Sources of support for nonprofits include grants
and donations, earned
income, endowments, in-kind
support and volunteer
service. Each of these sources of support is described in more detail
by clicking on a link below.
Nonprofits operate through many types of support. Grants and donations
are cash contributions. They represent money that is given to the
nonprofit directly.
Grants
often come from foundations.
Foundations are organizations that support
charitable activities.
Grants
also may come from government sources.
Grants are provided by federal, state, and
local government.
Many
donations come from individuals.
These individuals may join the nonprofit as
members. Individuals also may donate to a nonprofit
even if they are not members.
Some
donations come through major donors.
Major donors contribute large amounts of money.
Major donors may be individuals or businesses.
Corporations often support nonprofits through
an arrangement known as sponsorship.
Nonprofits also gain income by earning it. Nonprofits earn income
just as businesses do. They provide a product or service in exchange
for a fee. For example, a counseling agency might charge fees for
counseling. Nonprofits also may earn income from investments.
Earned income represents the main source of income for many nonprofits.
A nonprofit becomes independent when it earns its own income. It
need not rely on other sources for funding. Nonprofits often run
programs that earn income on a regular basis. These programs are
known as sustainable programs. They help sustain the nonprofit
by keeping it running independently.
Some
nonprofits earn income through
endowments. Endowments are
very large donations, usually millions of dollars. Endowments are
set up as investments.The donated
funds are invested to earn interest. The interest
is then used to help the nonprofit operate.
Endowments are very
important to nonprofits because they represent continued
support. Organizations that have endowments never spend
the money that’s invested. They only spend the interest from
the investments. The original investment continues to grow and
to earn interest. Large endowments can support a nonprofit for
a long period of time. There’s no limit to the time of support,
since interest is always being earned.
In addition to money, nonprofits also receive other types of support.
Money enables nonprofits to buy the products and services they
need. Sometimes, however, nonprofits receive these products and
services directly. For instance, an animal shelter might need food
to feed its animals. It could receive animal food directly from
a pet supply business. Such non-cash support is called in-kind
support.
Another example of in-kind support occurs when a nonprofit receives
free office space. For example, a nonprofit might occupy space
in a government building. The government might not charge rent
or utilities to the nonprofit. No money is exchanged. In this way,
the government contributes office space in-kind.
Volunteer support is crucial for nonprofits. Volunteers work without
pay to serve nonprofit goals. Though volunteers aren’t paid,
their time and services are valuable. An organization known as
the Independent Sector conducts yearly research on the value of
volunteer time. According to the Independent Sector, American volunteer
time had an estimated value of $18.04 per hour in 2005.
The value of volunteer time adds up quickly! Imagine a nonprofit
with 20 volunteers. These volunteers deliver meals to the elderly
each week. Each volunteer works 10 hours per week, or 520 hours
per year. Together, the 20 volunteers work 10,400 hours per year.
They contribute $187,616 per year in volunteer time!
