During a recent review of the Pilgrim Foundation’s U.S.-based grant applications, one theme surfaced repeatedly in conversations with our nonprofit partners: everything costs more.
Partners described higher expenses for staffing, facilities, technology, transportation, and program delivery. At the same time, many were experiencing greater demand as the communities they serve faced higher costs for housing, food, childcare, healthcare, and other essentials.
None of this was particularly surprising. In fact, the Center for Effective Philanthropy’s (CEP) “State of Nonprofits 2026” found that 73% of nonprofit leaders reported increased demand for their services, while 66% expressed concerns about their organization’s financial stability. Those findings closely mirrored what we were hearing from our own partners. Not to mention, we experience inflation in our own lives and account for changing costs in many aspects of running a foundation. We budget for rising expenses. We consider compensation changes. Our investment partners think about real returns, not simply nominal ones.
But those conversations prompted us to look at one place where we had not been thinking about inflation nearly as intentionally: our grants.
Several of our long-standing nonprofit partners had received the same grant amount for multiple years. We had viewed that consistency positively, while also making larger adjustments in years when strong investment returns gave us greater capacity to give. These were organizations we trusted, whose work we valued, and with whom our relationships had deepened over time.
Looking Beyond the Dollar Amount
We had a rather obvious realization: while our commitment to these partners had deepened, the purchasing power of our grants had quietly diminished. Inflation had been changing what those same grant dollars could accomplish.
As we reflected on these questions, we came across a CEP blog on the same topic. The article reinforced what we had begun to recognize through our own conversations with nonprofit partners and affirmed that preserving the real value of grants is an important conversation across philanthropy. The article challenged funders to consider not simply whether grants remain consistent in nominal dollars, but whether they continue to provide the level of support originally intended as inflation erodes their real value over time.
Consider a hypothetical $50,000 unrestricted grant renewed at the same amount year after year. It’s hard to imagine a nonprofit that would say no to this kind of commitment, especially since unrestricted giving remains highly valued across the sector. After several years of cumulative inflation, that $50,000 grant may effectively provide purchasing power closer to $45,000 than $50,000. Nothing has changed in the award letter, but the organization now has thousands fewer dollars’ worth of purchasing power to carry out the same work.
In practice, that means the nonprofit is absorbing the difference, finding ways to cover rising costs elsewhere. We began to question whether that was the right outcome. If we intended to be long-term partners, did we have a role to share in those rising costs, rather than expecting the organization to shoulder them alone?
That distinction changed the question we were asking ourselves. Instead of asking, “Have we continued supporting this organization at the same level or more?” we began asking, “Does our grant still provide the level of support we originally intended it to provide?”
Those are not necessarily the same thing.
This question feels particularly relevant as philanthropy increasingly recognizes the value of long-term, unrestricted support: Unrestricted funding addresses how organizations can use our dollars, multi-year funding provides greater predictability over time, but neither, on its own, ensures that the economic value of those dollars remains consistent.
We wanted to address that very concern.
Accounting for Rising Costs
To do so, the Pilgrim Foundation recommended a one-time inflationary adjustment for our long-standing partners, while beginning to develop a policy for future adjustments to help ensure our grantmaking remains in step with the changing costs our partners face.
After reviewing inflation trends, examining our grant portfolio, and considering what we heard directly from nonprofit leaders, we recommended a 12% adjustment to our board, roughly three times the prevailing annual inflation rate that was reported in May. We intentionally chose an adjustment above the current rate to recognize that the erosion in purchasing power had occurred over multiple years, while applying the same adjustment across the portfolio kept the approach simple and consistent.
The decision was shaped not only by economic data, but by what our partners shared throughout the application process about both rising costs and increased demand — trends that align with broader national research. In addition to CEP’s research, Independent Sector found that 68% of nonprofits expect demand for their services to increase, yet only 31% anticipate being able to expand the number of people they serve. That disconnect between growing community need and organizational capacity reinforced our conviction that maintaining the real value of long-term grants deserved greater attention.
What Listening Required of Us
There was another lesson in this experience that went beyond the need to adjust grants for inflation.
Funders frequently ask nonprofit partners to tell us what they are experiencing. We conduct site visits, review applications, administer surveys, and ask leaders about emerging challenges. But listening becomes meaningful when what we hear causes us to examine our own practices.
CEP’s “State of Nonprofits 2026” underscores why those conversations matter. More than half of nonprofit leaders reported that foundation funding has become harder to secure, while 44 percent reported receiving less funding from foundations than in prior years. The report also found that 39% of nonprofits operated at a deficit in 2025, compared to 22 percent just three years earlier. These findings illustrate that many nonprofit leaders are navigating rising costs alongside an increasingly uncertain funding environment.
Our partners were not necessarily asking us to develop an inflation policy. They were describing their reality: costs were rising, community needs were increasing, and resources were being stretched further. We began to realize that we could treat those observations solely as information about their organizations, or we could also ask what they might mean for our grantmaking.
There is no single answer, and an inflation adjustment may not make sense for every foundation or every grant. But our experience reinforced for us that partner feedback sometimes asks us to reconsider an existing practice.
Looking Ahead
Looking forward, our board also approved incorporating inflation into future grantmaking considerations to help maintain the purchasing power of long-term grants over time, alongside the other factors that inform our funding decisions.
We are also exploring how to apply this thinking to our international partnerships, where inflation, currency fluctuations, and broader economic volatility can make the real value of grant funding even less predictable. We are still working through what a thoughtful approach might look like across very different contexts and would welcome insights from others who have wrestled with these questions.
Whether another foundation adopts the same approach is less important than the broader lesson that the real point isn’t how much money is given, but what that money actually allows organizations to do.
As economic conditions continue to evolve, periodically reassessing the real value of grant funding may be one practical way funders can better align their giving with the outcomes they hope to achieve.
Jackie Daniel is domestic partnerships manager and Manivanh Khy is executive director of The Pilgrim Foundation.
