Despite the essential roles they play, Black-led nonprofits and nonprofits focused on services for the Black and brown community often encounter systemic funding disparities that threaten their long-term viability. This is especially true in the current political climate, where government contract payouts are routinely delayed or canceled outright and some corporate donors are withdrawing support over diversity, equity and inclusion (DEI) concerns.

It leaves grassroots leaders to manage critical services, like housing and mentorship, with minimal reserves. While Black households in the U.S. give a higher percentage of their income to charity than any other racial group, Black-led nonprofit organizations today receive significantly less institutional funding and fewer unrestricted assets than their counterparts.

Without a transition toward trust-based, unrestricted funding, Black nonprofit organizations confront a daunting cycle of intense scrutiny and operational fragility.

How Black-led nonprofits face strong headwinds

In California, the National Coalition of 100 Black Women, Oakland Bay Area Chapter (NCBW OBAC), recently experienced a direct shift in the philanthropic climate. Shari P. Wooldridge, the chapter president, reports that a sponsorship was revoked specifically due to language on their website advocating for Black women and girls, a core element of the volunteer organization’s mission to serve as a voice for Black women and girls.

"Funding organizations that commit to support various programs are now backing out due to their stance that DEI is creating division," Wooldridge explains. 

This has been exacerbated by the fluctuations of federal funding and policies. For organizations like NCBW OBAC, the challenge has become more than the nonprofit mission; it’s the complex task of navigating a landscape where advocacy for specific demographic groups is being de-prioritized by traditional funders and even demonized by politicians.

Capital disparities

The funding gap facing Black-led nonprofits and organizations serving the Black and brown community is rooted in broader economic inequities. Data indicates that Black workers earn approximately 76 cents for every dollar earned by white workers. While this may reduce the overall impact of individual donors, it does not reflect a lack of civic engagement. Black households consistently give a higher percentage of their income to charity than any other racial group.

However, this grassroots generosity is often not matched by institutional philanthropy. Nonprofit organizations led by Black CEOs regularly report lower revenues and significantly smaller unrestricted net assets than those led by white CEOs.

Systemic barriers

Access to capital in the nonprofit sector can be heavily dependent on established networks. Historically, systemic barriers have limited the ability of Black leaders to access some wealthy donor circles and foundation boards that play a role in large-scale fundraising.

This blocked connectivity has necessitated a more intentional approach to collaboration, notes Roni Weiss, Executive Director of Travel Unity, which works to make the world of travel welcoming for all people through innovative approaches to education, professional development and community building. “[Nonprofits] can't do this on our own and we can't expect everyone to do it with us," Weiss says. “It is important to come together with those who are seeking a just world and make sure we keep moving the needle forward through intentional action based on defined goals.”

Without diversified funding streams, nonprofits face operational risk. Some estimates suggest that as many as half of all nonprofits could be forced to cease operations if they lose only one or two primary funders. This lack of a financial cushion prevents long-term strategic planning and forces leaders into a state of perpetual crisis management.

Operational pressures

The combination of limited resources and growing community needs creates a pressure-filled environment for leadership. This can result in a conflict between impact and infrastructure, advises Shannon M. Carey, Chief Development Officer of the National CARES Mentoring Movement, which works to secure and transform the lives of Black children by recruiting, training and connecting volunteer mentors to local organizations. "Our challenge is sustaining this vital work in a landscape where the needs are urgent, the stakes are high and the commitment to equity must be renewed every day,” says Carey.

However, Black nonprofit organizations often experience elevated scrutiny from funders. Nonprofits can be required to provide more evidence of "success" based on fewer resources. Any resulting holdups in funding can be harmful. At the NCBW OBAC, Wooldridge notes that delays in executing contracts for shelter services, based on criteria not previously used, create immediate risks for the unhoused. This kind of balancing act places unfair burdens on nonprofits, which may feel compelled to bridge service gaps without guaranteed reimbursement. 

The DEI backlash

One significant hurdle for nonprofits serving Black and brown communities is the ongoing effort to persuade broader society and institutional funders of the necessity of their demographic-specific work.

With the term "DEI” now triggering such politically polarized responses, organizations that explicitly serve Black and brown communities are finding their missions characterized as “divisive," not "essential.” This retreat from equity commitments, especially those made by many institutions in recent years, is a return to a "colorblind" philanthropic model that ignores the specific systemic hurdles Black and brown communities face. 

Such a change in perspective has tangible consequences. Tragically, when sponsorships are revoked or contracts are delayed due to altered perceptions of necessity, it is vital services that suffer. Children aren’t mentored; the displaced aren’t housed; the underrepresented aren’t spoken for.

Shifting toward sustainability

The resilience of nonprofits serving Black and brown communities is evident in their ability to continue operations despite the obstacles. But resilience is no substitute for capital. 

To ensure organizations can continue their work, systemic shifts are required. These include equitable and reliable government contracting and a return to trust-based philanthropy favoring multi-year unrestricted funding over restrictive, project-based grants.

Interestingly, the latter may be more in vogue in light of recent changes to the U.S. tax code that encourage larger grants covering multiple years.

Additionally, as Roni Weiss of Travel Unity optimistically notes, "I recently moderated a panel and asked the panelists what gives them hope. Several pointed to a rise in grassroots movements.” 

And yet, even with grassroots movements providing a possible template for future action, institutional funders must be part of the picture. The missions of organizations like the National CARES Mentoring Movement, NCBW OBAC and others remain vital; the challenge is ensuring the philanthropic landscape evolves to support, not hinder, their success.