~ter6
The Many Sources of Funding
and Support
Don't say you don 't have enough time. You have exactly the same number
ofhours per day that were given to Helen Keller, Pasteur, Michelangelo,
Mother Teresa, Leonardo da Vinci, Thomas Jefferson, and Albeit Einstein.
- H. Jackson Brown
Section I of this book provided guidance for start-up nonprofits in establishing themselves, and
for established organ izations in revisiting nonprofit basics for review and updat ing. Developing
Budgets, the last chapter of Section I, discusses how an organization projects revenue, and lists
potential sources for that revenue. In today's highly cornpetitive world of nonprofit fundraising,
143
144 GETTING STARTED
wa
organizations must seek to develop funding from a mix of individual and institutional sources in fa.
order to remain viable. Section 2 of this book discusses the multiplicity of traditional-and all
new-sources available to nonprofits and suggests how they may be approached. All organiza­ st!
tions are urged to solicit as many of these sources as is practical and appropriate in order to
develop the highly diversified support base that is so vital to an institution's health. fr
Fortunately, the vast number of individuals and institutions that support nonprofit initiatives go
around the world attests to the universality of the philanthropic instinct. Individuals extend their
support in myriad ways: they make contributions and pledge s in respons e to direct mail requests,
phonathons, appeals on the Internet, door-to-door canvassing. and face-to -face solicitations.
They give at their offices through workplace solicitation and payroll deductions, and consult
their financial advisors to choose planned giving vehicles . Individuals also contribute in their
communities by attending special events and purchasing goods and service s from nonprofits,
ranging from gifts, cards, and theater tickets to school tuition and hospital care.
Institutions that provide both financial and in-kind support to nonprofits include foundations;
businesses and corporations; local, state, and federal governments; religious institutions; and
labor unions. Additionally, thousands of local and national civic associations, usually nonprofit
themselves, extend some kind of aid to charitable and philanthropic undertakings, as do federated
fundrai sing organizations, such as the United Way. The existence around the world of millions
of nonprofit organizations-more than one million are registered with the goveritnent in sUf
the United States alone-attests to the depth and breadth of individual and institutional esti
resources that are committed to supporting their work.
Tapping these resources is the ongoing work of those who raise money for nonprofit organizations.
Their work. popularly referred to as "development" by fundrai sing professionals,
encompasses a wide range of activities, only one of which is the actual solicitation of individu als
and institutions for contributions. Development work ranges from organizing a street fair to raise
several thousand dollars, to meeting with business and social leader s to develop an invitation list
for a special event with a $350,000 goal, to undertaking a yearlong planning process for a $10 All
million capital campaign. gav
Development also includes such activities as visiting the Foundation Center in New York WCI
City, one of its field offices, or its Web site to research foundations whose guidelines and giving sev
history make them candidates for support, as well as designing and writing proposals, solicita­ nia
tion letters, direct mail pieces, and newsletters. Development activities also include meeting
with staff members of other nonprofit organizations to seek advice, create joint programs, or
review fundraising schedules to avoid conflicts, as well as meeting with board and committee
officers and members to develop relationships, discuss work in progress, identify and discuss
problems, or review candidates for volunteer leadership positions.
All these activities-and so many more-are undertaken to raise money in the vast, complex,
constantly changing, and highly competitive world of nonprofit finance. Enormous though this
range is, two fundamental principles of fundraising lie at the center of this enterprise.
The first principle is that successful fundraising requires careful forethought and planning.
The second is that no organization should depend so much on a single funding source that the
group would be unable to function without it. All planning needs to be guided by this second
principle, because an organization that is totally dependent on government grants and contracts,
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The Many Sources ofFunding and Support 145
for example, is ex tremely vulnerable. Th e group that receives support from foundations, a federated
fundraising body, and a pool of individuals in addition to government agencies is clearly
stronger and mo re secure. In 1869 the Metropolitan Museum of Art turned solely to New York
City's wealthy citizens for support. More than a ce ntury later, it still welcomes contributions
from a large number of individuals, but it also receives support from the local, state, and federal
government, from corporations, and from founda tions as we ll.
