit Leaders Are Experiencing the Political Context [15 pp. PDF] (March 2025).

“Nonprofits in the U.S. are facing unprecedented challenges in the early days of a new presidential administration that is targeting significant portions of the sector. Actions and pronouncements this year that have alarmed nonprofit leaders include a January 27 attempt to halt “all federal funding” in an Office of Management and Budget memo that was later rescinded; attacks on diversity, equity, and inclusion (DEI) in executive orders; and a February 6 White House memo suggesting that ‘many’ nonprofits ‘are engaged in actions that actively undermine the security, prosperity, and safety of the American people.’”

“We wanted to understand both how nonprofit leaders were experiencing the current situation and what they were seeking from their foundation funders.”

Later in the year, in August and September 2025, there was another round of surveys and interviews. See Mounting Pressure: Foundations and Nonprofits on the Current Context (Report) [36 pp. PDF] (November 2025). (By then, the CEP research team had coined a special term – the “Current Context” – to refer to the Sturm und Drang of Trump 2.0.)

Last week, on January 29, 2026, CEP released its full report on how charitable nonprofits are faring in the Current Context and on how well the nation’s funders have risen to the need. See A Sector in Crisis: How U.S. Nonprofits and Foundations [36 pp. PDF].

Key Takeaways

There’s a lot to unpack in this Report; we’ll continue with that in the next post.

In a nutshell, though, the deeply troubling news includes these key points:

The abrupt and unconscionable block of already appropriated federal funds has been such a body blow to so many organizations that almost half of them report they may soon have to close.
The demand from the public for charitable assistance and support has risen to levels topping those seen during the COVID-19 pandemic.
Throughout 2025, there has been a shocking disconnect between the accurate assessment by the grantee-organizations of their own urgent needs and the (lack of) understanding by the funders of the depth of those grantee needs. These foundations also mistakenly believe that their support has been sufficient and has satisfied their grantees’ requests and expectations. “Not even close,” say the grantees.

Additional Commentary

To understand the scope and implications of these findings, the CEP Report is a good starting point but is augmented helpfully with in-house commentary including:

New CEP Study Reveals a Nonprofit Sector in Crisis (January 28, 2026) Press Release, Center for Effective Philanthropy [“93% of foundation leaders report their foundation has been effective in understanding the challenges their grantees are facing” but “[o]nly 54% of nonprofit leaders agree that their funders understand the challenges they face.”]
Guarding Against Complacency in the Face of Existential Threats (August 12, 2025), Phil Buchanan, President, CEP Blog [“The nonprofit sector and foundations dodged several bullets in recent months…..In normal times it would be understandable for foundations and their leaders to exhale…But these times remain anything but normal and, unfortunately, we continue to see an unrelenting series of actions by this administration that represent a real and present danger to our democracy. It’s not a moment for complacency — nor should we focus exclusively on sector defense, as important as it is, or foundation self-defense.”]
A Sector in Crisis: CEP’s Elisha Smith Arrillaga Exposes the Dangerous Disconnect Between Foundations and Nonprofits (February 3, 2026) Let’s Hear It (podcast) by Eric Brown and Kirk Brown, [From introduction by podcaster Eric Brown: “Nonprofits are facing record demand—higher than during COVID—and they’re getting less funding. Not just from government. From foundations too. The sector is in freefall, and many of the people with the resources to help don’t even see a problem.”]
New Data Reveals a Sector in Crisis, But Steadfastly Mission-Focused (January 29, 2026) Ellie Buteau, Ph.D., & Seara Grundhoefer, Center for Effective Philanthropy [“Most foundation leaders told us that they believe foundations have a significant role to play in supporting the nonprofit sector. However, the majority of nonprofits, and a sizeable portion of the foundation leaders CEP interviewed, are dissatisfied with the overall response from foundations. One foundation leader sums this sentiment up, saying: ‘There’s a lot of [what] almost feels like self-congratulations, of “look at us supporting and organizing each other,” and there is not enough action. I think that [some foundation leaders] are being incredibly brave. But I see that effort as being primarily [in] defense of philanthropy rather than making common cause with a broader nonprofit sector.”]