The Candid Conversation Nonprofits Cannot Afford, Yet

CEP finds that nonprofits hold back with funders. More opportunities to talk help. But how an organization earns its money shapes what it can afford to say.

The Center for Effective Philanthropy's Evolving Foundation Responses to a Sector in Crisis (2026) surveyed 183 foundation leaders and 329 nonprofit leaders about the federal policy and funding shifts that began in January 2025.[1] This is a separate study from CEP's State of Nonprofits 2026.

Much of the report looks at how foundations are responding. But its third finding gets at something more basic: when nonprofits are in trouble, do they tell their funders?

The Finding

Only 41% of nonprofit CEOs surveyed believe they can be completely honest with their foundation funders about the challenges they face nowadays.[2]

CEP asked the 191 CEOs who hold back why. The most common reason, cited by 68%, was "concern that communicating honestly will lead funders to reduce or withdraw funding."[3]

That number should be in front of every nonprofit board member. An organization that cannot explain its problems to the people paying to help solve them faces two problems: the crisis itself and what it feels compelled to hide about it.

CEP puts the consequence plainly. Nonprofits are "holding back in ways that may limit funders' ability to know what is most needed."[4]

CEP's Remedy

CEP puts responsibility on both sides. Its conclusion calls for foundations to create better conditions for candid communication and for nonprofits to be more direct with their funders.[5]

This is good advice, as only 23% of nonprofits rate their funders as very effective at communication, among the lowest ratings CEP recorded.[6] About a quarter of the CEOs who hold back want greater transparency about what funders are doing and what grantees should expect.[7]

One CEO described learning that a local foundation had cut an award by almost half only after the award letter arrived and the CEO asked about it.[8] That is hardly an invitation to speak freely.

CEP also finds that CEOs who believe they can be completely honest are more likely to rate their funders' responsiveness, willingness to take risks, and rapid-response support as effective.[9] It asks foundation boards what they could do to encourage greater candor and to hear directly from grantees more often.[10]

I agree with the direction, because funders need better information. Nonprofits need to know that raising a difficult issue will lead to a serious conversation, not an unexplained decision.

Where CEP Is Right

Start with access. Of the CEOs who hold back, 64% cite "limited opportunities to have these communications with our funders,"[3] close to the 68% who fear losing funding.

You cannot have an honest conversation if you cannot get a meeting, and more regular contact matters, and so do intermediaries. In a recent CEP blog post, Otha Cole and Carrie Harlow of the Nonprofit Sustainability Initiative describe CEOs approaching their pooled fund with difficult issues much more readily than they approach their own funders.[11]

Grant terms matter as well. Three years of unrestricted funding give a CEO more room to raise a problem in year one than a short-term restricted award does. CEP reports that CEOs who believe they can be completely honest are slightly more likely to rate their funders' unrestricted and multiyear support as effective.[9] That is a small association, not proof of cause and effect, but still, better grant design is a real part of the response.

I would not discount either remedy, but I just don't think they address the whole problem.

The Structure Behind the Fear

Here is where my argument begins, and this is my reading of the problem, not a finding CEP makes.

An opportunity to speak and the ability to speak without financial consequences are not the same thing. Access determines whether the conversation happens; however, fear shapes what gets said.

Consider the calculation facing a CEO whose budget depends almost entirely on grants. If a funder reacts badly to a candid disclosure, the loss could reach the operations payroll. What does the CEO gain by speaking up? Perhaps the funder helps, or perhaps nothing changes. In CEP's survey, 38% of the CEOs who hold back believe their funders would not act on the challenges they disclosed.[3]

The CEO does not need to believe punishment is certain; a large possible loss, set against an uncertain benefit, may be enough to keep the conversation superficial.

To be clear, CEP measures the fear of funding loss, but it does not measure how often funders actually cut grants because nonprofits were honest. So, some CEOs may overestimate the risk, but if the fear keeps information from reaching a funder, the damage to communication is already done.

Nor am I talking about disclosures required by law, contract, or basic ethics, as those obligations remain. I mean the broader conversations about emerging risks, weak points, operational strain, and needs that a nonprofit is not formally required to report.

An organization can attend every listening session a foundation offers and still say that things are on track. The door is open, but the financial stakes have not changed.

This brings me to my thesis: single-instrument dependency makes candor a financial risk.

I'm okay with grants. I'm not okay with grant dependency. When grants are the only way money comes in, a conversation about a problem can also become a conversation about whether the organization survives. Unrestricted, multiyear support makes that conversation safer; however, it does not, by itself, change the organization's dependence on one funding mechanism.

CEP's Own Words

There is a passage in CEP's Research Limitations section worth reading alongside Figure 9: "Given the precarious position many nonprofits find themselves in, we cannot know to what extent nonprofit leaders felt fully comfortable sharing their experiences in this study."

CEP goes on to say that nonprofits' experiences "may be even more negative than what is shared in this report."[12]

CEP does not define that precarity in financial terms. But when it asks CEOs why they show restraint in conversations with funders, 68% cite concern about losing funding, and only 3% cite potential legal consequences. [3] So, among the reasons measured, financial loss dominates.

If a nonprofit leader might hold back even in a confidential research study, it is worth asking what happens in a conversation for the next grant when the money funds the nonprofit's entire operations.

