“Reserves can buy time, but they can’t replace a sustainable financial strategy.”
– Diana Miller
The proportion of nonprofits reporting a budget deficit has nearly doubled in four years, rising from 22% to 39%, according to new survey data from the Center for Effective Philanthropy. The finding comes from the CEP’s fourth annual Nonprofit Voice Project, which surveyed 380 nonprofit leaders representing a nationally representative panel of U.S.-based organizations that receive at least some foundation funding.
That number does not describe an organization in crisis. It describes a sector in which operating at a deficit is becoming the norm.
What the CEP Data Actually Shows
The survey captures conditions as of early 2026, with respondents asked to compare their situation to January 2025. The headline figures are stark across every dimension the report tracks.
According to the Center for Effective Philanthropy’s State of Nonprofits 2025, roughly two-thirds of nonprofit leaders are concerned about their organization’s financial stability, and many report workforce reductions. Meanwhile, Challenger, Gray & Christmas data show that nonprofits cut 28,696 jobs in 2025—more than five times the 5,640 jobs cut in 2024. Candid found that 14,015 nonprofits could run out of cash within three months if government grants stopped, potentially jeopardizing nearly 2.8 million nonprofit jobs.
On the funding side, almost 60% of respondents said it has become harder to secure foundation grants since January 2025. More than 40% reported reduced funding from existing foundation funders. Organizations that lost state or local government funding are more likely to have already reduced both services and staffing.
Burnout Is Accelerating at the Leadership Level
The operational picture is compounded by a leadership stability problem. Nearly 90% of nonprofit leaders reported some level of concern about their own burnout. The share reporting burnout as a very significant personal concern rose from under 30% in 2025 to 46% in 2026. One in four CEOs now believes burnout is significantly affecting their staff, up from 17% the prior year.
More than half of respondents said the current environment has contributed to lower staff morale, heightened stress, and an atmosphere of fear. Almost half cited staffing as their organization’s single biggest challenge.
Phil Buchanan, president of CEP, described the findings plainly: “Most leaders indicate that the current context poses a significant threat to their organization’s continued existence and ability to provide essential programs and services.”
How Organizations Are Responding
The report documents 13 categories of action nonprofit leaders are taking or considering. Pursuing new funders topped the list at 88%. Beyond that, the responses divide between revenue and cost strategies that organizations are deploying simultaneously.
On the cost side: 46% are freezing or postponing increases in staffing costs, 44% are drawing from reserves, and 34% are reducing programming or services. On the structural side: 61% are considering changes to board composition, 49% are exploring joint fundraising with peer organizations, 36% are considering shared operations, and 17% are considering a merger.
The reserve drawdown figure carries particular weight financially. Reserves exist to bridge temporary gaps, not to fund ongoing operations. Organizations drawing down reserves now are compressing the runway available to them if conditions do not improve, doing so at a moment when both foundation and government funding pipelines are under pressure.
The Financial Management Implications
For nonprofit CFOs and controllers, the CEP data reinforces a set of financial management priorities that have become more urgent, not less, as conditions tighten.
Cash flow visibility matters more when reserves are being consumed. Organizations managing month-to-month on thinning margins need accurate, timely financials, not quarterly reports assembled weeks after close. Scenario modeling, specifically understanding what a 10%, 20%, or 30% reduction in a major funding source does to the operating budget, is not optional planning work in the current environment.
The increase in the deficit rate—from 22% to 39% over four years—also has audit implications. iAuditors will be looking at going concern indicators with greater attention for organizations showing consecutive deficits or significant reserve draws. Boards and finance committees should be having that conversation before the auditor raises it.
Wiss works with nonprofit organizations on financial statement audits, outsourced accounting, and CFO advisory services for organizations navigating funding volatility. For finance leaders managing tighter budgets without the staff depth to absorb additional complexity, having the right external support in place before a difficult audit cycle is worth considering now.
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