At DonorsTrust we firmly believe a robust, thriving nonprofit sector is key to defending freedom. In the post below, Philanthropy Roundtable Visiting Fellow Jack Salmon outlines the importance of philanthropic independence from government influence. Salmon is the author a new report, “How Government Funding Compromises Nonprofit Independence,” which he introduces in this blog post. This piece was originally posted at PhilanthropyRoundtable.org and has been reposted here with permission.
—DonorsTrust
Why Nonprofits Must Reclaim Their Independence
By Jack Salmon
The nonprofit sector has long been celebrated as the beating heart of American civil society, an intricate web of community-driven, volunteer-led and donor-supported organizations committed to solving social challenges where government often falls short. But in recent years, a worrying trend has taken hold: the growing dependence of nonprofits on government funding.
A new report, “Strings Attached: How Government Funding Compromises Nonprofit Independence,” reviews the latest data available that illustrates how an overreliance on government dollars erodes nonprofit independence, creativity and the accountability to the communities these organizations serve.
This came into sharp focus earlier this year when President Trump issued a memorandum temporarily freezing grants, loans and financial assistance to nonprofits. Though it was swiftly rescinded, and had been done in a spirit of long-needed fiscal responsibility, the event exposed a deeper vulnerability.
For organizations that have grown reliant on government funds, a single political shift or bureaucratic decision can bring operations to a halt, harming those who depend on essential services. This dependency stands in stark contrast to the nonprofit sector’s historical role as a counterweight to centralized power, an ideal championed by Alexis de Tocqueville nearly two centuries ago.
A nonprofit sector that increasingly resembles an arm of the state, rather than a collection of independent, community-rooted organizations, undermines the fabric of a free and participatory society. Instead of being accountable to donors, volunteers, local stakeholders and those in the community they serve, nonprofits become beholden to government agencies, policy directives and funding requirements.
One of the most significant consequences of this trend is mission drift. To secure government grants, nonprofits may pivot away from their original goals in favor of satisfying government priorities. This shift can weaken the focus and responsiveness of the sector, favoring compliance and bureaucratic alignment over innovation and real-world impact. Large, well-connected organizations with administrative muscle are more likely to secure funding, sidelining smaller, grassroots efforts that may better understand and reflect the needs of their communities.
The report also includes compelling empirical evidence on the crowd-out effect, where government funding displaces private charitable contributions. Across numerous studies, the pattern is clear: when public money flows in, private donations and fundraising efforts often decline. In sectors like social and human services, each dollar of government funding may crowd out 50 cents or more in private giving. This not only shifts financial power toward the state, it undermines the social trust and personal engagement private philanthropy fosters.
Moreover, regulatory requirements tied to government funding often push nonprofits toward professionalization and administrative expansion, increasing overhead costs and reducing the role of volunteers.
Maintaining a diverse funding base protects the independence that allows nonprofits to be innovators, watchdogs and true community partners. Philanthropists, nonprofit leaders and policymakers must recognize the risks of overreliance on public funding and work to ensure America’s civil society remains a source of pluralism, creativity and democratic vitality.
When many are calling for revitalization of local communities and civil society, it’s important to remember nonprofits must be free to act, dissent and lead, not just serve as administrative agents of the state.
Read the full report: “Strings Attached: How Government Funding Compromises Nonprofit Independence.”
