Unrestricted Funding (UF) has always been a crucial component of NGOs operations in Hong Kong. The city remains one of the most expensive in the world in terms of cost of living, and nonprofits survive by relying on increasingly competitive fundraising streams to meet their budgetary requirements. Such challenges are especially true for non-subvented NGOs, which cannot access government funding and are fully reliant on donations or grants from the private sector.
Foremost among hefty NGO expenses are office rent and salary for existing or new staff. These are not fully covered by Restricted Funding (RF), which normally limits admin/operations cost to 15-25% in grant proposal budgets and the rest of funding expected to be spent on project implementation. Building a substantial reserve for contingencies (such as budgetary deficits), ranging from a low of three months to an ideal of one year at average expense, is another critical imperative for seeking out unrestricted income.
Recommended Sources of UF
Generally, any donation that does not come with specific expense conditionalities fall under the category of UF and may be disposed of at the discretion of the recipient NGO. The bulk of such funds are usually sourced incrementally from a wide range of fundraising activities outside of grants (which require binding contracts and regular reporting). However, pressure from some Hong Kong NGOs for more unrestricted grants has been mounting in recent years, which include flexibility in the allocation of funds or full discretion on its allocation without prejudice to reporting obligations.
It is important that persuasive arguments for the unrestricted use of funds be worked into pitches for targeted audiences. Donors usually rely on inputs from NGOs on where the greatest needs lie, and a solid presentation on the wisdom of organizational synergy, allocation flexibility and governance integrity can swing their decision towards placing their donations in the UF bucket.
Here are a few suggestions on the systematic procurement of UF:
- HNWI Gifts: HNWIs often have philanthropic mindsets that run on thematic advocacies, some of which may an NGO’s mission. If their wealth is under trusteeship such as under HSBC, the bank trustees may require reports on how their gift has made an impact without getting into granular details on program or expense items. For instance, Rusy and Purviz Shroff Foundation in Hong Kong gives millions in grants that allow for flexible allocations as long as the overall objectives are preserved.
- Regular Individual Giving: While smaller and incremental in nature, developing this mode of donation can still add significantly to the UF pot. This becomes even more effective if a campaign is devised whereby an individual giver is matched to a specific beneficiary, providing a personal connection that motivates the giver to prolong or even increase the donations. A strategy to convert one-off givers to regular monthly ones must be carefully designed beforehand, as not everyone in this segment has the capacity to regularize even small donations.
- Gala Dinners/Events: This source of UF can provide a huge windfall income if done correctly, earning millions (in HKD) for just 4-5 hours of layered, intensive giving. Depending on scale and income target, a substantial amount of time, money and effort from staff and volunteers is required. Preparation time is 5-6 months on the average.
Given limitations in staffing, an NGO may have to start with small gala dinners that target around 50-60 potential/actual donors. Staffing shortage may be offset through mobilization of volunteers from within its network (MDWs, students, partners, donors, etc.). In the same manner, partnerships can also help defray the cost of Gala preparations, which may have to be paid for from reserve funds. The four- to five-fold net income will definitely be worth the initial investment.
- CSR Volunteering: Corporates have programs that allow their staff to volunteer to their NGOs of choice, many of which include monetary donations of an unrestricted nature. Enrich can tap into this pool by seeking out companies whose CSR programs have good mission alignment, notably in the banking and finance sector.
- Crowdfunding: Nowadays, this is mostly done online and through such platforms as Give2Asia, Simply Giving, and SparkRaise, which usually take 2% of the amount raised. But other methods involve face-to-face interaction with potential donors, such as Flag Day and setting up booths on the street and inside malls, both of which involve permits or partnerships. Due to increasing competition among NGOs, the returns from such fundraising activities can be underwhelming, and the cost effectiveness of deploying scarce resources for marginal income has discouraged many nonprofits from utilizing this source.
- Grants: There have been calls in recent years from among HK NGOs to allow UF in grants, such as from Voice for Social Good (VSG), an informal campaign group of women NGO leaders. On the other hand, their relevant campaign “Bake the Difference” needs to be invigorated and developed to raise awareness on the practicality and justness of full-cost, multi-year UF.
As things stand, there is a growing segment of grantmakers that are already in this track, among which are Manan Trust, Ford Foundation, Skoll Foundation, MacArthur Foundation, Mackenzie Scott (Yield Giving), Satterberg Foundation and Givewell. In Hong Kong, Manan Trust and WYNG Foundation provide flexible to fully unrestricted grants. The former allows for full, unrestricted funding, while the latter allows budget reallocation of expense items even in middle of project implementation if given advance notice and justifiable reasons.
Conclusion
Most non-subvented NGOs in Hong Kong seek UF through various means of fundraising, but the largest sources are still outside of grants. Developing regular individual giving, HNWI major gifts, gala dinners/events, CSR volunteering and even crowdfunding can help fill the UF pot and provide NGOs with more flexibility and control over operations, programs and strategic planning.
For any nonprofit, the best methods for amassing UF would depend on overall organizational capacity. This could start with the simplest ones and move on to the more complex (but also more lucrative) ones as capacity develops through the judicious use of UF raised. Under-resourced organizations should look at any fundraising project mainly through the twin prisms of ROI and cost effectiveness, without necessarily overlooking its public awareness and marketing/communications benefits.