Critical Role of Unrestricted Giving

Critical Role of Unrestricted Giving

October 2nd, 2014

 

by Andy Canada

 

In today’s world, we are offered choices at every turn. Do we buy vanilla ice cream or chocolate or one of 53 other flavors? Do we choose to watch a movie, a home improvement show, or a sports event on TV?

 

When it comes to our charitable giving, does the cause influence our choice of gifts above all, or do we choose to direct our support towards a specific project?

 

More and more, we see donors wanting to direct their gifts to specific projects, and after all, it is their money and their right to choose how to spend it—right?

 

Donors are indicating they want to see the impact of their gift directly and they can do this more easily by supporting a project like a scholarship or a new building. Unrestricted giving, however, requires a deeper level of trust between the donor and the organization, the donors must feel confident their funds will be utilized to move the organization forward.

 

But, as we all know, unrestricted giving is critical to almost every non-profit. These funds can be used to pay overhead costs or provide the organization flexibility to take advantage of opportunities as they arise during the course of the year. They can also be kept aside to provide incentives, or meet any critical emergency needs that come along.

 

Though interest in unrestricted giving has been going down in recent years, it is important for your organization to continue approaching and educating donors about the important role unrestricted giving plays in the organization.

 

In many cases we have seen clients remove some of their top donors and prospects from annual solicitations, to make sure they are not being over solicited and so that the request can be made in person. Yet these donors still need to be given the opportunity to make an unrestricted gift to support the organization.

 

In some cases this could be a separate solicitation letter being sent that thanks the donor for the restricted gift that they have made earlier in the year and also talks about the importance of unrestricted support. This can and should be a soft ask but it can be an effective way to educate your current donors about the importance of the unrestricted fund.

 

Realizing personal solicitation is the best way to approach your top donors, encourage gift officers to also discuss the role of unrestricted giving when they meet with donors who have previously given to a specific program. If donors are currently giving $5,000 a year for a scholarship fund, would they consider a gift of $500 or $1,000 for the unrestricted fund? In some cases, they will respond positively to the request and see the importance of supporting the organization. While this requires a double ask during the visit, it allows the donors to consider their full commitment to the organization over the course of the year or over multiple years.

 

Organizations need to continue being proactive in approaching their constituents about unrestricted giving. It might be more difficult than discussing a restricted gift to a specific project but the flexibility of the funds are critical for the organization.

 

Lilly Endowment Underscores the Importance of Unrestricted Giving

 

In the midst of the recent move toward more restricted giving, the current Lilly Endowment’s GIFT (Giving Indiana Funds for Tomorrow) VI grants initiative is working to encourage more unrestricted giving.

 

The Lilly Endowment is offering Indiana community foundations and county affiliate funds a 1:1 or a 2:1 match for unrestricted dollars given to them. But the gift must be made without directing it to a scholarship, a capital fund, or even the local disaster relief fund.

 

So why is the Lilly Endowment going against the trend of designated charitable giving? With the GIFT VI program, Lilly Endowment is demonstrating to donors that there is importance in supporting your community foundation in terms of general community welfare. Causes come and go, but strong charitable institutions can be flexible to meet changing needs of the community if we help to build them up with unrestricted gifts.

 

Lilly Endowment’s example of incentives for unrestricted giving serves as food for thought to all who are concerned with the sustainability of their nonprofit organizations.

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