Sources of Nonprofit Funding - dummies

By Stan Hutton, Frances Phillips

One distinctive feature of the nonprofit sector is its dependency on contributions. Gifts from individuals of money, goods, services, time, and property make up the largest portion of that voluntary support. This portion is also the oldest of the voluntary traditions in the United States and goes back to colonial times.

Since the late 19th century, private philanthropic foundations have emerged as another major source of support, and more recently — particularly after World War II — the federal government and corporations have become important income sources. Earned income through fees for service, ticket sales, and tuition charges also can be an important revenue source for many nonprofits.

Where the money comes from

Among private, nongovernmental sources of support, gifts from living individuals — as opposed to bequests from people who have died — have always represented the largest portion of total giving, but philanthropic giving by foundations and corporations has been growing. The best fundraising strategy for most organizations is to take a balanced approach that includes individual giving as well as grants and corporate contributions.

Source of Income Amount of Total Giving in Billions Percentage of Total Giving
Individuals $217.79 73%
Foundations $41.67 14%
Bequests $24.41 8%
Corporations $14.55 5%
Total $298.42 100%

Source: Giving USA: The Annual Report on Philanthropy for the Year 2011 (2012). Chicago: Giving USA Foundation.

Fundraising for fun and profit

Nearly every nonprofit organization depends on generous donors for the cash it needs to pay its bills and provide its services. Even if you have income from ticket sales, admission charges, or contracted services, you’ll find that raising additional money is necessary to keep your organization alive and thriving.

Individual giving is the largest single source of contributed income to nonprofit organizations. But you can’t just sit waiting by the mailbox for the donations to begin arriving. Two basic rules of fundraising are that people need to be asked for donations and thanked after giving one.

Grants from foundations and corporations make up a smaller percentage of giving to nonprofits, but their support can be invaluable for start-up project costs, equipment, technical support, and sometimes general operating costs. Keep in mind that the figures you see here don’t apply equally to every nonprofit. Some organizations get most of their income from foundation grants; others get very little.

Fundraising works better if people know you exist. That knowledge also helps get people to your theater or to sign up for your programs. Here’s where marketing and public relations enter the picture.

Make no mistake about it, fundraising is hard work, but if you approach the task with a positive attitude and make your case well, you can find the resources you need.