That is a key question, not a causal finding, and CEP explicitly cautions that its data do not establish causation;[12] however, I take its limitations statement as a reason to examine the financial structure behind the fear.

Why More Funders Are Not Enough

A reasonable response is to diversify the grant portfolio: instead of relying on one foundation, build relationships with ten.

That helps, as ten independent foundations make independent decisions, so one disappointing conversation is less threatening when that funder provides only a fraction of the budget.

But ten grants still leave an organization dependent on one kind of decision: whether funders choose to support its mission in the next funding cycle, and independent decisions do not mean independent circumstances. CEP's report examines a shared shock: federal actions with "the potential for wide-ranging effects on nonprofits' funding and work."[13] A grant-funded organization can have ten funders and still be exposed when the whole funding environment shifts because of a shock.

More funders reduce the stakes of any single conversation, but they do not reduce the share of revenue subject to grantmaking decisions.

Sources change who decides. Mechanisms change what the money depends on.

That distinction is the heart of the Resilience Portfolio I have been developing. Its premise is that nonprofits should design revenue across different mechanisms, not simply add more sources of the same one.

Earned revenue, revenue-generating corporate partnerships, and blended finance can bring money into an organization on different terms: a customer pays for a service; a corporate partner pays for operational value; an investor expects surplus creation and a return. Each has its own demands and risks, including solvency concerns, but they don't all make decisions based on a foundation's grant cycle or grantmaking criteria.

The point is not to replace grants. It is to make them one instrument among several uncorrelated ones, so a difficult conversation with one funder does not put the same share of the organization at risk.

This will not work equally well for every mission. Advocacy, emergency response, and services for people who cannot pay may rightly depend heavily on grants, and for them, the practical question may be modest: what part of the budget, if any, could be supported without waiting for the next award?

Nor does a broader revenue mix solve every reason nonprofits remain silent. Forty-nine percent of the CEOs who hold back cite "fear of causing reputational harm to our organization."[3] Reputation can suffer with customers, corporate partners, investors, and the public just as it can with a foundation, as more mechanisms can mean more people to answer to.

Revenue design can reduce one kind of financial exposure, but it cannot eliminate reputational risk. The 31% of CEOs who cite a lack of funder interest in their challenges still need the communication improvements CEP recommends.[3]

A Question for the Next Survey

CEP's study cannot tell us whether nonprofits with a more diverse revenue mix are more candid with funders. Its nonprofit sample comes from the Nonprofit Voice Project, a panel representative of organizations that receive at least some funding from private foundations giving $5 million or more annually [14], so the report does not compare honesty across revenue models; however, that would be a useful next step.

Ask CEOs how much revenue comes from grants and how much from earned income, partnerships, or investment. Then compare their answers with the honesty and hesitation measures in Figures 8 and 9.

Two other variables matter: unrestricted reserves and the share of revenue provided by the largest funder. A nonprofit with two years of reserves faces a different decision from one that may miss payroll in three months, even when both rely on grants.

CEP has already examined responses by leader identity and field of work.[15] Revenue mix is another dimension worth testing.

I would be interested in either result. If CEOs with several funding mechanisms are just as afraid of losing grants, my thesis becomes weaker, and CEP's emphasis on funder behavior deserves more weight. If fear is associated with grant concentration even after accounting for reserves and dependence on the largest funder, we would have reason to look beyond the number and quality of funder conversations.

Either way, the evidence would improve the debate.

An Open Question

CEP asks foundation boards what they can do to help grantees speak more honestly.

I would add a question for both foundation and nonprofit boards: If your grantee – or your own organization – told the full truth tomorrow, how much of its budget would be on the table?

Notes

1. Center for Effective Philanthropy, Evolving Foundation Responses to a Sector in Crisis (2026), Appendix A, pp. 27, 29–30. https://cep.org/wp-content/uploads/2026/09/CEP_CurrentContext_Layout_FNL.pdf

2. Ibid., Figure 8, p. 19 (N=328).

3. Ibid., Figure 9, p. 20 (N=191; respondents could select all that apply).

4. Ibid., Finding 3, p. 19.

5. Ibid., Conclusion, p. 25.

6. Ibid., p. 19.

7. Ibid., p. 20.

8. Ibid., p. 20.

9. Ibid., p. 20. CEP uses "slightly" to denote a small effect size (pp. 28, 31).

10. Ibid., "Questions This Raises for Foundation CEOs and Boards," p. 26.

11. Otha Cole and Carrie Harlow, "The Case for Pooled Funds in a Time of Disruption," CEP Blog, October 15, 2026. https://cep.org/blog/the-case-for-pooled-funds-in-a-time-of-disruption/ (The views are the authors', not CEP's.)

12. CEP, Evolving Foundation Responses, Research Limitations, p. 32.

13. Ibid., "Terminology," p. 6.

14. Ibid., Appendix A, p. 27.

15. CEP Staff, "Ten Questions on 'Evolving Foundation Responses to a Sector in Crisis,' Answered," CEP Blog, October 6, 2026. https://cep.org/blog/ten-questions-on-evolving-foundation-responses-to-a-sector-in-crisis-answered/