The U.S. nonprofit sector is facing a period of significant destabilization. Recent executive orders have created both widespread uncertainty and concrete losses—jobs eliminated, community services disrupted, and payments withheld for completed work.
Candid and the Urban Institute’s Center on Nonprofits and Philanthropy have each released analyses examining government funding of nonprofits and implications for what’s at stake for communities nationwide. Here are the key takeaways:
There’s consensus that government funding is a crucial lifeline
While drawn from different data sources, samples, and methodologies, our analyses reveal a consistent story: Government funding is critical to the U.S. nonprofit sector. Candid’s analysis of IRS Form 990 datai and Urban’s results from a panel study on government grants and contracts for public charitiesii reveals three common themes:
1. Many nonprofits receive government funding
Candid’s analysis found that nearly one-third of U.S. nonprofits rely on government grants. Urban’s panel study found that two-thirds of public charities receive either government grants or contracts.
2. Larger nonprofits are more likely to secure government funding
IRS data suggests that 55% of nonprofits with budgets above $5 million receive at least one government grant. Urban’s data shows that two-thirds of public charities and 79% or more of those with annual expenses of $1 million or more received at least one government grant or contract. Larger nonprofits typically have more resources to navigate the complex process required to secure government funding.
3. Government grantees depend on these funds
Candid found that about a third of nonprofit government grantees rely on these grants for more than 50% of their total revenue. Urban found a similar pattern among large public charities with $1 million or more in annual expenses.
Can nonprofits survive without government support?
Urban’s latest data tool, What Is the Financial Risk of Nonprofits Losing Government Grants?, advances our collective knowledge by quantifying the financial vulnerability nonprofits would face if they were to lose their government grants. By calculating the operating surplus of public charities that received government grants, with and without that funding, Urban identified which organizations would be in deficit if these grants disappeared. Our joint analysis of this data reveals three key insights:
1. Two-thirds of nonprofits receiving government grants would face deficits if these grants disappeared
The median nonprofit receiving government grants operates with a budget surplus of 9%, but without government grants, this plunges to a 13% deficit. Many nonprofits function with razor-thin margins; even the loss of a small portion of revenue can impact their financial stability.
The pattern is consistent across the United States: In every state, between 60% and 79% of nonprofits receiving government grants would fall into deficit—a range that is both narrow and alarmingly high. Nonprofits in Alaska (79%), West Virginia (76%), Arkansas (75%), and Mississippi (74%) would be particularly vulnerable.
2. Financial vulnerability transcends size
Both Candid and Urban’s previous analyses show that larger nonprofits are more likely to receive government grants. However, our vulnerability analysis reveals that the financial impact of losing government grants is remarkably consistent across nonprofit size.
3. All nonprofit subsectors are vulnerable—but some more than others
Candid’s previous analysis identifies human services, international/foreign affairs, and public/societal benefit as subsectors where government grantees are particularly dependent on those grants, with 35-40% relying on them for their primary revenue stream.
Our vulnerability analysis reveals an even starker picture. Using Urban’s tool, we found that at least half of government grantees in all subsectors would face a deficit without those grants. In this analysis, human services ranks as the most vulnerable subsector (71%), followed by health organizations (70%) and education organizations (68%).
Overall, our analysis reveals significant nuances in the data surrounding nonprofit financial dependencies. While some organizations may be less likely to receive government grants or report less reliance on government funding as a percentage of their overall revenue, they can still experience profound financial vulnerability.
Candid and Urban are working together to illuminate these complexities at a time when the nonprofit sector faces not only financial challenges but also serious threats. We’re committed to providing research that advances accurate, data-driven narratives to shape public understanding of the sector—by combining our expertise and resources.
The Urban Institute is funded primarily by foundations, corporate philanthropies, and public agencies at all government levels.
i Candid’s analysis is limited to nonprofits filing a Form 990, which does not include government contracts. Numbers are based on most recent available filing (largely 2022 or 2023). All 501c subsections are included.
ii Urban’s panel study data comes from the 2024 National Survey of Nonprofit Trends and Impacts, a nationally representative panel study of 501(c)(3) public charities that provide important services across American communities, excluding hospitals, higher education institutions, schools, and other specialized types of nonprofits, such as religious and mutual benefit organizations. The public charities in the panel have annual expenses and revenues of $50,000 or more and engage in activities ranging from direct service provision to community building and advocacy. They primarily receive rather than provide funds. For more information about the sampling frame developed for the National Survey of Nonprofit Trends and Impacts, see the methodology section in the report Nonprofit Trends and Impacts 2021.
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