How You Give Matters (Part 1): General Operating vs. Project-Based Support
All philanthropists face the same dilemma … deciding whether nonprofits benefitting from their generosity should receive unrestricted or project-specific charitable dollars.
One thing is clear: donors want to make a real impact with their hard-earned money, using philanthropy to improve the world in a tangible and measurable way, preferably during their lifetimes. In Hoplin Jackson’s experience, most donors can easily rattle off a list of what causes they care most about. However, they often question how to structure their gift for maximum impact.
When donors have specific areas of interest, they tend to gravitate towards particular programs or projects within a nonprofit. But what nonprofits often desire—and what could be more impactful in the long run—is unrestricted support, also known as general operating support.
What is general operating support?
General operating support is a “no strings attached” contribution that can be used for anything from life-saving medication to a nonprofit’s electric bill. Donors often don’t want to hear that their dollars are helping to keep the lights on, but it is hard to accomplish your mission in the dark! General operating support simply means relies on the nonprofit’s leader to allocate the donation any way he or she deems appropriate. Often, this will come down to a nonprofit’s greatest expense—personnel! A nonprofit is only as capable as the people who work there. Unrestricted support, among other things, helps these nonprofits attract and retain the best talent while providing competitive wages.
What is project or program-based support?
Project-based support is funding that is designated for a specific program or event that the nonprofit is running. Nonprofits must follow strict accounting rules to ensure that your donation is used solely for the purpose that you designate. Project support can be used for ongoing programs of the nonprofit, new endeavors, or events hosted by the nonprofit.
What are the benefits of project-based support?
Project-based support is appealing for a variety of reasons because it:
1. Allows donors to support specific areas of the nonprofit’s work that most appeals to them.
2. Can be easier to track – for example, if a donor wants to support an after-school STEM program for 100 children, a nonprofit could easily report whether the program reached this number of children as well as their general improvements (or lack thereof) in STEM knowledge.
3. Offers some protection to the donor – for example, the donor could request any unused funds for the designated project be returned to him or her at the end of the grant period.
What would HJ do?
At Hoplin Jackson Charitable Advisors, we often encourage donors to consider general operating support. In combination with our team, the donors we work with are strategic, smart, and thorough. Each gift is made with careful consideration, taking into account the many strengths and weaknesses of each nonprofit organization. A general operating grant signals to the nonprofit that you have trust in its leader and his/her team to execute on the mission. The leader then has the flexibility to utilize your donation in a way that is most beneficial to the organization. As a result, nonprofits are often deeply appreciative, and happy to provide donors with any data requested on its operations throughout the year. In short, if a donor invests in the right leader, he/she will deploy a contribution to advance the mission further and faster than if it was restricted to some purpose that may or may not be a priority at any given time or may not reflect the often changing dynamics inside an organization’s operations.
But as with everything, context is everything. Nonprofits come in all shapes and sizes—some with eight- or nine-figure budgets. In such cases, where even a generously sized grant could be the equivalent of a rounding error on their balance sheet, a targeted (project-based) gift might be more meaningful.
If you often find yourself questioning whether to issue project-based or unrestricted support and similar decisions related to how your gift is structured, the team at Hoplin Jackson Charitable Advisors might be able to help! Contact us today to learn more about how HJ can help you develop strong relationships with nonprofits that allow you to feel confident about your philanthropy and the type of gift you want to make!
And stay tuned for the next part in our series, where we will dive deeper into multi-year vs. annual contributions!