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Monday, September 17, 2018

How to Give: Restricted v. Unrestricted Funding

Is it better to tell the charities you support how you want your donations to be used, or leave it up to them to determine?

Keep reading to learn the key differences between “restricted” and “unrestricted” funding and what they mean for your favorite organizations.

Restricted Funding

Restricted funding is money designated for a specific cause or program within a charities’ offerings. Organizations must comply with donors’ guidelines for using the funds according to their designation. For example, if a donor supports an environmental conservation charity with a gift fund their oceans program, the gift cannot be used to fund their forestry work or education programs.

Unrestricted Funding

Unrestricted funding is money without a designation, which is often called “general support” or “general operating support.” Charities can use these funds at their discretion to fund programs and initiatives as they see fit. In this case, the same donor’s gift could be used to fund the environmental group’s oceans program, forestry work, education program, or even be set aside to pay bills and salaries that will allow the charity to continue doing its work.

So, how should I give?

Restricted funding is very common after a disaster. Donors want to know that their gifts are being used to help crisis victims. And, quite often, the need following the disaster outweighs the restricted support the charity will receive. Unrestricted funding, however, allows organizations to be flexible in any situation. If an organization raises more cash in the wake of a disaster than it needs to respond, unrestricted funding allows them to save the funds for the future disaster work or use the money to fund a concurrent initiative. 

Outside of a disaster, unrestricted funding allows charities to determine their own needs and respond to changing demands for their services. They have more flexibility to move money between programs or fund new initiatives that will allow them to better serve their clients and/or achieve their missions.

You can use Charity Navigator’s Advanced Search Tool and Discover feature to research your favorite organizations or find a new charity you can trust.

Written by Ashley Post, Communications Manager at Charity Navigator.

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