By Sean S. McNeil, CPA, MBA
Accounting and Auditing Director
Nonprofit organizations use many names to describe their major fundraising efforts. While the labels differ, the purpose of development and advancement remains consistent: to sustain the mission of the organization through reliable, long-term funding.
Funding can come from grants, donations, endowments, investments and government funding. It can come from corporate contributions and/or earned income through fees for services or the sale of goods related to the mission.
Today’s economic landscape, shifting donor preferences, and changing public funding sources are causing many organizations to reassess how they fundraise or earn income. Ideally, unrestricted funds are more sustainable as they can be applied wherever the need is greatest.
However, donors and other funders often want specifics on how their money will be used. Without clear parameters, they can place unnecessary restrictions on the use or timing of funding.
From a practical standpoint, restricted funding creates complexity with accounting and audit of nonprofits, not to mention budget planning, including:
- Operational imbalances
- False sense of financial health
- Administrative burdens
- Cash flow constraints
- Donor-driven priorities and mission drift
How can your organization communicate fundraising goals that encourage trust, generosity, and flexibility? Here are some ideas:
Share Causes, not Categories
Share how unrestricted fundraising can help your organization respond to the most pressing needs of the community today but also in the future. Unrestricted funds allow for flexibility and more investment in mission resilience.
For example, rather than raising funds for a new sound system, open up the fundraising efforts to “ongoing technology needs that help our organization reach all generations.” Think about possibilities beyond the sound system that reach more people or serve more programs.
Focus on Mission
You can be specific about funding needs while aligning it to the greater mission. “Last year, we served 1,500 animals. This year, we want to double that impact. Help us build life-saving programs through expanding our facility space and increasing the comfort of animals, staff and visitors. We will do this by…”
Although the overriding fundraising need is a larger building, you can encourage unrestricted fundraising by talking about the approach and benefits to the larger space.
Emphasize Constant Change
While funding a very specific need might be a great idea this year and next year, needs change more rapidly than they used to for all organizations. Public funding can shrink due to political or economical reprioritizing. Grants take time to write and qualify for. Insurance is in flux with more claims and complexity for coverage. Donors may choose other, more urgent causes.
On the positive side, you may receive a large, philanthropic gift that opens up new possibilities for other fundraising or matching opportunities. If donors understand these dynamic shifts in funding, they may be more flexible with their gifts.
[Celebrate Strategic Partnerships
On that note, tell stories of how unrestricted funding opens up new possibilities in programming, people served, or impacts made. When organizations can jump on opportunities to buy land, form a partnership or respond to a crisis, it means more in the long run than carefully planned funding to simply meet a budget.
To engage donors and partnerships in development, you can hold forums and Q and A sessions or educational events that honor and celebrate donor efforts. Emphasize that your VIPs are the ones who give your organization the freedom and trust to advance your mission.
In the long run, unrestricted funding translates to easier accounting, reporting and nonprofit compliance. Those are also great ways to trim administrative costs and put more money into your mission.
Are there reasons to obtain or accept restricted funding? Sometimes. Talk to your advisor at GT Reilly & Company before you go down that road.
Let us know if you would like more support from GT Reilly’s nonprofit organization consulting services.
