Nonprofit general operating support gives mission-critical funding. While nonprofits often welcome program-specific support, program funding often drains other resources. Without enough unrestricted support nonprofit operations are less effective and successful. Increasingly charity associations, funders, and media advocates believe nonprofits need more general operating funds than they receive to achieve their mission.
Seven Reasons Nonprofits Need General Operating Support
Why do charities need unrestricted support? In many cases general operating funds not only keep the lights on – they also contribute to the effectiveness of charity program development and implementation. Here are seven reasons why nonprofits need unrestricted support.
- Fostering financial sustainability and capacity building;
- Strengthening donor and charity relationships and trust;
- Providing flexibility to efficiently and effectively meet charitable missions;
- Promoting mission-focused work using core capabilities and strengths;
- Permitting better long-term planning;
- Easing administrative burdens for charities and in some cases donors; and
- Establishing broad, mission-based outcome accountability.
Just like other organizations, nonprofits need funding responsive to their unique needs.
Donors Contributing to General Operating Support
Perhaps aware of these concerns, in recent years some donors have increased their gifts for unrestricted support. One study of foundations found that from 2008 to 2014 the percentage of grant dollars going to general operating costs grew from 20% to 25%.
Donor-advised fund donors often provide more unrestricted support than foundations. This may reflect a difference in giving culture. While some donor-advised funds solicit grants and have staff with program expertise focused on grants, most do not.
Donor-advised fund donors tend to base grant advisement decisions on personal charitable experiences. These donors often volunteer individually or as a family at charities they support. They also tend to fill out advisement forms that offer general operating costs as a default grant purpose.
Donor-Advised Fund Contributions to General Operating Support
The Advise Us Fund found that from 2013 to 2014 the majority of our donor-advised grants and grant dollars went to unrestricted support. In 2013 donors advised 68% of grants and 39% of grant dollars to general operations. In 2014 these numbers increased to 85% of grants and 89% of dollars.
Among the largest donor-advised funds, Fidelity Charitable found from 2011 to 2013 the percentage of grants for unrestricted support ranged from 41 – 42% – an increase from 37% in 2008. Vanguard Charitable during the decade from 2004 to 2013 found 63% of grants and 45% of grant dollars supported general operating expenses. Critically, during the economic turn down in 2010, Vanguard Charitable donors responded with 63% of their dollars going to unrestricted support.
An Opportunity for Charities
Donors choose funding methods and charities that best fit their wishes, but charities have an opportunity to shape donor preferences. Nonprofits should share their story with donors, telling donors what unrestricted support means to their mission. The core message for many charities is simple: general operating funding promotes mission-based programming with mission-based results.
Development staff have an opportunity to share how unrestricted support helps secure the charity’s present and future. As development staff consider their funding mix, they should seek targeted opportunities to gain more general operating funds. Focusing on donor-advised funds is a great place to start!
Hiram Wurf is Charitable Catalyst, Managing Director of The Advise Us Fund®. The Advise Us Fund is an independent 501(c)3 nonprofit organization that offers a donor-centric approach to charitable giving. Hiram formerly served as Executive Director and Founder of the nonprofit 12 State, Inc. and as Marketing Communications Manager for Cool Choices, Inc. He has more than 16 years experience in nonprofit development, marketing and communications including nine years administering grants at a family foundation.
The information in this blog post is general and educational. It is not intended nor should it be construed as legal, tax, investing or financial advice. Individuals should consult with their own advisor about charitable giving arrangements The Advise Us Fund® may describe.