Foundations Think They Are Helping. 93 Percent of Nonprofits Disagree.

Ninety-three percent of foundation leaders believe their organization has been effective at understanding the challenges their grantees face. Fifty-four percent of nonprofit leaders agree.

That 39-point gap, buried inside the Center for Effective Philanthropy's January 2026 report A Sector in Crisis, is not just a polling curiosity. It is the single most important number in American philanthropy right now — because it explains why a sector sitting on $1.75 trillion in assets is watching its grantees talk openly about whether they will survive the year.

The Granted News brief on the CEP report covered the headline findings when they dropped. This is the deeper story: what the perception gap means, why it persists, and what grant-seeking organizations should do about it.

The Numbers Behind the Disconnect

CEP surveyed hundreds of foundation and nonprofit leaders in late 2025, as the full weight of federal funding disruptions was settling across the sector. The findings paint a picture of two groups looking at the same crisis and seeing fundamentally different realities.

On the nonprofit side: 70 percent reported reduced funding from at least one major source — government, foundation, or individual donor. Sixty-seven percent experienced increased demand for services, higher than pandemic-era levels in 2020. Seventy-one percent expressed concern about their organization's financial stability.

On the foundation side: 67 percent did not increase their payouts beyond what they had already planned for 2025. Sixty-four percent provided some form of emergency or rapid-response grants, but in many cases these were one-time supplements rather than sustained increases to operating support.

The disconnect becomes clearest on the question of voice. Fifty percent of nonprofit leaders said they want foundations to be "bolder and more outspoken" in response to the current crisis. Foundation leaders, meanwhile, largely characterized their response as appropriately measured.

"If this isn't the rainy day, when is the rainy day?" one nonprofit leader told CEP researchers — a question aimed directly at the endowment-preservation instincts that dominate foundation boardrooms.

Why Foundations Think They Are Doing Enough

The perception gap is not about bad intentions. It is structural.

Most private foundations are required to distribute roughly 5 percent of their assets annually to maintain tax-exempt status. That floor has become, for many, a ceiling. When markets are up — and the S&P 500 returned roughly 25 percent in both 2023 and 2024 — foundations see their endowments grow even after grants. Spending 5 percent feels generous when the portfolio is gaining 20.

But here is the math that nonprofit leaders live with: foundation giving grew 4.2 percent in 2025. Meanwhile, federal funding to nonprofits dropped by an estimated 15 to 25 percent across affected sectors, and demand for services surged. A 4.2 percent increase does not fill a 20 percent hole.

Foundations also tend to measure their effectiveness by their own activity — grants made, convenings held, reports commissioned — rather than by grantee outcomes. The CEP report co-author Elisha Smith Arrillaga put it plainly: "Funders evaluated their effectiveness much more highly than nonprofits evaluated their foundation funders." The organizations writing the checks grade themselves on effort. The organizations receiving them grade on impact.

There is also a timing problem. Foundations operate on annual or multi-year planning cycles. Their grant committees meet quarterly. Their program officers manage portfolios of dozens or hundreds of organizations. When a nonprofit faces a 90-day cash crisis because a federal contract was frozen, the foundation's normal processing timeline can feel like indifference — even when the foundation fully intends to help.

What Federal Funding Disruptions Changed

The CEP report did not emerge from a vacuum. The federal funding landscape shifted dramatically beginning in early 2025, when the administration initiated sweeping reviews of existing grants, froze disbursements across multiple agencies, and terminated 977 NIH grants representing approximately $1.7 billion in committed funding.

For nonprofits that had built programs around federal grants — community health centers, environmental organizations, education providers, social services agencies — the disruptions were existential. Revenue that had been stable for years vanished in weeks. Staff were laid off. Programs were suspended.

The assumption that undergirds much of American philanthropy — that foundations provide supplementary, catalytic funding on top of a stable government base — shattered. Suddenly, nonprofits needed foundations not as partners but as lifelines.

And foundations, by and large, were not structured to play that role.

The 64 percent that provided emergency grants did so within their existing budgets. Most did not increase their payout rates. Most did not convert restricted grants to unrestricted operating support. Most did not accelerate their disbursement timelines. The machinery of institutional philanthropy, built for steady-state grantmaking, creaked when asked to serve as a crisis-response system.

The Forecast Makes This Worse, Not Better

Here is the cruel irony: 2026 is projected to be a record year for foundation giving. FoundationMark projects total foundation disbursements will reach $118 to $122 billion, up 5 to 7 percent from 2025. Foundation assets, meanwhile, are approaching $1.75 trillion.

For nonprofit leaders reading those numbers while cutting programs and furloughing staff, the message is devastating. The money exists. It is simply not moving fast enough, or in the right form, to meet the moment.

The growth in foundation giving is real, but it is distributed unevenly. Large foundations with diversified portfolios are increasing grants. Smaller family foundations — which collectively make up the majority of the sector — are more cautious, often waiting for market clarity before adjusting their giving plans.

And even the largest increases tend to flow to established grantees through existing relationships. New organizations, organizations in newly distressed sectors, and organizations that previously relied on federal funding often lack the foundation relationships needed to access emergency support.

What This Means for Grant Seekers

If you run a nonprofit that depends on foundation funding, the CEP data contains both a warning and an opportunity.

The warning: Do not assume your foundation funders understand the severity of your situation. The 39-point perception gap is real. Your program officer may genuinely believe your organization is stable because your last grant report showed strong outcomes. You need to communicate your financial reality explicitly, specifically, and repeatedly — not in the bureaucratic language of grant reports but in the direct language of organizational survival.

The opportunity: Foundations that are paying attention to the CEP findings are actively looking for ways to be more responsive. That creates an opening for nonprofits willing to make specific asks.

Three strategies are working right now:

First, request unrestricted operating support, even from funders who have historically given restricted program grants. The CEP data gives you cover — cite the report and the sector-wide demand for flexible funding. Some foundations have already begun shifting their portfolios in this direction.

Second, ask for accelerated timelines. If a foundation typically makes decisions on a quarterly cycle, ask whether emergency or rapid-response funding is available. Many foundations created these mechanisms during COVID and still have them on the books, even if they are not actively promoting them.

Third, be specific about the federal funding gap. Foundations respond to concrete numbers — "we lost $340,000 in federal funding in Q1 and need bridge support to maintain services through September" is more compelling than "federal cuts are affecting our work."

The CEP report also found that nonprofits serving lower-income populations face compounded pressure. If your organization works in underserved communities, say so explicitly — the data supports the argument that these organizations need disproportionate support, and foundations under public scrutiny are more likely to respond.

The Bigger Question

The 93 percent perception gap raises a question that the philanthropy sector has been avoiding for decades: Is the foundation model — built around perpetual endowments, 5 percent payout floors, and multi-year planning horizons — capable of responding to acute crises?

The honest answer, based on the CEP data, is not yet. But the data itself is a forcing function. Foundation boards are reading this report. Program officers are circulating it internally. The public conversation about payout rates, spending timelines, and crisis response is louder than it has been since 2020.

For grant seekers, that means the next 12 months represent a window. Foundations are under pressure to demonstrate responsiveness. The organizations that communicate clearly, ask specifically, and reference the sector-wide data will be positioned to benefit.

Navigating that conversation — knowing which foundations are shifting, what language resonates, and how to frame an ask — is exactly the kind of strategic work where Granted can turn your situation analysis into a submission-ready proposal.