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Fundraising Fact and Fiction

Legal Counsel for Philanthropy and the Nonprofit Sector

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Fundraising Fact and Fiction

This article, by Ken Hoffman, originally appeared in Third Sector on July 13, 2000.

We cherish some grand illusions, those of us in the charity sector. I will describe four of them to you. Do you believe in them?

The value of restricted grants is an illusion. Most foundation or trust grants have a restricted purpose. Yet the raising of restricted funds by a charity implies that it has other, unrestricted funds available too. Charities operate with a single, overall budget. If a programme is a high priority, it will command whatever unrestricted money is available. The arrival of a restricted grant does nothing more than displace the unrestricted funds that were going to be spent anyway.

Would the same results be gained if all funds arrived unrestricted - that is, to be spent as the operating charity itself thought best?

Of course they would. But there would be less joy for the donors. The sad fact is that nearly every donor foundation, corporation or individual, when given the opportunity, will make a restricted, rather than an unrestricted, gift.

Another illusion is the value of matching grants. Many matches are awarded at onerous ratios: in the US, a charity might receive one dollar in match for every two, three, or even four it raises from other sources. The higher ratios - those that make the charity work harder and harder - are punitive and wasteful.

In fact, the matching grant is an insidious device. It allows one major donor to set the agenda for a charity, yet to fund only one-half, one-third, or even one-quarter of the full budget.

Loans to charities - or, in grantspeak, 'programme-related investments' - are of little benefit. Whether at low or no interest, I cannot see the purpose served in requiring a needy charity to repay an endowed foundation. A grantmaker or lender may argue that larger sums can be placed, albeit temporarily, with a charity. Yet charities, by their nature, find debt onerous. Most of my clients, even large ones, struggle to repay lines of credit that help them survive irregular cashflow. Charities that depend on contributions (rather than earned income) are better off without loans. And on top of that, most loans are converted into gifts, anyway - a waste of effort by all involved.

And then there is the grandest illusion of them all: that when fund raisers ask for just one contribution and say we will never ask again, we mean it. I admit that I have written proposals asking for 'one final grant'. But nothing is final in a world where charitable institutions live forever. The charity staff may leave. In the US, 46 per cent of them change jobs every year. But there is no such thing as final in the institutional relationship between donors and recipients.

In the end, we live by illusions. Best to recognise them for what they are.

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