Today, diversification of support is vital, and no orga nization can hope to finance its wo rk
successfully from anyone source. Even if it does succeed in obtaining that one large, elusive
grant, there's no guarantee the grant will be renewed each year, and the organization's future
will not be secure. Moreover, funding sources like to see that an orga nization's funding is diversified,
for this shows broad-based ag reement that its mission is important and worthy of support.
Where Do Novice and Veteran Fundraisers Begin?
By becoming acquainted with the entire array of available funding sou rce s, fundraisers can
select those most appropriate to their ow n organization. The chapters in this section and the
worksheets at the concl usion of each chapter will help yo u identify whic h sources may consider
supporting your orga nization. Remember that it is highl y unJikely that every source will be interested
in your work, and so, with limi ted fundraising resources, you will need to choose your
"best bets." The chapter and worksheets in Sectio n 3 will help you refine your list to incl ude onl y
those sources that might become part of your particular funding "mi x." You will then be able to
map out your fundraising action plan.
Individuals
All philanthro py ca n, almost without exception, trace its origins to individuals rather than to
governments, businesses, or foundations. The "fo unding" phil anthropi sts of the United States
were ind.ividuals such as Benja min Franklin, whose generosi ty and vision led to the creation of
several of Phil adelphia's earlies t nonprofit institutions, incl uding the Un iversity of Pennsylvania
and Penn sylvan ia Hospital.
Durin g the Middle Ages, Euro pe's cathedrals were built not only through the largesse of
kings, queens, and other nobility, but also through the generosity of tradespeople and artisans.
Many members of merchant and guild associatio ns, including bakers, carpente rs, weavers, shoemakers,
butchers, masons, fishmongers, furriers, and others co ntributed to the building of the
famed cathedral in Chartres , France; their funding underw rote the creation of many ofits breathtaking
stained glass windows.
Today, individuals are actually the largest source of unrestricted dollars for most nonprofit
organization s after the fed eral government (w hose fu nding is actually pro vided in large part by
individuals through taxes). In the U nited States, for example, ind ividuals gave nearly $ 160 billion
in 1999 to nonprofit organizations (including bequests), and reg ularly provide almost 90
percent ofall charitable contributions in a given year. Each and every one of us is today' s phil anthropist.
Wheth er we respond to a direct mail solicitatio n, attend a spec ial event, or donate
146 GETTING STARTED
construction supplies to build a homeless shelter, it is our combined efforts that make nonprofit
endeavors possible.
What distinguishes individual philanthropy today from that of previous eras is its depth and
unmatched variety. Tills is the direct result of nonprofit leaders' creativity in developing their
approaches to individuals. The most popular and effective methods of soliciting contributions
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from individuals today are discussed in Chapters 8 through 14.
Foundations
The purpose of a foundation is to make grants and contributions to other nonprofit organizations.
Whereas some foundations are created through the gifts of a single wealthy individual or family,
others, such as conununity foundations and certain public charities, receive their income from a
number of different individuals and families. Some corporations also create foundations to distribute
a portion of their profits to charitable causes.
Although foundations date back more than a thousand years in Turkey, modem foundations,
relatively recent arrivals on the philanthropic scene, can trace their origins to the late nineteenth
and early twentieth centuries, when industrialists such as John D. Rockefeller and Andrew Carnegie
in the United States, and lR. Tata in India, established foundations to distribute portions
of their huge fortunes for charitable purposes.
There are currently more than fifty thousand foundations in the United States, ranging from
small, unstaffed, local foundations to endowed international ones with professional staffs.
Although American foundations have impressive assets, their collective annual grantmaking
may reach approximately 10 percent of all United States charitable giving in any given year.
Consequently, nonprofits cannot look to foundations to supply the majority of their contributed
income on an ongoing basis .
During the 1980s and 1990s, there was an enormous proliferation of nonendowed
grantmaking institutions-legally defined as "public charities"-willch derive their income
from a large number of individuals. Examples include community foundations; dozens of
women's funds around the country that support grassroots women's groups; the Paul Robeson
Fund, which funds social issue media; and the Funding Exchange Network, which makes grants
to social change initiatives.
Other countries have also seen a rapid increase in the number of these funds . lnterPares, in
Ottawa, Canada, funds economic development projects in developing countries with the money
it raises in Canada. MamaCash, with headquarters in the Netherlands, funds an impressive array
of community-organizing women's projects around the world. Community foundations in
Antigua, Mexico City, Mumbai (India), Warsaw, and other places are adapting this first world
tradition with some exciting results.
