The findings in this report are based on a series of focus groups held in different regions of the country and attended by more than 100 nonprofit and voluntary sector organizations, as well as roundtable discussions with funders and interviews with key informants, responses to a written survey of nonprofit and voluntary sector organizations, in-depth case studies, and a review of other research. The sense of alarm expressed by the nonprofit and voluntary sector community stems mainly from how organizations are funded. Many organizations that survived government funding cutbacks of the 1990s are financially fragile because they are now dependent on a complex web of unpredictable, short-term, targeted project funding that may unravel at any time. This study was done for the Working Group on Financing, a subgroup of the Capacity Joint Table of the Voluntary Sector Initiative (VSI). The VSI is a joint effort by the federal government and representatives of the nonprofit and voluntary sector to strengthen the sector’s capacity to meet the challenges of the future. The purpose of this study was to identify current sources and mechanisms of funding for nonprofit and voluntary sector organizations and to explore the differential impacts affecting sustainability.