The Flexible Funding Dilemma
Flexible funding has emerged as a cornerstone principle in the realm of trust-based philanthropy, offering non-profit organizations the latitude to address pressing issues with long-term, unrestricted financial support. The COVID-19 pandemic has accelerated the adoption of this approach, with many funders relaxing restrictions to allow non-profits to respond swiftly to the crisis. MacKenzie Scott’s groundbreaking approach, characterized by providing unrestricted grants without a rigorous application process, has ignited significant interest and debate in the philanthropic and non-profit sectors.
Transformative Impact of Unrestricted Gifts:
The impact of large unrestricted gifts, as exemplified by MacKenzie Scott, has proven transformative for non-profit organizations. These funds have empowered organizations to advance equity more effectively, serve marginalized communities, and shift their focus away from constant fundraising. Despite initial concerns about the one-time nature of these funds, many leaders believe they have facilitated long-term strategic planning and infrastructure investment.
Advocates for Flexible Funding:
Proponents of flexible funding argue that it allows non-profits to adapt swiftly to unforeseen changes, a crucial ability in an era marked by multiple crises. This approach signifies trust in the expertise and judgment of non-profit leaders, fostering impactful and equitable partnerships. Research, such as that from Bridgespan, supports the idea of changing the power imbalance between funders and grantees, particularly for organizations led by people of color.
Opposing Views: Project-Based Funding Advocates:
Despite the advantages of flexible funding, there are proponents of project-based funding who emphasize the need for accountability and measurable impact. They argue that project-based funding ensures targeted goals and tangible results, preventing the risk of unrestricted funding leading to a lack of focus and organizational complacency. Project-based funding is viewed as a tool for risk mitigation, aligning initiatives with corporate goals and allowing ongoing assessment and adjustment of supported projects.
The Non-Profit Starvation Cycle:
The concept of the “non-profit starvation cycle” sheds light on how organizations consistently underfund their infrastructure and operational costs. Unrealistic expectations from funders contribute to this cycle, leading to underinvestment in essential areas. Research recommends that funders fully cover administrative costs, support financial management capabilities, contribute to unrestricted funds, and collect data on cost coverage to break this cycle.
MacArthur Foundation’s Progressive Step:
The MacArthur Foundation’s adoption of a 29% flat rate for indirect cost recovery is seen as a progressive step in rectifying the non-profit starvation cycle. However, calls for a nuanced approach argue that a one-size-fits-all rate may neglect the diverse financial needs of different organizations and projects. Critics highlight concerns about inefficiencies like overlap and double charging, disproportionately affecting smaller, innovative projects.
The ongoing debate between flexible, unrestricted funding and project-based funding reflects the broader conversation within the philanthropic community about how best to support non-profits in achieving their missions. The need for trust, accountability, and a nuanced understanding of the financial dynamics of different organizations underscores the complexity of finding the most effective funding models for the diverse range of non-profits working towards positive social impact. As the philanthropic landscape continues to evolve, finding a delicate balance between flexibility and accountability remains a crucial challenge for both funders and non-profit organizations.
Submit.com
Submit.com is a submission management platform that can be used to manage flexible funding. It offers a range of features and automation options that allow organizations to create custom, automated review workflows, accept any type of submission, disburse funds and awards, track program progress, and measure results – all in one place. Submit.com’s solutions for organizations allow them to build and run any application-based program to suit both their and applicants’ needs. The platform’s drag-and-drop form builder and custom review workflows enable organizations to launch programs in a matter of days or weeks, not months. Submit.com’s advanced reporting features provide a clear view of how programs fulfill an organization’s mission. The platform’s scalability and powerful tools are built on a foundation of security and reliability, making it a valuable tool for managing flexible funding.
