The Future of Funding: Darren Walker Shares 3 Ways Donors Can Serve Nonprofits

Americans donated a record $470 billion to charitable organizations in 2020. On the surface, that’s excellent news for nonprofits. Yet a closer look at the data reveals key challenges: Not only did most Americans fall further behind financially during the pandemic, there were fewer donors giving larger sums. As nonprofits work to serve greater numbers of people, they’re under increased scrutiny from sophisticated philanthropists to report on impact. And that means they have to work harder than ever to achieve their missions

At Nonprofit Summit 2022, Darren Walker, President of the Ford Foundation, sat down with Dr. Una Osili, Associate Dean for Research and International Programs at Indiana University Lilly Family School of Philanthropy, to discuss innovative solutions to the challenges nonprofits face. Here we share insights from that conversation, including three challenges facing nonprofits and how donors can better support them.

It’s understandable that donors want to see the money they give go to good use, like building a new hospital wing or providing educational opportunities to underserved communities. But when donors place limitations on how funds can be used, they constrain organizations’ long-term financial stability. In fact, with unrestricted funds totaling only 20% of donations sector-wide, many nonprofits don’t have enough money to fund necessary project support.

“Donors don’t seem to understand how important unrestricted giving is to the financial health of the nonprofit,” said Walker. “It’s essential to ensure nonprofits have enough project support funding. Organizations are sometimes penalized for this and this is a huge problem in the donor community.

Here’s why: Like their for-profit peers, nonprofits incur overhead expenses. They need skilled employees and updated technology to work across projects and functions. When donors earmark money for specific activities, those funds cannot be used for necessary expenses like wages and equipment, leading to starvation budgets that make it impossible for organizations to complete their mission. It also makes it less likely that they can take advantage of new opportunities or respond to emerging needs — such as what nonprofits experienced during the pandemic.

Donors need to appreciate the amount of administrative work it takes to apply for funding. A reliance on old tech means nonprofit employees must complete multiple forms and run multiple reports, often for the same activity. Unfortunately, technology upgrades are the type of expense covered by the unrestricted donations that are in short supply.

“There is a power imbalance that exists between nonprofits and donors,” Walker said. “Donors don’t consider the burden of supporting multiple grants, sometimes for the same activity, but having to generate multiple reports. We should be optimizing tech to improve efficiency and drive greater impact.”

With one platform that connects data and works as a single source of truth, organizations can simplify administrative processes, build donor-nonprofit relationships, and accelerate grantmaking.

“The idea of this platform is to [have] a central portal through which [nonprofits] can apply to many foundations for funding for the same activity, as opposed to having to go serially to each foundation with a different application,” Walker said.

As Osili noted, record levels of giving is wonderful. But although wealth’s obligation to give back is key to a healthy, functioning society, donors need to do more than simply feel good about writing a check.

“The Andrew Carnegie essay The Gospel of Wealth has guided generations of philanthropies. But I also look at a little-known quote from Dr. Martin Luther King: ‘Philanthropy is commendable, but philanthropists should not overlook the economic injustice that makes philanthropy necessary,’ said Walker.”

Donors can learn more about the communities they serve by asking questions about the ways systems, structures, and individuals contribute to poverty and inequality. To do this, Walker recommends using tech and innovation to bring the sector together and becoming more “engaged and proximate” to the communities nonprofits serve. In this way, donors can answer the question: How can we serve nonprofits better?

Nonprofits are the vehicle that help corporations and people acknowledge culpability and accountability.

As Walker told Osili: “The nonprofit sector, when they are at their very best, they hold the mirror to America and say: Here’s who we say we are and here’s what the data tell us we are.. “How do we fill that gap so that each and every American can dream, can believe in the future, can be hopeful, and can get on that mobility escalator?”

About the Author

David Slater
VP of Product Marketing at Salesforce.org