93 Percent of Nonprofits Say Foundations Are Failing Them, Report Finds

A new report from the Center for Effective Philanthropy paints a stark picture of the American nonprofit sector: 93 percent of nonprofit leaders say they are dissatisfied with how foundations have responded to the current funding crisis. The report, titled "A Sector in Crisis," arrives as sweeping federal grant cuts force organizations nationwide to slash staff and programs.

The findings carry weight for every grant seeker navigating today's fractured funding landscape.

The Scale of the Problem

Eighty-one percent of nonprofit leaders report increased demand for their services or anticipate it rising further. At the same time, the majority experienced reduced funding from government sources, foundations, or individual donors. Thirty percent have already been forced to reduce services — not to refine strategy, but simply to keep their doors open.

The human toll is visible in the data. Organizations describe unexpected 40 percent cuts to prevention services. Staff layoffs. Programs shuttered in communities that depend on them. And 71 percent of nonprofit leaders express concern about their organization's basic financial stability.

Foundations Responded — But Not Enough

Foundations did act. Sixty-four percent provided emergency or rapid-response grants in 2025. Almost a third increased their payout beyond what was originally planned, with the median increase reaching 2 percent of endowment value. More than 40 percent began offering new forms of assistance beyond traditional grants.

But a perception gap has opened. While 93 percent of foundation leaders believe they understand grantee challenges, only half of nonprofit leaders agree. The disconnect fuels the sector's frustration: 56 percent of nonprofits want foundations to advocate more boldly on their behalf.

What Grant Seekers Should Do Now

Organizations heavily dependent on federal funding need a diversification strategy. The CEP data suggests that foundations are willing to increase payouts but need persuasive cases tied to specific community impacts — not generic appeals. Nonprofits should approach foundation funders with concrete data on service demand increases and funding gaps.

For grant seekers building diversification plans, grantedai.com tracks foundation and federal opportunities side by side.

For deeper analysis of how foundations are shifting strategy in response to federal retrenchment, check the Granted blog.