(Illustration by Envato)
This is, without question, the hardest moment in decades to lead a social sector organization. Nearly 70 percent of nonprofit leaders in the United States reported a drop in funding in 2025. At the same time, 65 percent report demand for their services has increased. Thirty percent have been forced to cut services—among them, programs that are vital to the health, safety, and survival of individuals and families.
The numbers are staggering in their own right. An analysis by outplacement firm Challenger, Gray & Christmas found that the nonprofit sector cut nearly 29,000 jobs in 2025—more than quadrupling the losses recorded in the prior year. According to an Urban Institute survey, a third of all nonprofits experienced some form of government funding disruption in just the first four to six months of 2025, including organizations delivering job training, mental health services, emergency shelter, and disaster relief. The Trump administration canceled or froze an estimated $425 billion in federal funds across health, education, and social services in the first half of 2025, and CEP data reveals that a year later, nonprofits are still reeling: Two-thirds of nonprofit leaders in a national study reported concern about their organization’s financial stability in early 2026.
For many foundation leaders, the question is no longer whether to respond—it is how. How to balance urgency with long-term strategy. How to move quickly and strategically at the same time. How to justify increased risk to boards whose instincts lean toward institutional preservation. And so far, foundation CEOs do not believe they are responding adequately, according to a new study. This is where the story becomes both more complicated and more urgent: For most foundation CEOs, the decision about whether and how to amplify impact in this moment—whether to increase payout, take on greater institutional risk, redirect grantmaking toward crisis response—does not ultimately rest with them. It rests with their boards.
The resources, the relationships, and in many cases the will to respond meaningfully to this crisis exist within the walls of foundations. The question is whether boards will open the door—and what it will take to move them.
The Governance Gap
Data on boards of mission-driven organizations more broadly suggests this is not a foregone conclusion. For decades, BoardSource’s Leading with Intent study, the most comprehensive longitudinal examination of nonprofit board practices in the United States, has tracked a persistent and troubling pattern among both foundation and nonprofit boards: Boards perform reasonably well at internal oversight functions and significantly worse at everything that requires external engagement and strategic courage.
In its most recent survey of nearly 700 chief executives and board chairs, BoardSource found that boards earned their highest grades in financial oversight and legal and ethical compliance, and their lowest grades in fundraising, advocacy, and leveraging networks to influence public policy. These ratings are not new—they have been consistent across decades of data collection. But in the current environment, they take on new urgency. The skills and orientations boards have consistently deprioritized are precisely the ones needed right now.
Consider advocacy. More than a third of the executives surveyed reported that their boards had not discussed advocacy at all. These boards are not ignorant of the stakes: Eighty-three percent of executives said their boards understood to some extent how public policy affects their organization’s mission. They know. They simply aren’t acting.
The Conversation Nobody Wants to Have
In interviews we conducted with foundation leaders in late 2025, we heard the same frustration surfaced again and again: the wish that boards “would step up to have this discussion about spend rate,” and, simultaneously, the acknowledgment that, for some, the current crisis is finally forcing the conversation.
The federally mandated minimum payout rate for private foundations is 5 percent of assets annually. Many foundations give at or near this floor, a practice defended as preserving the foundation’s capacity to give in perpetuity. The logic is familiar and, in many circumstances, reasonable. But perpetuity arguments assume a stable environment in which communities and organizations can absorb the gap between what foundations give and what is needed. That assumption has collapsed.
A recent publication by the National Center for Family Philanthropy, drawing on interviews with more than 60 foundation CEOs and board chairs, documented how many boards that ultimately made bold commitments following the murder of George Floyd and during COVID-19 did so only after having difficult governance conversations they had previously avoided. The pattern suggests that the current moment may similarly serve as a forcing function. But it also suggests that these conversations don’t happen without someone in the room willing to name the discomfort directly.
This is the foundation CEO’s dilemma. Two-thirds of foundation leaders in a recent Center for Effective Philanthropy study named specific ways their boards could strengthen philanthropic impact right now, including increasing payout, developing a better understanding of the context facing partners, and taking more institutional risks. They know what is needed. They often lack the structural permission to pursue it.
What Responsive Governance Looks Like
There is no single prescription for what foundation boards must do in this moment. But the research and the moment together suggest several orientations that distinguish boards positioned to amplify impact from those likely to wait it out.
