Insights · Grant finance
Philanthropy Isn't Dying, It's Narrowing: Donor Concentration Risk for Nonprofit Finance Teams
Americans gave a record $617 billion in 2025, and the number of people giving fell for a fifth straight year. The money is coming from fewer hands. Here is what donor concentration risk looks like on a nonprofit's books, how to measure it, and what a finance team should change before one lost gift becomes a budget hole.
The short version
- Total US giving reached an estimated $617.20 billion in 2025, up 5.7% in current dollars and 3.0% after inflation (Giving USA 2026). Bequests rose 19.7%, or 16.6% after inflation.
- Over the same year, the Fundraising Effectiveness Project (FEP) counted 3.6% fewer donors while dollars rose 5.0%. It was the fifth straight year of donor decline, and the growth came almost entirely from Major and Supersize donors.
- The Q2 2026 FEP release puts it in one line: Major and Supersize donors gave 76.4% of all dollars while making up 2.9% of donors.
- For a single nonprofit, that pattern shows up as donor concentration risk: a short list of funders whose loss would break the budget. Measure it with a top-donor share, then set reserves and restricted-fund policy to match.
- Government grants spread the risk, but they bring their own concentration and a compliance bill. A nonprofit that spends $1,000,000 or more in federal awards in a year needs a Single Audit (2 CFR 200.501).
The headline and the footnote
Every few months someone declares that philanthropy is dying. The 2025 numbers say otherwise. Giving USA estimates $617.20 billion went to US charities last year, the first time the total cleared $600 billion. All four sources grew in current dollars: individuals, foundations, bequests, and corporations. Bequests led at $62.19 billion.
The footnote is in the donor counts. The FEP tracks giving across about 15,000 organizations and 7.8 million donors. Its Q4 2025 report found dollars up 5.0% and donors down 3.6%, a streak that began in 2021. In the report's own words, the sector is "more dependent than ever on fewer, larger gifts."
So the pool of money got bigger and the pool of people got smaller. That is not a death. It is a narrowing, and narrowing is a finance problem before it is a fundraising one.
What 2026 has shown so far
The first half of this year looked like a pause, then the old pattern came back.
| Period | Dollars | Donors | Note from FEP |
|---|---|---|---|
| 2025 full year | +5.0% | -3.6% | Growth driven almost entirely by Major and Supersize donors |
| Q1 2026 | +4.3% | -0.8% | Only Micro donors ($1 to $100) still declining |
| Q2 2026 (year to date) | +6.6% | -1.6% | Major and Supersize: 76.4% of dollars, 2.9% of donors |
Two details from the Q2 release matter for anyone building a budget. Micro donors are still 51.6% of all donors, and they fell 4.2% in count and 4.4% in dollars. And only 11.3% of donors acquired in 2025 had given again by the end of Q2. The FEP's Q1 release also warned that some late-2025 growth may have been pulled forward by donors moving gifts ahead of tax law changes, so the back half of 2026 could be tougher.
Read together: the base that feeds future major donors is shrinking, and the big checks carrying the totals are the ones most exposed to a market drop. The FEP's own Q4 commentary notes that large donors have historically pulled back in times of economic uncertainty.
Donor concentration risk, in plain numbers
Donor concentration risk is the share of revenue that depends on a few relationships. The sector averages above are interesting. Your client's own ratio is the one that decides whether payroll clears in March.
Start with three numbers from the last two fiscal years of contribution data:
- Top donor share: largest single donor (family and related entities combined) divided by total contributions and grants.
- Top five share: the five largest, same treatment, divided by the same total.
- Months covered: operating reserves without donor restrictions divided by average monthly operating expenses.
There is no regulatory threshold for these. As a working rule (our view, not a standard), when the top five share exceeds the months covered expressed as a share of a year, the organization cannot absorb losing its biggest funders without cutting programs. Put differently, if five donors fund 40% of the budget and reserves cover two months, the math does not close.
Worked example
A made-up human services nonprofit with a $4.0 million budget:
| Item | Amount |
|---|---|
| Total contributions and grants | $3,200,000 |
| Largest donor (family foundation) | $600,000 |
| Next four donors combined | $500,000 |
| Top five share of contributions | 34% |
| Unrestricted operating reserve | $500,000 |
| Months covered at $333,000 a month | 1.5 |
Now the family foundation shifts its priorities, which foundations do. The organization loses 15% of its budget with six weeks of cash behind it. The only fast levers are layoffs and delayed payables. Nothing about the total giving climate helps this organization, because its risk sits in one relationship.
The same organization with a $1.3 million reserve (about four months) and a federal award covering one program has time to replace the gift. That is the whole argument in one table.
A check you can run from the outside: the 990
You do not need the client's donor database to see concentration. Schedule B of Form 990 lists contributors who gave $5,000 or more in the year. For most 501(c)(3) public charities, the names and addresses on the public copy are not open to inspection, but the amounts are. A Schedule B with one line that dwarfs the rest is your first conversation starter.
