This series reflects topics of interest of the Catalyst’s Impact Council. Each quarter, our council of local nonprofit thought leaders selects one topic to explore. We post the results of that exploration in pieces like this one.
Part 2 of 2. Read part 1 here.
It’s common knowledge within the nonprofit sector: Restricted grants can kneecap even the leanest, scrappiest programs and organizations.
“While it seems intuitive that an individual, foundation or corporate partner who believes enough in the nonprofit’s mission would also trust them to spend it impactfully, the fact is that nonprofits have worried about “giving inefficiency” for years,” says Michelle Curtis, Chief Development Officer and Vice President of Philanthropy at YMCA of Greater St. Petersburg. “Some would say that the system is flawed – and that there are other ways to ensure that organizations are responsible stewards of unrestricted gifts.”
YMCA of Greater St. Petersburg operates recreational programs and services with the goal of building a healthy spirit, mind, and body for all. Operating these crucial community initiatives requires a sizeable staff of summer camp counselors, preschool teachers, youth program specialists, lifeguards and more.
Unrestricted grants, also known as general operating support or core funding, are a vital lifeline for nonprofit organizations. Unlike restricted grants, which come with specific conditions on how the funds can be used, unrestricted grants provide nonprofits with the flexibility and autonomy they need to address dynamic challenges and fulfill their missions effectively.
“Unrestricted gifts provide the most flexibility for nonprofit organizations like the YMCA, which usually means these funds will have the greatest impact,” says Curtis. “When donors or funders give unrestricted gifts, they trust that the nonprofit will use them to honor their intentions and fulfill the Y’s mission.”
Both nonprofit leaders and philanthropic experts say the structure of charitable gifts has changed in recent years.
“In a remarkable way, the pandemic and associated crises inspired a movement for donors and funding organizations to loosen restrictions – allowing organizations to spend money and meet the urgent needs of their respective communities,” says Curtis.
However, philanthropic giving throughout the U.S. hasn’t been as generous. A recent study found 2022 was a challenging year for fundraising; less than half of Americans made gave to nonprofits, leading to the “steepest ever” drop in charitable giving from 2021 to 2022. While some organizations in our area report a drop in recent donations, many say trust-based giving has been increasing.
“We grew exponentially from 2022-2023, and a large part of that was bolstered by an unrestricted donation from Duke Energy,” says Kimberly Jackson, Executive Director of the Institute for Strategic Policy Solutions. The Institute for Strategic Policy Solutions (ISPS) at St. Petersburg College is a not-for-profit organization that aims to enhance understanding, educate students and citizens, and engage conversation in support of effective, solution-oriented public policy.
“Those unrestricted funds from Duke Energy did so much to support our growth and put us in the right direction,” says Jackson. “It’s important that if you’re working with an organization, you trust them to use the funds to better the organization and the community. You have to trust the nonprofit you are giving to and give them the latitude to use the funds to the donor’s best intent.”
As high-value grant programs get more competitive and donations become increasingly more difficult to come by, nonprofit experts say unrestricted funding and gifts are more crucial than ever. Donors have an important role to play in making philanthropy more democratic, inclusive and, ultimately, more effective. By putting trust in the people and organizations fulfilling meaningful missions, donors have the opportunity to give nonprofits the ability to adapt to fast-changing circumstances.
“Establishing trust with donors is the pathway to raising more unrestricted funds. Knowing is trusting,” says Marlene Spalten, President and CEO of Community Foundation Tampa Bay, a 501 (C)(3) public charity that connects people, ideas and resources to create meaningful, lasting impact across Hillsborough, Pinellas, Pasco, Hernando and Citrus counties.
“For trust to grow, the nonprofit, its leadership, and its beneficiaries need to interact authentically with donors – inviting them into the mission of the organization and providing opportunities to witness the impact of their giving,” Spalten added. “Developing mutually satisfying relationships between nonprofit leadership and its supporters is key to building trust. Healthy relationships based on shared knowledge, values and respect ideally lead to agreement on a strategy for addressing the nonprofit’s purpose and the donor’s gifts become investments in the mission.”
Trust is mutual; nonprofit organizations receiving flexible funding can earn and keep the trust of their donors by focusing on their missions. In turn, donors have the tremendous opportunity to support that vision in their grantmaking, helping shape the future of giving to nonprofits – our vital, valuable frontline of community support.
We encourage you to research steps on how to develop a trust-based relationship with your giving. The National Center for Family Philanthropy’s guide, Trust-Based Philanthropy At-A-Glance, is a great place to start.