Mission-first calibration. BoardSource’s research consistently finds that boards with the strongest performance share a common trait: They treat mission not as a backdrop but as an active decision-making criterion. In this environment, that means asking a specific and uncomfortable question: What does our stated mission require of us right now? A foundation committed to thriving communities cannot treat the collapse of the organizations doing that work as someone else’s problem. A foundation whose mission involves health equity cannot remain on the sidelines while mental health and housing organizations lose federal funding by the billions. Reconnecting board discussions to mission language—concretely, not abstractly—is both the most straightforward and most underutilized tool available to foundation leaders seeking to create the conditions for bolder action.
Ensuring the stakes are clear. Boards cannot make well-calibrated decisions without accurate information about what their grantees are experiencing. This means more than reading a report or reviewing a dashboard. It means creating direct lines of communication between board members and the communities they serve—through structured conversations with grantee partners, through community input sessions, through listening structures that bring the weight of this moment into the boardroom rather than filtering it out in the name of board time efficiency. Leading with Intent found that boards with stronger knowledge of their organization’s programs outperformed on nearly every dimension of governance, including strategy, community engagement, and fundraising. The same principle applies to contextual knowledge: Boards that understand what is actually happening are better positioned to act.
Having the hard conversation. Conversations about payout, taking on institutional risk, and whether the foundation’s current grantmaking strategy meets the moment are uncomfortable. None of these conversations happen without someone naming the need for them. In a recent survey, CEOs who wished their boards would initiate the spend rate discussion were often sitting next to board members who also sensed the inadequacy of current posture but were waiting for someone else to speak first. The first and most important governance act available to foundation leaders—CEO and board chair alike—may simply be to ask for the conversation, by name, on the agenda, with enough time to have it meaningfully.
Not waiting. One nonprofit leader recently described what it feels like to be on the receiving end of foundation hesitation: “We have seen more use of our food pantry than at any other time in our organization’s history. There’s less funding available, our funders are being more restrictive, and we’re all looking at shortfalls for the first time in our organization. So, we’re just like, ‘When is philanthropy going to start releasing funds?’” The risk of a wait-and-see strategy is not merely that help arrives late. It is that by the time foundations are ready to act, the organizations they would have funded no longer exist. Programs pause. Staff leave the sector. Institutional knowledge built over decades dissipates. The Chronicle of Philanthropy’s nonprofit layoff tracker documented that as 2026 opened, the sector was still shedding jobs, with leaders reluctant to hire even when funding appeared because the trauma of 2025 had fundamentally altered their risk calculus. The window to prevent organizational collapse is shorter than boards tend to assume.
The Political Dimension
Any honest accounting of this moment must acknowledge what is different about it. Unlike COVID-19 or the financial crisis of 2008, the current threat to nonprofit infrastructure is not purely economic. It is partly political in origin and character, which means it raises questions that boards, particularly those of 501(c)(3) organizations, often prefer to avoid.
The Trump administration’s campaign against nonprofits has been described by sector leaders as among the most hostile policy environments in the history of American civil society. Since early 2025, federal actions affecting nonprofits have included the termination or withholding of federal grants, new conditions on federal funding, threats to the tax-exempt status of nonprofit institutions, and efforts to expand federal authority to suspend or terminate grants. Many of these actions have faced legal challenges, with courts blocking some funding freezes and grant terminations. These developments have created significant financial, legal, and operational uncertainty for nonprofits across the country.
Foundation boards that treat this environment as simply a difficult funding cycle are misreading the nature of the challenge. What is at stake is not just whether grantees can meet this year’s budget. It is whether the infrastructure of American civil society can survive at sufficient scale.
The Question of Leadership
The instinct to do more, to recognize that extraordinary times require extraordinary governance, is more common among foundation leaders than the current pace of institutional response would suggest. The gap between what board members sense and what they are willing to act on is not primarily a gap in information or values. It is a gap in permission and structure. Boards need to be asked. Conversations need to be had. The explicit, named request—from a CEO, from a board chair, from a trusted colleague—to consider whether the foundation’s current response is equal to the moment is often all that separates motion from stasis.
The nonprofit sector is in dire straits. The organizations that catch people when every other system has failed are now stretched to the breaking point themselves. While philanthropy cannot “fill the gap” left by the disappearance of federal funds, the resources to respond meaningfully— in ways that could prevent the worst outcomes—exist inside American philanthropy. Whether those resources reach communities in time depends less on wealth than on governance: on whether foundation boards are willing to have hard conversations, to reorient decision-making around mission rather than institutional preservation, and to recognize that the risk of inaction is now greater than the risk of action.
Nonprofits are asking when philanthropy will start releasing funds. The answer to that question is determined, ultimately, not in the grant office but in the boardroom. The keys are in hand—the question is who will unlock the door.
Read more stories by Elisha Smith Arrillaga & Ellie Buteau.