The lack of flexibility from not having sufficient unrestricted funds can lead to loss of focus and often disrupts the board/staff balance. Nonprofits that lose government funding often turn to institutional funders like corporations and foundations. While these sources can be useful for specific projects and capital expenses, they are the least likely to provide ongoing, unrestricted operating revenue. As a result, too often organizations try to re-invent themselves and their programs every few years to appear new to these funders.
Increasingly, foundations are re-assessing the need to provide operational support, sometimes unrestricted, to help build the core capacity of nonprofits. This is a great trend. In the past, the rare situations in which such unrestricted funding was provided allowed some nonprofits to view grants as sustainable income.
For example, foundations with an emphasis on the arts or environment have long provided less restricted funds. In addition, nonprofit research institutions have been able to maintain ongoing foundation support. However, in most of these circumstances the funders still saw their support as backing something new – a new production, a new initiative, a new study. Yet even with the evolving attention to operational support from newly enlightened foundations, nonprofits should remain cautious about seeking too much support from one source.
Let us know where you get the majority of your unrestricted funds.
Dennis McMillian, is President of The Foraker Group, a capacity building organization based in Alaska, and the author of Focus on Sustainability: A Nonprofit’s Journey.