CEP’s “State of Nonprofits 2026” confirms what many funders already sense: The sector is under severe strain. Burnout among nonprofit CEOs jumped to 46% this year, up from just under 30% in 2025. Fifty-seven percent of leaders say foundation grants are harder to get than before. And 39% of organizations ran a deficit in their last fiscal year, nearly double the 22% who did in 2022.

The easy reading of that data is a revenue story. Money got tighter, so deficits grew. Give more, and the deficits shrink.

Look again at the same report, and a second story appears. Among organizations that ran a deficit, the most common contributor was not lower foundation revenue. It was higher-than-expected costs, cited by 58% of those leaders, followed closely by lower-than-expected foundation revenue. Costs ran past the budget more often than grants fell short.

That difference matters because the two problems have different cures. You can close a revenue gap with a bigger check. You cannot close a cost gap you cannot see.

Here is the part the sector rarely says out loud: Most nonprofits cannot state what it truly costs them to serve one client. Not the program budget. The fully loaded cost, with a fair share of rent, insurance, leadership time, technology, and the finance staff who keep the lights on. The gap between that real cost and what a grant or a client actually covers is structural. It stays invisible until the year ends in red. I call it the Social Enterprise Gap.

Think of a couch advertised at $100. The real cost is $125, once you add $20 for delivery and $5 for tax. A nonprofit that prices its programs at the 100 number runs a quiet loss on every unit it delivers, no matter how hard it fundraises.

This is why the sector’s main response gives me pause. In CEP’s data, 88% of nonprofits are considering pursuing new funders, and 77% are leaning harder on existing ones. Active fundraising is the single most common action leaders report taking. The instinct is reasonable. But an organization that does not know its cost per client will set the wrong fundraising target, accept grants that lose money, and grow into a larger deficit. More money poured into an unmeasured model does not buy stability. It buys a bigger version of the same fragility.

Read the full article about funding cost clarity by Thaddaeus Hubbard at The Center for Effective Philanthropy.