Any reliance on a single funding source is sometimes unavoidable, but the vulnerability it creates for a nonprofit should be the impetus to strive for diversification.
The plan for Komen for the Cure to defund breast cancer screenings for women served by Planned Parenthood clinics, and its subsequent reversal of that decision, also led to sudden largesse for Planned Parenthood.
It received $3 million in contributions in three days because of the institutional shortfall of a private foundation. Momentum had already been building among individual contributors when New York City Mayor Michael Bloomberg offered a $250,000 matching gift challenge to Planned Parenthood.
Reportedly, it took less than three hours for Planned Parenthood to receive $250,000 in additional donations, fulfilling the match requirements.
Planned Parenthood learned a lesson that could benefit all charities: Individual donors are a vital component to every nonprofit’s fiscal survival and health. For nonprofit practitioners, what appeared as a footnote in this story has become the credo from this example: Never forget the importance of individual charitable giving.
According to Giving USA’s 2010 estimates, individual contributions to charitable causes in this country account for 73 percent of all charitable giving, while foundation giving accounts for just 14 percent of such giving. Nonprofit fundraisers are all too aware that what foundations – private or corporate – give, they easily can take away, leaving the organization in shambles.
The Madoff scheme impacted more than 100 foundations across the country, leaving hundreds more nonprofits in crisis.
For example, three foundations that supported the ACLU closed, resulting in an $18 million loss of support that forced the group to cut programs and 10 percent of its staff.
Revenue diversification isn’t just a good idea for personal investment and private foundation portfolios.
Nonprofits need to be mindful of seeking balance among their funding sources and moving toward more robust fundraising management.
Individual charitable giving should be a key element of the funding equation for nonprofits.
Here’s why: When a large grant falls through, a nonprofit’s supporters and donors are quickly asked to come in and bridge the gap, and indeed people can respond in a more nimble and responsive way than foundations can or have to date.
Rather than using individual-giving appeals as contingency plans or last-ditch efforts, individual donor outreach can be a first line of defense for organizations prone to program funding cuts.
Nonprofits that neglect the care and feeding of their individual donors, as a base of ongoing and lifetime support, do so at their own peril. Foundation grants have their own allure and necessity. As arts and educational organizations know all too well, when these grants are received, their large sums can cover costs for an entire program or service.
And one grantmaker can attract others that may follow suit, since they tend to pay attention to what other foundations are giving.
Although foundation grants generally are seen as a boon to a nonprofit’s fundraising efforts, organizations should not disregard sources like individual contributions that can be a staple for their long-term sustainability.
While not every organization has the benefit of a national and international scope, every organization has friends, supporters and donors who care – and who need attention.
So they shouldn’t just be the go-to in desperate times. Their ongoing cultivation should always be a component of an overall fundraising strategy.
Best practices here involve not only thanking donors for their support, but keeping them informed about the organization, which can keep them more engaged in its mission.
Cynthia Reddrick, formerly with the ACLU, is a graduate of the Heyman Center for Philanthropy and Fundraising at New York University, where she is pursuing a master’s degree in philanthropy.