As a result of government cutbacks in their support ofsociaI programs in many countries
made during the 1980s and 1990s, foundations are now receiving a greater volume of requests
than ever before. Since their grantmaking budgets do not usually increase significantly from
year to year, their ability to respond to new inquiries is limited. The result is that more and more
foundations are looking for ways to increase the impact of their dollars. Some make challenge,
or matching, grants that have to be matched by other sources. Not only do such grants leverage
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The Many Sources ofFunding and SUPP011 147
foundations' ability to make their dollars go further, but they also stimulate grantees' fundraislfig
efforts. Other foundations endeavor to increase a group's fundraising capability by making
grants to support direct mail efforts, create income-producing Web sites, or hire consultants.
Chapter 15 offers more information on how foundations operate and the best ways to approach
them for support.
Businesses and Corporations
Fromthe neighborhood mom-and-pop store to the giant multinational corporation, the business
sector provides support for nonprofit organizations around the world. Local merchants have
probablyalways played a role in enhancing the quality of life in their communities, but corporations
are relative newcomers to the philanthropic scene.
Corporate giving in the United States started in the late 1800s, when the railroads began their
long association with the Young Men's Christian Association (YMCA). As the railroads
expanded westward, the need arose for inexpensive, temporary housing for their employees. To
meet that need, the railroad companies helped build "railroad YMCAs." Hence, from its very
beginning, commerce found that it could serve its own interests through charitable activities.
What distinguishes corporate philanthropy is the diversity of ways that businesses assist
nonprofits, apart from cash grants and contributions. Companies, especially large ones, have
vasthuman and material resources that they can make available to groups. A neighborhood store
can place a cani ster next to its cash register for contributions, put flyers and posters in its window,
and sponsor a special event. One day of every month, Wild Oats Natural Food Stores (and
other chains) donate 5 percent of their receipts to adifferent community group. This is rarely less
than$2,000 in the urban settings where Wild Oats operates. Corporations can donate materials,
office equipment, and products; provide free quality printing of newsletters, ad books, annual
reports, raffle tickets, and other promotional materials; and serve as a source of volunteers. They
can directly promote nonprofit activities through joint promotions. As long as there is mutual
interest, businesses and nonprofits can work together in boundless ways.
'orporate giving in the United States totaled $11.02 billion in 1999 .1
Although U.S . corporate
giving has more than kept pace with the rate of inflation every year during the 1990s, corporate
giving as a percentage of pre-tax profits has declined slightly since its high point in 1986 to
1.3 percent in 1999. Much corporate and business giving i..:,hard to track, however, as it often
takes the form of in-kind donations such as computers and software, office fumi ture, paper, and
printing.
Like foundations, corporations are experiencing an increased volume of requests. As a result,
nonprofits are well advised to solicit noncash support from business, and to develop creative
partnerships that benefit both parties. Chapter 16 provides further insights into corporate philanthropy,
and suggests how nonprofits should approach business for support.
I. Ann E. Kaplan, ed., Giving USA: The Annual Report Oil Philanthropyfor the Year 1999 (Ne w York: American Association
of Fund-Raising Coun sel, 2000).
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148 GETTING STARTED
Government
Although government has assumed greater responsibility for promoting social welfare since the
nineteenth century, many would argue that it has regressed in the last twenty years. The discussion
regarding the government's role is the same now as it was in the late 1800s : who should care
for the disadvantaged? Should it be part of a government's mandate, or is this function best
accomplished by turning it over to private charity? Many of today's civic institutions, such as
fire departments and libraries, were previously operated by nonprofit associations rather than by
a governmental body; some continue to be. In many cases, nonprofits have been the trailblazers
for later government involvement. Even a program as well known as the U.S. Peace Corps took
its philosophy from such nonprofit precursors as Operation Crossroads Africa, which continues
to send American and Canadian college students to African countries each summer to work on
development projects.
In the late 1970s and 1980s, local, state and federal governments were well-entrenched partners
with nonprofit organizations in protecting and promoting the well-being of the citizenry.
That alliance has undergone deep challenges and changes ever since the Reagan and Thatcher
administrations attempted to shift some of this r~ponsibility away from the federal government.
