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Younger donors, shrinking federal support, and heightened scrutiny are reshaping funder communications. Translate openness into trust, loyalty, and long-term credibility.
Back in late 2022 when I published Managing Your Nonprofit for Resilience, I observed that nonprofits often hesitate to disclose their setbacks and challenges to their major funders. I spoke of “guarded communications,” referring to a nonprofit’s tendency to avoid full disclosure to funders during tough times. What has happened since that time?
In my more than 30 years of working with nonprofits, I understand why leaders may be concerned that acknowledging problems might discourage donors, grantmakers, or partners. Just as an underperforming sales division may want to accentuate the positive and eliminate the negative, nonprofits may feel that they must always put the best face on their results.
This lack of transparency, however, undermines the trust at the very core of the nonprofit-funder relationship. Transparency requires commitment to honesty in every interaction. It establishes a foundation of trust by giving stakeholders a clear view into your operations and use of funds. When communication is guarded, that foundation cracks. Funders may sense they’re not getting the whole story, leading to doubt and a loss of confidence. In worst cases, stakeholders blindsided by hidden bad news feel betrayed, which is a recipe for broken relationships.
Guarded communication also weakens risk management and resilience. Hiding problems doesn’t make them disappear. It makes them more likely to metastasize into crises. Effective risk management relies on candid discussion of potential threats and early warning signs. If leaders withhold information, they deprive funders of the chance to help mitigate risks or provide support. Proactively reporting challenges, however, can rally allies and resources to address issues before they escalate. As one resilience guide notes, “in an era of extreme skepticism and instability, transparency is everything” – it is key to earning trust, donor loyalty, and long-term credibility.” In short, openness fortifies an organization’s ability to weather storms.
When Managing Your Nonprofit for Resilience came out in 2022, nonprofits were emerging from the pandemic upheaval and learning hard lessons about communication. Although I have been unable to find hard research data showing any trend, I have sensed a greater tendency among the hundreds of nonprofit leaders I work with to be more candid with their stakeholders about the challenges they face. There may be a few reasons for this shift.
The Great Recession and the COVID-19 crisis showed that nonprofits need federal support to withstand profound economic shocks. Persistent problems in our society – like hunger, lack of shelter, and societal inequities – require collective action. Far from going away, such problems multiply and deepen during economic crises. Moreover, when the economy suffers, we cannot expect the donor community to step up on its own: donors face the same economic forces as the rest of us and will generally cut back on giving when the economy sours.
As a result, we need a system fueled by taxation as well as donations. The sector needed the influx of federal dollars during both crises. Donors and nonprofits cannot deal with critical social issues on their own.
The test of this concept may now be upon us. In the first six months of 2025, we have already seen an unprecedented reduction in federal funds flowing to the nonprofit sector. Now, if Republicans and Democrats in Congress, along with Donald Trump, cannot reach some accommodation that allows the federal government to continue to function past October 1st, we will soon find out how the nonprofit sector functions when money flows from the federal government truly dry up.
At that point, federal agencies would be required to stop disbursements for “non-essential” functions. Most grants would cease, as would funding for programs like the Special Supplemental Nutrition Programs for Women, Infants, and Children (WIC) and the Supplemental Nutrition Assistance Program (SNAP). Section 8 housing vouchers would continue for some time on residual funds, but would at some point those funds would be exhausted and landlords would begin evictions.
Nobody really knows what our nation would look like without these and a host of other critical behind-the-scenes resources. Federal cuts in a shutdown would disproportionately impact those who are least fortunate, whose stories tend not to make the evening news until blood is spilled and attention follows the trail of tragedy. Direct funding losses in the tens of billions of dollars would cripple operations of health clinics, shelters, schools, and community programs nationwide. Indirect consequences – from hungry families seeking food, to unpaid workers needing assistance, to charities struggling with cash flow and staffing – would compound the crisis.
We have never seen more than 35 days of federal shutdown. We may soon learn what happens when the lights dim for a lot longer.
Transparency is also simply harder to evade than it once was. Once upon a time, a nonprofit might hope that donors would not learn about their missteps. In the age of X, Instagram, and Facebook, nonprofits have learned that they need to assume that if something bad happens, people will learn about it.
Perhaps in recognition of this fact, transparency is increasingly a top driver of donor trust. In a 2024 study, the primary factors that encouraged trust were transparency and competence. Donors want to understand a nonprofit’s plans to achieve its mission and then see reports on how their dollars are used. They crave honesty about both successes and setbacks.
This is even more pronounced among younger generations of donors. Millennials and Gen Z, who are inheriting trillions in wealth, often distrust institutions and large-scale fundraisers unless organizations prove their transparency. These younger donors extensively research nonprofits before giving; they expect to find financial reports (990s, audits), data-driven impact results, and candid stories about challenges directly on nonprofits’ website and social media. They value authenticity over perfection.
For nonprofits, this is a wake-up call. The next generation of supporters won’t tolerate guarded communications. They’ll gravitate toward organizations that are forthright and open about the work.
The policy and funding environment is also pressuring nonprofits to be more transparent. Regulators and lawmakers have shown an increased interest in nonprofit transparency following the publicization of charity scandals and political debates. For instance, in early 2025, a bill was introduced in Congress, pointedly named the “Putting Trust in Transparency Act,” which would require charitable nonprofits receiving federal funds to publicly disclose their major donors (Schedule B of the IRS Form 990) or face automatic loss of tax-exempt status. This controversial proposal is intended to bolster oversight and public trust, though nonprofit advocates have raised privacy concerns.
Separately, new federal rules like the Corporate Transparency Act are coming into effect, requiring certain nonprofits and other entities to report their beneficial owners to prevent fraud and misuse. Most 501(c)(3) charities are exempt, but the trend is clear: greater scrutiny on organizational transparency.
One important caveat about the trend toward transparency, however. The Trump Administration has spent six months demonizing nonprofits that he views as too progressive. In executive orders focused on DEI, LGBTQ, immigration, and other issues, the Administration has sought to stop nonprofits from working on policies Donald Trump doesn’t like. Nonprofits doing that work have struggled to determine what they can and should say publicly about their activities. This confusion has led some nonprofits to obfuscate what they do – to scrub their websites but continue to perform the progressive work anyway. We have no easy way of measuring the magnitude of this impact.
I am cautiously optimistic that more nonprofits are acting with greater transparency than they were when MNFR was published. The brutal shocks of the Great Recession and COVID-19 crises made plain that nonprofits cannot function without substantial government support. Furthermore, hiding the ball is simply getting harder, and donors are expecting greater disclosure. In our next post, we will explore ways in which nonprofits can continue to foster free and honest communications about their risks.