Building a Sustainable Fundraising Mix
Those looking to support an organization, whether they are individuals, foundations or government, like to see evidence of organizational sustainability. Potential financial supporters may ask, “If the organization’s funding is dependent on a source that dries up, can the organization survive?” Given this reality, it makes sense for many nonprofits to pursue multiple funding sources and never to become too reliant on one funding stream.
In general, it is advisable for nonprofits to never receive more than 30 percent of their funding from any one source. First, if an organization loses 30 percent of its revenue, it could probably restructure in order to survive. However, a loss of over 30 percent would place an organization in an extremely vulnerable position. Second, nonprofits that are considered public charities must past the IRS public support test that requires one-third of a public charity’s support to come from the general public and/or governmental sources. A large grant can easily upset or tip this ratio, causing a nonprofit to lose its public charity status. For more information about foundations and tipping nonprofits from public charity to private foundation status and why foundations are concerned, read Foundation News and Commentary’s Legal Brief.
With these factors in mind, nonprofits should strive to pursue a healthy mix of revenue that will enable them to pursue their missions. To better understand the degree to which your organization has a reasonable mix of funding sources, Jon Pratt, executive director of the Minnesota Council of Nonprofits, has developed a tool to help nonprofits analyze both the reliability and autonomy provided by different funding sources.