Schedule A tells a related story. For organizations tested under section 170(b)(1)(A)(vi), contributions from any one donor (with related persons combined) count as public support only up to 2% of total support over a five-year period. A big single gift can therefore drag the public support percentage toward the 33 1/3% line. Giving USA's bequest surge is a live example: an unusually large one-time bequest may qualify as an unusual grant and be excluded, but only if it meets the IRS conditions and the records exist. Check that before year end, not when the 990 is due.
What the finance team should change
Measure concentration every quarter, set a reserve target tied to it, separate restricted from unrestricted money in the forecast, and diversify into revenue the organization can actually administer.
- Put the top donor share and top five share on the board dashboard next to months of cash. Boards react to ratios they see every quarter.
- Write a reserve policy with a number in it. Tie the target to the largest single funder: at minimum, enough unrestricted reserve to cover that funder's annual gift for the months it would take to replace it.
- Forecast restricted and unrestricted revenue separately. A record year built on restricted gifts can still leave operations short. The FASB liquidity disclosure under ASU 2016-14 already requires a nonprofit to report the financial assets available for general expenditures within one year; use that schedule as a management tool, not a footnote you fill in for the auditor.
- Ask the big donors for multi-year pledges in writing. A pledge schedule is a forecasting asset. A handshake is not.
- Count bequests as windfalls. Giving USA notes that bequest giving historically fluctuates a lot from year to year. Budget them conservatively, if at all, and route large ones to reserves or board-designated funds.
Government grants: real diversification, real cost
Federal and state awards are the obvious hedge against a narrow donor base. They are large, multi-year, and do not depend on a stock market quarter. They also come with strings that a finance team has to be able to pull.
First, a federal award is its own concentration. Under 2 CFR 200.340(a)(4), an agency may terminate an award under its terms and conditions, to the extent authorized by law, if the award no longer effectuates program goals or agency priorities. One large federal award replacing one large donor swaps a risk; it does not remove one.
Second, compliance capacity costs money before the first drawdown. Once federal expenditures reach $1,000,000 in a fiscal year, the organization needs a Single Audit (2 CFR 200.501). Below that line, records still have to be available to the agency, the pass-through entity, and the GAO. Time-and-effort documentation, allowable cost reviews, subrecipient monitoring, and reporting deadlines all need someone who knows them. If the award pays by reimbursement, the nonprofit also fronts the cash, which pulls straight from the reserve you just built.
The sensible move is a mix: a broad individual base the development team keeps working on, a reserve sized to the largest funder, and government awards sized to what the back office can carry. This is where outside accounting and CFO firms earn their fee.
How AwardNote uses this
A nonprofit that just won a new federal award, has a lopsided Schedule B, and has no grants accountant on staff is exactly the client who needs reserve modeling and federal compliance support at the same time. Each AwardNote opportunity pairs an award trigger with a finance capacity signal and labels the evidence Verified, Inferred, or Unknown. If you want that research for the nonprofits you serve, start with a $149 pilot: 14 days, 5 researched opportunities, no auto-renewal.
Sources
All retrieved November 3, 2026.
- Giving USA 2026 press release, Indiana University Lilly Family School of Philanthropy (June 23, 2026): philanthropy.indianapolis.iu.edu
- Fundraising Effectiveness Project, Q4 2025 report overview: publications.fepreports.org
- AFP, FEP Q1 2026 release (July 29, 2026): afpglobal.org
- AFP, FEP Q2 2026 release (October 29, 2026): afpglobal.org
- IRS, Instructions for Schedule B (Form 990): irs.gov
- IRS, Instructions for Schedule A (Form 990): irs.gov
- FASB In Focus, ASU 2016-14, Presentation of Financial Statements of Not-for-Profit Entities (August 18, 2016): OMB document (PDF)
- 2 CFR 200.501, Audit requirements (eCFR): ecfr.gov
- 2 CFR 200.340, Termination (eCFR): ecfr.gov
FAQ
Is philanthropy in the US declining?
Not in dollars. Giving USA estimates US giving reached a record $617.20 billion in 2025, up 3.0% after inflation. What is declining is the number of donors: the Fundraising Effectiveness Project reported a 3.6% drop in 2025, the fifth straight annual decline, with growth carried by Major and Supersize donors.
What is donor concentration risk for a nonprofit?
It is the share of revenue that depends on a small number of funders. A simple measure is the top donor share and top five share of total contributions and grants, compared with how many months of unrestricted reserves the organization holds.
How much operating reserve should a nonprofit hold?
There is no federal rule. A practical approach is to tie the target to concentration: hold enough unrestricted reserve to cover the largest funder's gift for the time it would take to replace it, and report the ratio to the board every quarter.
Can a large single gift affect a charity's public support test?
Yes. For organizations tested under section 170(b)(1)(A)(vi), contributions from one donor count as public support only up to 2% of total support over the five-year period, per the Schedule A instructions. A gift that qualifies as an unusual grant can be excluded if it meets the IRS conditions.
Do government grants reduce donor concentration risk?
They diversify revenue, but a large federal award is its own concentration and can be terminated under 2 CFR 200.340. Federal expenditures of $1,000,000 or more in a fiscal year also trigger a Single Audit under 2 CFR 200.501, so the organization needs compliance capacity first.