In the United States, beginning with the passage, 6f the Gramm-Rudman-Hollings Act in 1986
and continuing with the dismantling of welfare and other entitlements under the Clinton administration,
the role of government continues to be questioned and debated. In the meantime,
nonprofits are increasingly called upon to provide more services to greater numbers of individuals,
services that had previously been supplied, or underwritten, by the government.
However, despite these reductions in federal, state, and local support, all levels of government
are expected to continue providing funds to the nonprofit sector in the areas of social services,
health, housing, education, employment, and the arts and humanities, to name a few. (It is
common for governmental units actually to "contract" for services with nonprofit entities. A
contract involves a much more clearly defined relationship between two parties than does a
grant.) It is hard to calculate the total of annual financial support that government provides to
nonprofits through grants and contracts. Experts estimate that the various government bodies in
the United States provide more than $170 billion in grants and contracts.
As governments shift their funding priorities, no other segment of nonprofit financing is
expected to undergo as much change in the near future. Pressure from conservatives to reduce
social spending will continue to wreak havoe on the established framework for governmental
financing of human services, which reached its peak in the 1970s. However, whatever realignment
occurs between federal, state, and local units of government in the future, it appears that
government's preeminent role in financing nonprofit providers of human services will remain
intact. Chapter 17 offers information on government support and outlines how nonprofits can
identify and approach government agencies at the local, state, and national levels.
Religious Institutions
Organized religion has been the vehicle for transmitting charitable traditions from one generation
to the next, and for reminding believers that charity and philanthropy are moral imperatives.
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The Many Sources ofFunding and Support 149
Closeto 50 percent of the charitable dollars donated each year by individuals in the United States
is given to religious bodies and their related institutions and agencies.
It is difficult to measure how much financial support religious institutions provide to other
nonprofits, but the amount is significant. For example, the Campaign for Human Development
of the United States Catholic Conference grants more than $12 million every year to social
change and economic development projects. Religious bodies, from the local parish to the
national governing body, provide a range of resources extending beyond the financial, including
officeand meeting space, volunteers, and advocacy support, among others.
Of course, giving is not the province of anyone particular religion; its spirit is common to all
and is expressed in many different ways. Some religious groups prefer to establish their own
nonprofit organizations, while others choose to make grants to other nonprofit entities. Others
mayactualIy undertake both roles and become direct service providers as well as grantmakers.
At a time when the federal government is drastically cutting back and devolving its social
welfare expenditures, funding from religious sources is becoming more visible and appreciated
for its depth and consistency. Chapter 18 explores the world of religious philanthropy and providessuggestions
on how to seek your share.
Labor Unions
Labor unions are rarely sources of significant cash contributions, but their support of
nonprofits- by providing volunteers, advice, political contacts, facilities, and services-is on
the rise. Unions have become keener to establish relationships with local nonprofit organizations
to help break down their isolation and strengthen their community ties in order to reach more
potential members. This is good news for nonprofits, and the time is now ripe for them to
develop mutually beneficial partnerships with labor unions.
Developing ties with nonprofits is only one aspect of U.S. labor unions' intense efforts to
reverse the sharp decline in membership that began in the mid-1950s. At that time, some 35 percent
of all workers in the United States were union members, but by the mid-1990s, union membership
had fallen to 14 percent of the U.S. workforce. With the election of John 1. Sweeney to
the presidency of the AFL-CIO in 1995, however, a campaign was launched to increase union
membership; working with nonprofits was one of the strategies developed toward this end .
Labor's support of nonprofit organizations has a clear agenda: allocate resources to support
its own goal of increasing union membership.Ifyour organization can raise and enhance the visibility
of a union, or improve its workers' quality of life through the services you provide in your
community, it may well be a candidate for developing a mutually beneficial relationship with a
union. Chapter 19 discus ses how unions support the work of nonprofits, what they expect in
return, and how your organization might develop a relationship that advances your common
goals.
