Why Unrestricted Funds Are Important for Nonprofits

A person making a donation on a smartphone

And why are they are especially important for disability-led organizations like WID

By Charlotte Stasio

A Season of Giving

As 2022 comes to a close and many nonprofit organizations prepare for a new year of strengthening commitments to marginalized populations, it is a timely season to recognize how financial donations help make this work possible. Not all donations are created equal. Certain types of donations, called restricted funds, pose challenges for nonprofits as they are limited to specific projects. While restricted funds are essential to advance budgeted organizational projects, they leave little room for unplanned opportunities for growth. This challenge can be supported through the use of a donation type known as unrestricted funds, which are general donations or grants given to a nonprofit that are not tied to a specific project. All nonprofit organizations greatly benefit from unrestricted funds to effectively carry out their important work. However, for organizations strengthening the rights and opportunities of multiply-marginalized communities like WID, unrestricted funds become even more critical, as their work is connected to advancing equity. Making progress to close or narrow equity gaps requires organizations to harness collaborative flexibility, which is increasingly difficult on a restricted budget.

What are Unrestricted Funds?

Unrestricted funds support the overall mission of an organization and do not have a specific use required for spending. They allow the organization the freedom of discretionary spending, and they are essential financial resources contributing to the effective operation of a nonprofit organization. Unrestricted funds can be used for overhead costs like expanding staff, equipment, training and professional development, and emergency expenses. Covering critical expenses through an annual budget keeps nonprofits running smoothly and ensures the stability of the employees and the communities they serve.  A strategy to fundraise for unrestricted funds is a key consideration for nonprofits to fulfill rising organizational objectives, especially when the services provided do not generate surplus income. Nonprofits often juggle the need to raise money with doing important work for their communities, which is where fund development becomes urgent. In the case of grant funding, there may be dozens of applicants trying to get the same pot of money for their own causes. Some nonprofits choose to focus on direct appeals to their communities, but there is no guarantee of success or even a specific amount of funding. Appeals for unrestricted funds are often through individual giving campaigns such as Giving Tuesday, or other campaigns raising general funds for the organization.

Benefits of Unrestricted Funds

By giving a donation of unrestricted funds, donors are helping to level the playing field and disrupt traditional power structures in philanthropy. Uncoupling donations or grants from specific projects challenges donors to rethink giving and empowers the leaders of nonprofits to use funding to achieve the organization’s goals. 

Having the solid overhead capabilities that come from unrestricted funding makes organizations more resilient to disruptions like pandemics and disasters. It also empowers these organizations to provide surge support to their constituents during a disaster, emergency or crisis situation or other times of particular need.

Nonprofits benefit from the breathing room granted by stable funding to focus on long-term planning goals and can dedicate resources to research and organizational improvements. Another benefit is that nonprofits can afford to pay competitive salaries to hire and retain employees, which is needed now, more than ever as there is a crisis of attrition affecting the world of nonprofits.

Disability-led nonprofit organizations in particular face challenges in obtaining funding. Restricted funding may not provide the resources to address disability inequity and overcome accessibility barriers in the scope of a particular project. These ongoing efforts are essential and with flexible investments from unrestricted funding, disability-led nonprofit organizations can continue to grow their capacity to serve people with disabilities and multiply marginalized communities.

Trust and Transparency

How can donors be sure unrestricted funds will be used properly? One of the most credible nonprofit vetting resources is Candid.org (formerly known as GuideStar).  Candid centers its research by collecting, standardizing and publicizing financial and mission-related data about nonprofit organizations and awarding Seals of Transparency to indicate an organization’s transparency status. The Seals are a tangible way for organizations to demonstrate their commitment to transparency and build confidence among potential donors and supporters.  WID has earned a Platinum Seal on Candid, which indicates the highest level of organizational transparency. 

Reporting on unrestricted funds is different from restricted funds since there is not always a specific metric attached to a funding amount. Donors should embrace high-level summaries indicating the impact of donated funds, instead of reports on every dollar spent. Donors should also look for Strategic Plans and annual reports often found on its official website.

Making an Impact

By donating or allocating unrestricted funds to trustworthy organizations, you can bring stability, effectiveness, and innovation to the populations they serve. When you provide disability-led nonprofit organizations with unrestricted funds, you can help to empower the organization to create an inclusive society for disabled people. Please consider WID as a recipient of your support, and help us to advance our mission through an unrestricted gift.

Donate to WID.

Charlotte Stasio, a white woman with short brown hair smiles while wearing a patterned blouse and earrings.

Charlotte Stasio is a Freelance Writer for WID.

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