The Critical Importance of Unrestricted Funding, Especially Now

Photo by: S. Joshi

Imagine this scenario: you have one hundred dollars to spend at your favorite store. You can buy anything you like, as long as the total doesn't exceed one hundred dollars. In another scenario, you are mandated to buy specific items under the hundred dollar budget at your favorite store, plus you must furnish your receipt to confirm you followed the rules. In both scenarios you receive the hundred dollars, but the items you buy may be very different. On one hand you are restricted to certain formalities. On the other hand you have full freedom to be creative and exploratory with your purchasing decisions. 

Now imagine you are a cause-based organization, looking for ways to advance your mission, amplify your social impact, or accelerate your sustainability program. Your search for funding covers the public sector (i.e. governments), corporate donors, philanthropies and impact investors. As is usually the case, these donors have pre-determined programmatic goals, and/or geographical priorities, that they must fund. So you can apply for funding as long as your program fits within the donor's criteria. Each of these programs comes with reporting requirements, timelines, due dates and delivery expectations.

In another scenario, where a donor organization provides unrestricted funding (funding to help cause-based organizations, nonprofits or mission-oriented companies fill in gaps in programming, address needs of constituents, or invest in impact programs, without the added criteria of programmatic deliverables, geographic specifics, timelines in some instances or specific goals), it’s akin to being given a one hundred dollar bill at your favorite store without the requirements of purchasing specific items and furnishing a receipt. With unrestricted funding, your organization can use funds however you see fit, but with the intent to deliver on your cause, mission or impact program using creative methods, innovative approaches and trying different models.

Unrestricted funding is truly the panacea of all funding. 

Let me give you an example as to why this is the case. When I was a nonprofit program director before launching Connective Impact, I managed several programs that had similar deliverables, but in three different geographies. Our primary donor funded our program on a three-year timeline, and it was my job to ensure that all of the objectives were met, our program teams in each geography were tracking their deliverables, budgets were in order, and our work was following the donor’s output expectations to a tee. It was challenging to deliver under our tight timeline, especially as issues beyond our control took time to manage, and our budget never budged when we had unexpected shifts in community needs due to a weather disaster in one of the geographies.

To fill in programmatic gaps, we had to seek unrestricted funding from a different donor, essentially to ensure we were delivering on our primary donor’s requirements. Unrestricted funding gave us a bit more wiggle room in terms of how we carried out the program, how we used our budgets to support the stakeholders involved and the timeline under which we were operating. The unrestricted funding became our stop-gap measure. Had our original donor allowed our funding to be unrestricted, we would have had a much easier time delivering on our programmatic goals, because we wouldn’t have been as tied to timelines and specificities. We may have had more flexibility to deliver, and thus wouldn’t have needed to find additional funding to complete the program.

Unrestricted funding allows for a much more goal-oriented and community based method of program delivery, without so much effort tied to specifics that get cause-oriented organizations tripped up.

It’s something that should be considered by all donors as a critical element to philanthropy.

So why is unrestricted funding so critical, especially now, during this global pandemic?

First of all, timelines have become completely unrealistic, given the uncertainty of what lies before us. We really have no idea how long this pandemic will last, what it means for our work, our institutions and our communities. Given the millions of people under quarantine, it's impossible to deliver on programmatic priorities that require in person engagement, training, or other activities that are measured in groups. In some situations a virtual substitute is possible, but the timelines would still be out of sync. Donors must shift to unrestricted funding to account for timeline discrepancies at a minimum.

Second, programmatic priorities are shifting — quickly. It goes without saying that when an entire planet of people is struggling to maintain health and economic wellbeing, priorities will change. Donors must be flexible with programs that now have very different deliverables and expectations than before this crisis.

Finally, unrestricted funding allows nonprofits, mission-driven companies and other social cause programs to keep people employed, programs running, and the economic engine of growth intact. In some cases programs are already underfunded outside of a pandemic. Now, more than ever, social causes need opportunities to propel their missions and reach those who have the greatest needs. This is true whether the entity is public or private. Unrestricted funding simply gives organizations the wiggle room to test new ideas, keep the lights on or ensure programs are still running in this difficult and challenging time.
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There have been positive developments in the funding community around this issue as of late.  Some of the largest philanthropies in the United States have indicated that during the course of COVID-19, they will switch all of their grantees toward an unrestricted model, which means fewer reporting requirements, more flexible timelines, and broader programmatic parameters.

While having fewer restrictions will be so critical during the current pandemic, my hope is the move towards more unrestricted funding will stay here for good. Heading into the next ten years, as we do our best to advance the UN Sustainable Development Goals (SDGs), businesses, nonprofits, governments and entrepreneurs alike will need more flexibility to try new programs, test new ideas and be innovative. Flexible and unrestricted funding, with fewer reporting restrictions, will allow for that on a much broader scale.

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