As a grant management professional, the funds you award help support important causes and positively impact communities.

You can give two types of funds to organizations: restricted and unrestricted. Restricted funds can only be used for a specific purpose or project, which cannot be changed. These funds are traditionally more common, as most grants and corporate donations are restricted to specific purposes or programs.

With a major donor like Mackenzie Scott demonstrating impact through unrestricted grants, giving in this way has a lot of potential. In fact, one of the main reasons why more organizations don’t award unrestricted grants is that they are unaware of unrestricted funds and their benefits.

When unexpected events happen, the organizations you support should be able to accommodate new realities. This is what unrestricted funding aims to accomplish. Transparency in operating costs is important. I also feel that trust and confidence are equally important.

But to ensure that your unrestricted funding is impactful, you foundation should do its due diligence with regards to selecting grantee nonprofits and the causes they support.

Here are four best practices you should follow while awarding unrestricted grants:

  1. Carefully align your mission Unrestricted grants give you much less control over where there are used. Because there is a large amount of trust required between you and your grantees, you should make sure that their mission aligns with your foundation’s values. 
  2. Focus on DEI A recent report found that nonprofits led by people of color are often overlooked by funders, receiving less in funds and had more strings attached to those funds, which reduced their ability to get desired outcomes. This is one of the main disadvantages of restricted funds - strict terms and conditions apply to who can receive the funds in the first place. 
  3. Measure your impact Being able to measure and communicate your impact to stakeholders will ensure the long-term success of your grantmaking or corporate giving prorgams. 
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  4. Use a specialized tool‍ In addition to reporting, a grant management platform like Optimy improves all your processes. You can store all your data in one place, including all documentation for grant applications, and seamlessly collaborate with both internal and external parties.

Read the full article about unrestricted funds by Angad Bachhar at optimy.