Giving Compass' Take:

• Kevin Starr explains why philanthropists should provide unrestricted funding to best help organizations achieve impact. 

• How can we change the conversation and culture around funding to prioritize impact, rather than low overhead?

• The Bridgespan Group shares how restricted funding hurts nonprofits. 

Unrestricted money makes an organization work smoothly, enables innovation, and provides fuel for growth. It unlocks potential and allows people to get down to business and do what they’re best at. It makes it possible for great organizations to weather crises without losing momentum. For us, it serves to leverage other people’s restricted money—and I love the feeling that we’re getting a better deal.

I suppose that many worry that if they give an organization unrestricted money it will be wasted or used inefficiently. The solution is pretty simple: If you don’t think an organization is smart enough to use your money well, don’t give them any.

In the real world, if you were to invest in a company you thought would make you a tidy profit, you wouldn’t tell the senior management they had to make a product of your choosing, restrict the number of vehicles they purchased, or expand operations into a new country. Why should we do any differently in the social sector? Why not simply invest—fund—on the basis of return in the form of impact?

Unrestricted funding on the basis of real impact is a lot more satisfying than worrying about line items in a budget. What is important is the impact per donor dollar: the cost per child’s life saved, per family out of poverty, per island species saved from extinction. If we like that number—if we think they are cost-effective in terms of impact—we don’t have to get worked up about overhead costs or whether employees fly business class now and again.

Read the full article on unrestricted funding by Kevin Starr at Mulago Foundation.