What’s up, what’s down in funding for nonprofits?

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As we look at the funding landscape for charitable nonprofits heading into 2015, nonprofits are feeling as if we’re on a see-saw.

In some ways, we’re on top of the world: recent reports tell us that the tide may be turning – a little – when it comes to private philanthropy’s interest in providing funding for capacity building. And we’re chipping away at the donating public’s perception that “overhead is bad,” and hopeful that being transparent about the full costs of delivering services will demonstrate the need for contributions to cover administrative costs and also give donors, foundations, and the media data to show that it actually costs something to deliver services in communities (gasp!).

But, on the other hand, the bumps at the bottom of our see-saw ride are a reminder that the dollars flowing to charitable nonprofits are not enough to allow our sector to soar.

Here’s what’s up and what’s down.

UpGeneral operating support: A strong majority (81 percent) of grantmakers surveyed by Grantmakers for Effective Organizations, known as “GEO,” reported that their grants include general operating support grants. From this group of grantmakers, the median percentage of their total grant dollars that went towards general operating support was 25 percent - a big leap from just 3 years ago, when the median was only 20 percent. However, we’re also hearing from the field that many grantmakers are still stuck in the mindset that a “new” initiative is more exciting than an existing program or funding general operating support. “Funders continue to change their criteria and do not support general operational expenses. Everyone wants a new initiative, but if the old one is working and producing why not continue to fund what works?” (Quote from survey respondent in the The Fall 2014 State of Grantseeking ReportTM ). The 2012 data reported by The Foundation Center indicates that there were fewer dollars and grants directed for general operating support in 2012, than in 2011, so we’re still holding our collective breaths on this one.

UpMultiyear Support: This headline in the 2014 national study of philanthropic practice by GEO was music to our ears: “Multiyear support is making a comeback. Most funders now give multiyear grants.” Thank you, GEO for this insight: “Multiyear support shouldn’t be a fair weather practice. In tough times, nonprofits need this stabilty more than ever. Long-term support allows nonprofits to plan with confidence and reduces the amount of time they have to spend applying for and reporting on grants.”

UpFinancial support for capacity building: The same study by GEO noted that more than 25 percent of the responding grantmakers reported they have increased the type of grant support most commonly associated with capacity building, which GEO also defines as “resiliency and capacity to navigate change.”

DownGovernment dollars: Almost half the nonprofits surveyed by the Nonprofit Finance Fund in its 2014 State of the Sector survey (NFF survey) with government contracts or grants reported a decline over the past 5 years in the amount earned from those contracts/grants. Plus, late payments from governments continue to be a problem: 26 percent of those taking out a loan reported that they used the loan to fill a funding gap created by delays in payments from governments.

DownDonor loyalty: If your nonprofit had a donor retention rate of only 42 percent, what would you do? That’s the national median retention rate for donors, according to the 2014 Fundraising Effectiveness Project, which underscores that many nonprofits are losing ground in their return-on-investment for new donor cultivation. The data are sobering: for every 100 donors gained in 2013, there were 102 lapsed donors; over the last nine years, donor and gift dollar retention rates have been consistently below 50 percent. New donors were the least likely to make a repeat gift.

DownCorporate support: Where’s the cash from corporate America? Yes, thank you for the in-kind gifts. Thank you, too, for the skilled volunteers. We don’t want to sound ungrateful, but it was surprising that 2013 marked the smallest increase in corporate giving since 2011, and that the majority of the increase was attributed to in-kind gifts. Surplus inventory doesn’t pay the bills.

Whether you are feeling up or down, we think you’ll agree that these are challenging times for fundraising. Good luck to your nonprofit with its year-end fundraising activities. And please don’t forget to thank your donors, and make sure your nonprofit is registered for charitable solicitation activity in every state where registration is required and where a nonprofit solicits contributions.

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