Is the future unrestricted? Charity funding post Covid-19

Arguably the most uncomfortable fact about charity funding is that fundraisers find it hard to ask donors for the things their organisations actually need. This isn’t because they don’t know—ask any fundraiser what the best possible gift would be and their answer will be multi-year unrestricted funding. So why isn’t everyone already giving unrestricted as part of a transparent and trusting funding relationship? What has changed under Covid-19? And how can these changes be sustained in the long term?

Why aren’t funders already giving unrestricted?

Although many donors already give unrestricted, others don’t, for a number of reasons. For one thing, fundraisers might not have asked them to and so they have never had the opportunity to give in this way—perhaps it didn’t occur to the funder that it was an option, or maybe they were just asked to support a restricted project instead. Equally, some funders state upfront that they won’t fund unrestricted which leaves fundraisers with little latitude for an unrestricted ask. There could be a number of reasons for this—the funder could dislike the notion of funding ‘overheads’. Other funders simply may not be persuaded by a charity’s case for unrestricted support.

Another factor is that, generally speaking, many major gift teams in charities are better geared towards accepting and stewarding restricted funding than unrestricted funding. Many donors recognise that it’s often clearer to see the impact of their donation if they give a restricted gift, so they prefer to give that way—especially if they’ve had a disappointing experience of funding a charity in the past. Similarly, charities can find it easier to articulate progress on specific projects, so they often find it simpler to report on restricted gifts rather than on unrestricted gifts. This means that, often, the experience of giving a large restricted gift to charity can be better than giving a large unrestricted gift.

What has changed?

Everything. Since coronavirus hit, fundraisers have asked for more unrestricted gifts or asked donors to de-restrict existing gifts. Their ask has been made both easier and more urgent by the current circumstances. In return, funders have stepped up and recognised their vital role in helping charities to meet huge demand, many are now funding unrestricted where they weren’t before. More funders than ever are trusting their grantees, agreeing to new kinds of asks, and being understanding about difficult messages and bad news—such as delays in achieving a set of outcomes or a need to change planned activities.

How can this be sustained?

Realistically, the onus for sustaining these changes in funding practice is going to sit with charities. In the months ahead, charities have an opportunity to build confidence in unrestricted giving and set new expectations around the type of relationships they want to have with funders. To help with that, they need to think about two things: stewarding unrestricted gifts and making the unrestricted ask.

The first step is for charities to do an outstanding job of stewarding the unrestricted or de-restricted grants they already have. Charities and fundraisers need to assure their donors that the experience of giving an unrestricted gift is equal to giving a restricted gift. Only by proving to funders that they are using the money well will charities help to dispel the myth that unrestricted giving is somehow inferior or inherently risky.

To do this, charities need to ensure that they are capturing information on their work, impact and learning. They then need to translate this information into reports and updates that are engaging and rich in insights. Alongside this, charity fundraisers should be on the front foot by personally engaging with their funders and updating donors with everything from case studies to press releases­—creating a precedent for more transparent partnerships.

The second step is for charities and fundraisers to review when and how often they are making asks for unrestricted funding. Fundraisers will need to ensure they have a rock solid case for support.

To do this, charities need to know, and fundraisers need to be able to convey, exactly how their organisation is helping service users, how the charity’s work fits within the wider landscape, their CEO’s top three organisational priorities, what the charity hopes to achieve in what timescales and how, and why flexible funding is important for this.

Rewarding trust and flexibility

It would be remiss of grantees to think that Covid-19 has irrevocably changed philanthropic giving. In reality, what we have actually entered is a ‘testing phase’ for the sector. Many donors have done what has been asked of them, and they will be watching to see how their gifts are managed. It is now the responsibility of charities and fundraisers to ensure that the trust and flexibility loaned to them is rewarded—so in the future funders can be persuaded to give in the same way again. Ultimately, this is not only about charities receiving the best gift possible, it is about ensuing the sector is funded better in the long term.