A Sector in Crisis and a Sector Called to Prove Its Impact

By Sheri Chaney Jones, CEO & Founder of SureImpact

Across the country, nonprofit leaders are asking the same question: How long can we sustain this?

Demand for services is climbing. Funding is shrinking. Political and cultural tensions are influencing philanthropic priorities. And the organizations closest to community need are carrying the weight.

The Center for Effective Philanthropy recently released a powerful research report titled A Sector in Crisis: How U.S. Nonprofits and Foundations Are Responding to Threats. The data confirms what many leaders already feel in their day-to-day work. The sector is under significant strain.

According to CEP’s findings, 65% of nonprofit leaders report increased demand for services in 2025. At the same time, 68% report losing funding from at least one source. Federal funding cuts are widespread, with 34% of nonprofits experiencing reductions and 56% anticipating reductions. State and local funding shows similar patterns. Foundation funding reductions are also present, with 26% reporting experienced cuts and 35% anticipating cuts. Nearly seven in ten nonprofits report losing or anticipating losing funding from at least one major source.

Nonprofit leaders describe this period as an existential threat.

That phrase should give all of us pause.

When organizations that feed families, provide mental health services, support youth, house vulnerable neighbors, and advance community health describe their circumstances as existential, we must listen carefully.

At the same time, foundations are responding. CEP reports that 64% of foundations have provided or increased emergency or rapid response grants. 45% have provided or increased multiyear grants. Some are increasing payout rates or offering unrestricted support. Many are exploring new forms of assistance beyond traditional grantmaking.

Yet 42% of interviewed foundation leaders express dissatisfaction with the overall philanthropic response.

Nonprofit leaders are even more likely to believe foundations should be doing more.

This moment presents a shared challenge. Nonprofits need resources to survive and serve. Funders face overwhelming demand and heightened scrutiny from boards and stakeholders who expect careful stewardship.

The number of organizations seeking support exceeds the dollars available.

So what determines which nonprofits receive funding in this climate?

The answer is increasingly clear: the ability to demonstrate measurable impact.

The Funding Squeeze Meets the Proof Imperative

Lauren Carson, Founder and Executive Director of Black Girls Smile Inc., recently wrote a compelling reflection published by CEP titled Staying Steady in Choppy Waters: What Nonprofits Need From Funders in This Moment. Her essay captures both the emotional toll and the practical realities nonprofit leaders are facing.

She describes a sector where there is no safe issue area, no guaranteed funding stream, and no predictable planning horizon. Corporate giving has slowed. Foundation funding is tightening. Grants that once attracted hundreds of applications now draw double or triple that number.

Competition has intensified.

Funders are prioritizing organizations they already know. New relationships are harder to build. Smaller organizations without established philanthropic networks face significant barriers.

And funders themselves must answer to stakeholders who ask hard questions: Why this organization? What outcomes will result? How do we know our investment is working?

Funders want to help. Most are mission driven and deeply committed to community well being. But in a constrained environment, they are forced to make choices.

When choices become harder, proof becomes more important.

At SureImpact, we recently conducted a poll during one of our webinars. We asked nonprofit leaders a straightforward question: Have you missed out on funding opportunities because you could not demonstrate your outcomes?

The results were sobering.

47% of respondents either agreed or strongly agreed that they had missed funding opportunities due to an inability to show outcomes data. 36% were neutral. Only 17% disagreed or strongly disagreed.

That means nearly half of the leaders in that room believe they lost funding because they could not clearly communicate their results.

Pair that insight with CEP’s data showing widespread funding cuts and increased competition, and a clear picture emerges. Nonprofits are competing for fewer dollars in a climate where funders are seeking evidence of effectiveness.

Organizations that can demonstrate outcomes stand apart.

Organizations that cannot struggle to make their case.

What Funders Say They Need

CEP’s research also highlights important perception gaps between foundation leaders and nonprofit leaders.

For example, 93% of foundation leaders rate their understanding of grantees’ challenges as moderately or very effective. Only 54% of nonprofit leaders agree.

When it comes to providing multiyear support, 66% of foundation leaders believe they are effective, compared to just 32% of nonprofit leaders.

On willingness to take risks, 69% of foundation leaders see themselves as effective. Only 30% of nonprofit leaders share that view.

These gaps reveal tension, but they also reveal opportunity.

Funders are trying to respond. Many are increasing emergency funding and exploring flexible approaches. Yet nonprofits are still experiencing instability and uncertainty.

