By Natalia Siegel, Senior Donor Engagement Officer
In philanthropy, there are several different ways one can grant money to an organization, and they range from rigid requirements to no strings attached. While we understand why donors may prefer to dictate precisely how their funding is spent, we would like to share why Triangle Community Foundation has shifted our practices from more restricted giving to the best practice of general operating support, and why we encourage our fundholders to consider the same.
Generally speaking, “restricted” grantmaking refers to funds received by an organization that have a purpose dictated by the donor. For example, this may include funding a specific program, department, type of research, or articulating that the grant cannot be used for overhead support. “Unrestricted” or “general” grantmaking refers to funding received from a donor that can be used flexibly and in whatever way the organization needs it the most, ultimately supporting the mission of the organization over a particular project.
For the last few years, but especially since the impact of COVID-19 on the nonprofit ecosystem, there has been a move to embrace general grantmaking as best practice. Why? General funding provides both stability and flexibility: stability, in that general funding helps ensure that the nonprofit has enough money to keep in operation across all their different programming; flexibility, in that the money is not locked in place, and can be used as the organization changes, evolves new programming, or responds to an unforeseen need in their community. General funding allows for nonprofits to pay for overhead, which keeps staff operating programs, building and facility expenses paid, and internal infrastructure that allows the nonprofit to be that much stronger of a presence in the community. As seen by the response from nonprofits during the beginning of the COVID-19 emergency, general funding also allows an organization to pivot response based on urgent community needs and their programming to best suit the needs of their constituents. Finally, unrestricted funding is a major tenet of trust-based philanthropy, an operating value of the Foundation and many funders across the field. General funding is the tangible outcome of the belief that nonprofits are excellent stewards of their gifts, and experts in how to best utilize the money they receive.
Interestingly enough, donor-advised funds (DAFs) at the Foundation already give a large quantity of unrestricted grants. On average over the last three years, 70 percent of the grants sent from DAFs have been unrestricted funding, but represent just 50 percent of DAF grant dollars, meaning the same dollar amounts overall are being sent to nonprofit partners with restrictions in terms of how those dollars can be spent.
It’s exciting to know that donors understand the importance of unrestricted grantmaking, but we hope to encourage larger grants to also become general instead of restricted. Of course, it’s natural for donors to be wary of unrestricted grantmaking at such large sums – developing a level of comfort to trust your funding is being spent responsibly takes time and is not something we underestimate at the Foundation. However, from our deep experience working with nonprofits over almost 40 years, we know just how valuable and necessary flexible funding is to an organization’s long-term health and sustainability. We hope that you can see that the Foundation trusts our discretionary grantees with large gifts, and that you feel inspired to do the same.
For more information about unrestricted grantmaking, how the Foundation is leaning into trust-based philanthropy, or to talk with your fund liaison about your philosophy on philanthropy, please reach out to the Donor Engagement team at firstname.lastname@example.org.