The Case for Unrestricted Giving

Stonewall grantee, Generation Q, celebrates the opening of their new home at Queens Community House

Philanthropy News: Five CEOs of Wealthy Foundations Pledge to Do More to Help Charities Pay Overhead

For the past decade, Stonewall has been focusing its grantmaking on ensuring that the organizations we fund are freed from constraints that funders impose when issuing grants.  We have done this by overwhelmingly funding general operating expenses, and never capping overhead funding on our grant applications. We recognize the importance of unrestricted dollars to nonprofits, and have held it as a core value in our funding practices. We encourage our DAF partners to recommend unrestricted grants to qualified charities; trusting that those organizations know best how to utilize resources to move their missions forward.

Over-inflated concerns about high overhead costs led funders as well as individual donors to restrict dollars only to programs, not allowing for critical resources to fully cover the costs of those programs.  In 2013, Charity Navigator and Guidestar published a joint statement called “The Overhead Myth” to dissuade funders from perpetuating what had become known as the “Nonprofit Starvation Cycle,” in which organizations received enough funding to cover direct costs of programs, but were left scrambling to fundraise for indirect costs. As such (from the article) “An analysis of 274 nonprofits that received grants from two or more of the 15 largest U.S. foundations found that 42 percent had less than three months' worth of cash on hand.”

We are pleased to see large foundations recognizing the struggle nonprofits of all sizes face in covering their operating costs, and the importance of granting unrestricted dollars so that organizations can invest in their own development, growth, and stability.