Clear communication, transparency, multiyear general operating support, and unrestricted funding can help stabilize organizations. Lauren Carson articulates this well in her call for flexibility, clarity, and values based consistency.

I agree with her perspective. Stability matters. Partnership matters. Equity commitments matter.

And alongside those shifts, there is another reality we must acknowledge.

Funders must justify their decisions. Boards want to know that grants lead to meaningful results. Donors want to understand how their contributions change lives. Corporate partners must explain philanthropic investments to shareholders.

In a time of crisis, scrutiny increases.

Nonprofits that can provide credible, timely, outcomes based data make it easier for funders to say yes.

Creativity and Courage Are Not Enough

Lauren Carson writes about hope found in creativity, collaboration, and courage. I see that same spirit across the sector. Nonprofit leaders continue to show up for their communities. Teams innovate with limited resources. Partnerships strengthen. Leaders support one another.

Hope matters.

Courage matters.

Creativity matters.

Yet creativity without data leaves organizations vulnerable in competitive grant processes. Courage without measurement leaves impact stories incomplete. Collaboration without shared outcomes limits the ability to demonstrate collective success.

Funders increasingly want to see measurable change, not activity counts. They want to understand how many individuals improved housing stability, increased employment, improved mental health, or achieved educational milestones.

Outputs describe what we did. Outcomes describe what changed.

When budgets tighten, funders gravitate toward organizations that can show change.

This does not mean nonprofits must become data factories. It means they must clarify what success looks like, track it consistently, and communicate it clearly.

The Cost of Not Measuring

What happens when organizations cannot demonstrate outcomes?

They spend more time writing grant proposals that rely on anecdotes. They compete on passion rather than proof. They hope funders will infer impact rather than see it directly.

In stable times, that approach may sustain operations. In constrained times, it limits opportunity.

The nonprofit leaders in our webinar poll confirmed this reality. Nearly half believe they lost funding because they lacked outcomes data.

Imagine what that means at scale. If even a portion of the 68% of nonprofits reporting funding losses also lack strong measurement systems, the sector is leaving millions of dollars on the table.

At the same time, communities lose services.

Families lose support.

Progress slows.

Measurement is not about compliance. It is about survival and stewardship.

A Call to Nonprofit Leaders

The CEP report paints a picture of strain. Lauren Carson’s essay paints a picture of resilience. Both are true.

This is a difficult season.

It is also a defining season.

Nonprofits that invest in impact measurement now position themselves for stability later. They strengthen relationships with current funders. They attract new funders who are searching for credible partners. They equip their boards with clear evidence of mission fulfillment. They inspire staff by showing that their work leads to measurable change.

Now is the time to clarify outcomes. Now is the time to align programs with measurable goals. Now is the time to collect and communicate data that demonstrates progress.

Funders need confidence. Communities need services. Nonprofits need sustainability.

Impact data connects all three.

A Call to Funders

Foundations and donors also face important decisions.

Flexible funding, multiyear support, transparent communication, and investments in capacity building create stability. CEP’s data shows that many foundations are increasing emergency grants and exploring new approaches. That momentum matters.

Capacity support that strengthens evaluation infrastructure can have long lasting effects. When funders invest in systems that help nonprofits measure outcomes, they strengthen the entire sector.

Funding direct service without funding infrastructure limits long term impact. Funding programs while overlooking measurement capacity reduces the ability to demonstrate success.

This moment calls for partnership built on trust and data.

We Are All Stewards of Impact

The sector is under pressure. Demand is high. Resources are constrained. Political and cultural dynamics add uncertainty.

Yet one truth remains steady.

Communities rely on nonprofits.

Nonprofits rely on funders.

Funders rely on evidence.

The organizations that will weather this season most effectively are those that can articulate their value with clarity and credibility. They will combine courage with data. They will pair mission with measurement.

Crisis reveals weaknesses. It also clarifies priorities.

If we want a stable, effective, and trusted nonprofit sector, we must prioritize measurable impact. Not as an afterthought. Not as a compliance exercise. As a core strategy.

The CEP report calls this moment a sector in crisis.

I see a sector at a crossroads.

We can continue operating on instinct and hope that funding returns to previous levels. Or we can strengthen our ability to prove that every dollar entrusted to us leads to meaningful change.

The organizations that choose the second path will be positioned to secure funding, build confidence, and serve communities with greater stability.

Now is the time to prove impact.

Now is the time to show the difference your organization makes.

Our communities deserve nothing less.