As part two of our series, it is perhaps a truism that the first answer would always be money. The need for consistent and appropriate resources to execute on mission is a constant drumbeat for nonprofits. What is new is the pace of change, rapid shifts in sources of funds, changes in demand for services, and the constancy of stress and disruption.
A Brief History of Funding, Governmental and Otherwise
Since 2020, the nonprofit sector has faced ups and downs around funding and funding sources. While the era of COVID imposed a complete business disruption on every single person and business, it also brought significant sources of governmental funding to the nonprofit sector.
Per various informational sources, including the Giving USA estimate, there was growth in charitable giving from 2020 to 2021 followed by a drop in 2022. The years of 2023 and 2024 showed a bounce back, with 2023 and 2024 numbers exceeding the prior 2021 peak.
Giving USA information on individual donations shows a similar trend, with 2021 growth, 2022 contraction, and increases in 2023 and 2024 reflecting of market and GDP growth.
While 2025 data is not out yet, early directional indications appear to suggest a continuation of decent levels of giving among the affluent, economic uncertainty impacting middle-class donations, and changes in small donation behavior dropping off for many nonprofits. It remains to be seen what happens during 2026 with the return of increased inflation, more economic uncertainty, and impacts from fuel price increases beginning to reverberate through the economy.
Trends Under the Topline Donation Numbers
While overall funding growth looks good on the surface, there are worrying trends underneath. First, funding is counterbalanced by increases in inflation since 2020, eating away at the actual nominal dollar value of contributions.
Second, while total donation dollars may have increased overall during the period, the number of individual donors appears to be shrinking over time. Many in the industry are discussing the increase of large donor concentration.
Third, just as individual donors are decreasing, direct donations may be dropping as well. The use of donor advised funds appears to have increased dramatically. Intermediary donation platforms have increased as well.
Anecdotal Impacts from 2025 and 2026 Funding and Process Changes
We are not yet in a position to fully gauge the economic impact of the change in federal administrations in 2025. From an anecdotal “boots on the ground” perspective, our firm can concretely report that we have been hearing from clients weekly, and sometimes daily, regarding program cuts and funding impacts.
During the early days of DOGE, the rapid demolition of USAID left many nonprofits without their primary funding sources. Beyond that extreme example, during the first half of 2025, many of our clients faced significant disruptions in contract and grant payments. Mind you, these involved nonprofits where the programs were not cancelled, the grants and contracts were not cancelled, and there was no claim of lack of contract performance. The federal government just stopped paying. In some instances, this resulted in serious impacts, including the need to furlough or terminate employees. In most instances, the government issued the funding eventually, but the shockwaves were felt.
In the second half of 2025 and the first half of 2026, we have seen a fair amount of scaling back of program funding at the federal level. This in turn pinches both state and local government funding for programs involving pass-through of federal funds. This impacted many of our service-based nonprofits, including those dealing with food insecurity, homelessness and housing, health care, and mental health-related issues. Many of these changes are working their way through the system now.
Rising Expenses and Demand
Coupled with governmental funding uncertainty and the mixed private funding posture, nonprofits are being squeezed on the expense side of the equation as well. Inflation has been stubbornly high for years and is on the rise again here in 2026. This is particularly true today with huge recent fuel price increases due to the war with Iran and resulting closing of the Strait of Hormuz.
In addition, many nonprofits are facing an increase in demand for services just when their funding and economic posture is shakier. Inflation coupled with cuts in SNAP funding translates into a dramatic increase in demand for services from food pantries. More people are staring at an end to health insurance coverage with the end of subsidies under the Affordable Care Act. This ultimately leads to an increased demand on service delivery from nonprofits providing health care support for the uninsured. Similar trends are exposed in housing, homelessness, and other areas of nonprofit service.
Closing Comment on this Series, and What to Do Next
This is a series on what is keeping our nonprofit clients up at night. You can expect additional diagnoses of some of the challenges over the next few issues and then getting to what we are seeing in terms of best practices, solutions, and ideas. Even though we are lawyers, we promise this series will not be all doom and gloom![1]
For more information or help with nonprofit strategies, training, or legal compliance, please feel free to reach out Timothy Hughes at (703) 526-5582, thughes@beankinney.com or Doug Taylor, at (703) 526-5586, rdougtaylor@beankinney.com. We work with nonprofits throughout Virginia, Maryland, and D.C.
This article is for informational purposes only and does not contain or convey legal advice. Consult an attorney. Any views or opinions expressed herein are those of the author and are not necessarily the views of the firm or any client of the firm.
[1] Let us prescribe one really good idea you can do now. Subscribe to our friend Ted Bilich’s Nonprofit Good News-Letter available at www.tedbilich.com. This resource in particular is highlighting a significant number of cases of non-profits coming up with innovative partnerships and solutions. It is $15 a month spent really well. We can speak to this as paying subscribers.