Filling in Funding Gaps: How Philanthropy Can Sustain Nonprofits

Nonprofit organizations often rely on a mix of funding sources to carry out their work, and federal grants are a significant source of funds for many charities.

According to a recent article from Candid, an organization focused on providing data for the nonprofit sector, roughly 30% of U.S. nonprofits (over 100,000) report receiving government grant dollars, which total $303 billion annually. 

In many cases, government grants are the primary source of revenue. From Candid:

“Over 35,000 nonprofits—about a third of government grantees—rely on these [government] grants for more than 50% of their total revenue. 

The level of dependence on government grants is not uniform across nonprofit subsectors. Organizations in the human services, international foreign affairs, and public, societal benefit subsectors are most likely to heavily rely on government grants to execute their work. The human services subsector, which includes many direct-service organizations, is particularly vulnerable, with 40% of government grantees reporting that those grants comprise their primary revenue stream.”  

The presidential administration is changing the federal funding landscape through executive orders and other policy directives. Many charities are anticipating reductions that will make it harder to continue their operations.

What can donors do to help?

While the funding gap may be sizable, private philanthropy can help bridge the gap and sustain the work of charities that have traditionally relied on federal funds.

As you think about the donations you plan to make this year and beyond, we encourage you to consider the following:  

Increase Your Grants  

Consider increasing the dollars you direct to public charities experiencing hardships right now.

At the Community Foundation, we work with thousands of donors who have set aside assets in donor-advised funds for their charitable giving. Every day we see donors respond with critical grant support when nonprofits struggle to meet immediate needs, but it’s even more evident during times of crisis. For example, as the effects of the COVID-19 pandemic hit charities in April 2020, our donors granted 170% more grant dollars compared to April 2019.

With the recent cuts to USAID, it’s also important to note that donor-advised funds can easily support U.S.-based nonprofit organizations that are working internationally. Additionally, the Community Foundation can facilitate grants to NGOs outside of the U.S. for an additional fee.

Don’t Wait; Make Grants Now

Instead of waiting until the end of the year to support your favorite causes, consider the immediate impact your grants could have today. While many nonprofits face unpredictable funding streams, earlier support can provide much-needed stability.

Ask Charities About Their Needs

With the influx of policy changes and related media coverage, it can be hard to determine what’s really happening to nonprofit organizations in your community.

We encourage you to go straight to the source to understand their needs. Visit their websites, read their newsletters, find their social media posts. And if you’re still not sure, reach out and ask them directly how you can help. 

Anecdotally, we’re hearing that charities may need additional support to handle anticipated legal and communications expenses as they navigate the uncertainty. But the needs of the nonprofit sector vary greatly.

Reduce Restrictions for Charities

Providing unrestricted funding or general operating support enables nonprofits to use the financial resources where they’re needed most, so they can focus on their work rather than administrative tracking.

Your dollars can be a powerful source of encouragement to nonprofit professionals. Trust them to do what’s best based on their organization’s current needs.

To learn more about how you can provide critical support during times of uncertainty, reach out to our team of philanthropic advisors at info@growyourgiving.org or 816.842.0944.

Authored by: Whitney Hosty, Vice President, Philanthropic Services