Federated Fundraising Organizations
Federated fundraising organizations, such the United Way of America, are nonprofits organized
along geographic, constituency, or issue lines for the purpose of raising funds from the general
GETIING STARTED150
public and distributing them to a variety of designated nonprofits. Federated organizations genAssociations
of Individuals
tive" is used primarily to distinguish these funds from the United Way as well as to indicate these
funds attempt to address the root causes of social needs.) In coming years, more nonprofits are
expected to knock on the doors of their local United Ways to get access to those funds, while others
will unite to create new fundraising federations in their communities. Chapter 20 discusses
federated fundraising organizations and outlines procedures for seeking their support.
People with like-minded interests often work together for a common goal by creating associations;
today, more than forty thousand such groups operate in the United States alone. Additionally,
there are countless numbers of grassroots self-help groups .
While the prime motivating force behind such efforts may not necessarily be philanthropic, it
is quite common for associations to embrace some charitable or civic activity as part of their
mandate. They may choose to administer such activities themselves, or work in partnership with
other nonprofit organizations. The Junior League is an example of an association that does both.
Service clubs such as the Lions, Rotary, or Soroptomists often organize special events to benefit
local chlliities.
Associations can be a prime source of volunteers for nonprofits and can also serve as partners
in advocacy programs. Some groups, such as the League of Women Voters, have been active in
issues like voter registration and international affairs for many years. The key for a nonprofit
hoping to tap this resource is to identify which associations have similar concerns and might
be willing to work together. As competition for financial support increases, nonprofit organizations
can improve their success rate by demonstrating the support of associations in their communities.
Chapter 21 presents the world of associations in greater detail and describes how
nonprofits can seek their support.
I
I
erally organize annual fundraising campaigns in the workplace to solicit contributions from
employees in the form of payroll deductions at regular intervals. Paying out their contributions
over 52 weeks enables individuals to make larger gifts than they could if they wrote a single
check; this is the reason behind much of federated fundraising's success.
In communities across the United States, nonprofits have discovered that they can maximize
their fundraising potential by forming a fundraising coalition. Close to two hundred such coalitions
now raise money to support many areas of nonprofit concern, among them issues of gender
and racial discrimination, housing, health care, the arts, neighborhood development, and the
environment. Examples include Earth Share, which raises money for national and international
environmental organizations; Children's Charities of America, which funds teaching, feeding,
and protection programs for children in the United States and abroad; and the National Black
United Fund, which promotes organizations working for the advancement of the African-American
community.
The amount of money raised by federated fundraising organizations shows that theirs is a
very successful method. The United Way, for example, reports that its 1,400 autonomous locals
across the United States received pledges of more than $3.77 billion in 1999. According to the
National Committee for Responsive Philanthropy, "alternative" funds raised more than $700
million in 1996, and are expected to raise more than $1 billion per year. (In this context, "alterna­
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The Many Sources ofFunding and Support 151
Sound fundraising involves reviewing all potential revenue sources and targeting those whose
interests and giving histories indicate a possible match with a particular nonprofit. While your
search for funding sources will begin by compiling a lengthy list, your time and energy are limited;
refine the list through research to determine which sources are the best to tap . Once you
haveselected the mix of revenue sources that best suits your work, you will be able to develop a
fundraising strategy and plan to guide you.
The chapters in this section detail the range of financial resources available to nonprofits,
help you select the most appropriate ones to approach, and outline the actual solicitation process.
Complete the worksheets at the end of each chapter. Then proceed confidently to Section 3,
which will advise you how to develop a fundraising plan suited to the mix of funding partners
you have chosen.
Tips
• If you want to create a stable, healthy organization-regardless of size or location-you
must secure funds from a diverse array of sources. A wide and varied
base of support decreases a nonprofit's vulnerability and conununicates to other
potential funders that your organization's work is widely valued and deserving
of their support.
• To help determine your organization's ideal funding mix, research the mix of
organizations that have similar purposes and are comparable to yours in size,
location, and longevity. While individuals account for the bulk of charitable giving
in some countries, your research may reveal that organizations similar to
yours do not receive the bulk of their revenues from them. The equation will differ
for each type of nonprofit, and even among npnprofits with similar missions.
• Remember that the many sources of funding are not discrete entities; working
with one will often lead to another, and still another. An individual donor who
becomes interested in your organization's success may have ties to a foundation
or be involved in the charitable activities of the corporation where he or she
works. In the same way, volunteers provided by an association or labor union
may become personally interested in your work and expand their involvement.