Filling the Nonprofit Funding Gap: How Pro Bono Can Counter Inequality

There is a gap between the needs of nonprofits and the funding that is available to them; a gap that includes many of the essentials nonprofits must provide in order to function. According to the Nonprofit Finance Fund’s 2018 State of the Nonprofit Sector Survey, 86% of nonprofit respondents stated that the need for their programs was set to grow. Of those nonprofits, 57% didn’t believe that they’d be able to meet that increased demand. Pro bono is one tool that can be leveraged to address this serious, sector-wide problem.

Identifying the Gap Between Funding and Need

Within the nonprofit world, grantmaking has not traditionally funded the full cost of the programs nonprofits run. According to The Chronicle of Philanthropy’s 2019 article Why Funders Should Pay for the True Costs of Nonprofits’ Work — Not Just the Direct Project Expenses, grantmakers pay, on average, about 88 cents for every dollar of a grantee’s actual expenses—forming a dangerous nonprofit funding gap between accounting and reality. A true, all-inclusive budget for this necessary programming would be much higher than what many nonprofits submit, and in some cases, significantly higher than they are allowed to apply for in proposals for funding.

Indirect program costs—accounting for aspects of “overhead” like staff, supplies, or facilities—are typically 40% of a nonprofit’s overall annual budget. But, according to Stanford Social Innovation Review’s article Pay-What-It-Takes Philanthropy, grants often limit funding for indirect expenses to 15%, just over a third of what is necessary. Add to that the exhaustive reporting often required for grant funding and the increased competition for dwindling funding sources, and a picture of the gap between what grants will cover and what is needed becomes a stark vision of the future.

What’s next:

In times of crises like the ones we are living in, it is especially important to find ways we can help nonprofits serving people in need. Their work undergirds the health and well-being of communities throughout the country, and if they cannot keep their doors open, those communities will be the ones who suffer for it.

As a society, we often rely on nonprofits and social good organizations to address the complex issues facing our country. And as nonprofit supporters, we must step up to ensure the needs of these organizations are met. Pro bono service helps nonprofits regardless of their size, network, or funding history, and can be used to build capacity and address inequitable access to funding and resources. Pro bono is a useful (and for many organizations, essential) tool for meeting the needs of their programs and the needs of the people they serve.

In the coming months we will be expanding on this topic, diving into the research and exploring some examples of the effects of this nonprofit funding gap reach across all sectors. If this subject has touched your work, we would love to hear from you!