Building a Case for Unrestricted Funds

Written by Rhonda Cook Bonfield
Communications Associate, Aurora Grants and Consulting 

Since the majority of private funding institutions will only consider offering grants earmarked for programs that fit their designated funding priorities, as fundraisers we often hesitate to request grants for general operations even when we come across a funder who will consider granting such funds. This hesitation is entirely justified. In addition to appreciating client success stories and heart-warming tales, funders have come to expect their dollars to create data-driven results. The burden of proof is therefore on fundraisers to justify the organization’s needs by convincing funders of the expected impacts of undesignated gifts – that they will be used for more than just “keeping the lights on” or executive salaries.

To secure funds without restrictions, you’ll want to build a case that shows the donor your organization will be a good steward of their money. The following list offers suggestions to help generate ideas for developing a compelling unrestricted grant proposal.

1. Focus on how grant dollars will bolster the organization’s activities by building capacity or by sustaining its operations during challenging times.

Perhaps your strategic plan calls for expanding to serve a larger region or a greater number of people. Maybe your organization has the opportunity make a greater impact by participating in advanced training. A funder’s guidelines may indicate they will not pay staff salaries, but they may consider paying for professional development. While an unrestricted gift would not directly pay these expenses, similar activities shown as a part of your organization’s overarching goals for the grant period can demonstrate a legitimate need for dollars over and above office expenses or utilities. Has your region recently experienced a natural disaster or an economic downturn? Financial challenges beyond your organization’s control can explain to a funder why budgeted fundraising activities might turn up short for the year, or that actual costs might run higher than anticipated.

Be specific about your nonprofit’s capacity-building goals. For example, if student-to-teacher ratios have become a proven problem, what changes to the ratio would help you achieve a specific outcome? What professional development opportunities would help your nonprofit serve a new or changing demographic? Consider citing recent research that will help your organization justify new initiatives.

2. List broad outcomes that your programs are expected to generate.

If your organization will add horses for new equine therapy activities, for example, describe the need; then show how the increase will impact your organization’s overall mission. Maintain a bird’s eye perspective when asking for operating funds. Be sure that you are not setting the organization up to track outcomes for a specific program. A descriptive paragraph in the narrative section could begin, “Although XXX Foundation’s support will not go to directly funding our Horses for Children program, your funds will enrich the organization as we begin serving a new population of youth.” Then outline program needs and related activities in the greater scope of the project.

3. Share details of your nonprofit’s strategic plan.

If your board of directors has enacted a formal strategic plan, you’re in luck. A board-led plan indicates to a funder that your organization has committed to a set of activities, outcomes, and goals which communicates legitimacy and accountability. Your proposal might explain, in brief, the big-picture objectives for your strategic plan. Then list in greater detail a few activities that you will carry out during the designated grant period. Say that, for instance, your organization is broadening the scope of its mission to include serving an influx of residents from a Spanish-speaking country. New costs are projected for interpreters, printing, websites, and professional development. Assuring a prospective funder of thoughtful strategy behind a new focus will inspire confidence that ongoing activities will be sustainable.

4. Tell your organization’s story in the financial narrative.

Many funders hesitate to fund grants that cover administrative costs. Using Generally Accepted Accounting Principles (GAAP), a good finance team can assign some costs—including salary-related expenses and the day-to-day cost of doing business—to support operations of the organization’s overall mission. If your nonprofit is without a finance department, consult with your accountant to allocate staff and other overhead costs to mission-related programs and services. Your organization should be able to justify that, for example, maintenance department salaries in a patient care facility are considered a part of patient health outcomes as opposed to overhead. With a carefully planned and clear budget, detailed explanation is unnecessary; budget footnotes can tell the story. For instance, “XYZ Clinic maintains 20k/sq. ft. of sterile patient care space serving 2k patients annually. Janitorial services cost $100k annually, of which $60k are dedicated to direct patient care.” These notations are especially important if a prospective funder asks specific questions in the application form about overhead or salary costs as a percentage of overall costs. Keep in mind that all information shared in a financial narrative or budget footnotes must stand up to accounting principles and a formal audit.

Overall financial sustainability of the organization is a legitimate funder concern. The financial narrative is a good place to describe your organization’s capacity to raise resources needed to maintain operations with or without the grant requested. For example, “XYZ’s public/private funding model has been used since inception. Our capacity to raise funds as the organization grows is based on resources committed in our Strategic Plan. We will leverage $250k in federal CBDG-DR funds in 2023 and will close the gap by raising an additional $750k in private philanthropy.”

5. Create a bullet list of activities and objectives in your proposal “ask” section.

Your grant request should be on the first page of your organization’s proposal, and in any cover letter. There are as many ways to style the request as there are requests for funds, but be sure to list key activities for your organization’s operations. These should then be described in greater detail as space allows in the narrative section. Such an “ask” section for a homeless shelter might read:

XYZ Shelter thanks XXX Foundation for your commitment to fighting homelessness. We ask that you join us in safely housing 2,000 people in 2023. An operating grant for $20,000 will propel the organization’s mission in several ways:

a. Build capacity as we prepare to open our fourth shelter in Harris County, adding 200 beds to meet growing need in anticipation of flood events and climate change;

b. Expertly serve our current clients while we build four new community partnerships and train six staff members who will offer trauma-informed care to a new population of young adults;

c. Expand the efforts directed by our new Organization Strategic Plan to include options for Spanish-speaking clients in all activities and programs.

We rely entirely on private philanthropy to continue our vision that every Houstonian has a safe place to sleep. Our 2023 organization operating budget is $1,500,000.

6. Reporting on Unrestricted Funds

Once you’ve won that grant proposal, celebrate! You’ve earned it. Although operating grants are not earmarked for specific programs, it’s important to let your funder know at the interim and final grant term -- whether or not their compliance requirements include a formal reporting schedule -- how their generous dollars have been spent. Be certain that you have included only activities and projected outcomes that have been tracked, at least in the broadest sense. Your report should communicate the organization’s overarching successes by addressing all of the issues stated in the original proposal. Funders will appreciate it and be much more willing to fund your organization again. To simplify the process, you may create one report template each year for operating fund requests. Having this will help with both your grant writing and reporting efforts.

Most of all, create a winning team. Building a case for unrestricted funds takes some homework. The size, type, age, and history of your organization will determine where most of your work should be focused. Creating a fundraising team made up of grant writers, program managers, facility directors—any and all who know what’s going on in the organization—is key to a stellar operating grant proposal.