Giving Compass' Take:
- Community-based nonprofit organizations struggle to obtain philanthropic funding unless donors ramp up operating support.
- What are the benefits of unrestricted and flexible funding for organizations?
- Understand more about the overhead myth.
What is Giving Compass?
We connect donors to learning resources and ways to support community-led solutions. Learn more about us.
The truth is that many local nonprofits are starving. While program funding and impact investments power many innovative aspects of community development, these community-based non-profits need new funding for operating costs if they, and their work, are to survive. Our national progress on everything from affordable housing and family wealth-building to health, safety and jobs depends on it.
That’s why I have been out talking to public and private funders across the country, urging them to consider the importance of increased operating support—because for many of these non-profits, the pressure has been mounting for years. They have been running full speed since the last recession to support communities that never fully recovered from the 2007 housing crash. Add to that the intense pressure of the pandemic, rising operating costs, high interest rates, new capital constraints, and threats to project portfolios—and many find themselves pushed to the edge. They drained their reserves to meet urgent needs, and now find that there are few options to recoup those outlays and to make sure this work is fully covered going forward.
Even community development financial institutions (CDFIs) as large as LISC require operating support to fuel our organizations. Funding declines can wreak havoc on our budgets and, as a result, also affect our ability to scale up impact. We have bigger balance sheets and greater program diversity to help navigate economic crosswinds; yet those pressures can still negatively affect our operations.
This is much harder for boots-on-the-ground organizations working in underserved communities. These organizations directly engage with residents in crisis and address persistent social and economic pressures that ripple throughout urban and rural regions. They design and implement place-based strategies that reverse the impact of discrimination and disinvestment. And they are on front lines of economic and climate disasters, keeping people housed, keeping businesses open and filling gaps that no one else in the country can effectively address.
They don’t do any of that alone, of course. But they are the linchpin—as important to residents, business owners and municipal leaders working to build local prosperity as they are to philanthropy, impact investors and federal agencies looking fuel growth. Because of their success, we know beyond any doubt that underserved communities can be good places to live, work and invest. Without them, the distribution network for community development capital will falter, and so too will much needed progress.
Read the full article about how funders can support nonprofits by Denise Scott at LISC.