Does trust-based philanthropy reduce accountability?
Mar 19, 2025
Trust-based philanthropy continues to gain popularity. However, donors may misunderstand the concept as advocating for blind trust with little to no accountability for nonprofits. This arouses concern for donors looking to make the greatest possible impact in partnership with their favorite charities.
One of the primary hesitations donors have around trust-based philanthropy is the question of unrestricted granting—an important part of this charitable giving approach.
It’s time to demystify the values of trust-based philanthropy and consider how this charitable giving approach fosters, rather than reduces, accountability, providing the transparency so many donors are looking for.
Evaluating unrestricted granting
Whereas a restricted grant is given for a specific purpose, unrestricted funds can be used however the nonprofit deems fit.
For donors who prefer to give restricted grants, their hesitation toward unrestricted giving is understandable. They work hard to establish an impactful philanthropic legacy and are invested—emotionally and financially—in where the charitable dollars go. However, there are important considerations to keep in mind when evaluating this increasingly popular philanthropic approach:
| Donor Hesitation | Considerations |
Salaries
“I don’t want my charitable dollars to go toward employees or positions in the nonprofit’s operating budget.” | While billions of dollars are granted to nonprofits each year, very little of those funds goes to the talent within the charities. However, supporting the people “on the ground” usually has one of the greatest long-term returns for grant dollars and allows for developments that strengthen the financial independence of an organization. For example, a key IT position can create systems driving large efficiencies for an organization.
These questions can help you assess the nonprofit’s strengths in identifying talent gaps, filling them, and maximizing them; thereby ensuring that your charitable dollars to support talent will be effectively used.
1. What are the average tenures and key successes of other vital personnel in the organization? 2. What is your hiring process, and what are the skills and capabilities you are looking for? 3. What is your performance management process, and what resources exist inside the organization to support performance management? 4. What are the goals that you have for your key positions, and how do you hold your team members accountable to those goals? |
Existing Deficits
“I don’t want my charitable dollars filling a budget deficit. I prefer funding new projects.”
| Rather than jumping to a new project to avoid a nonprofit’s budget deficit, ask these questions to evaluate the deficit's cause, the steps taken to reduce it, and how future funds will support new initiatives. You can ask the CEO, CFO, or Board members for their insights.
1. What events have occurred in the organization’s lifecycle that has created the deficit? 2. What steps has the organization taken to reduce the deficit? 3. What programs or initiatives are not occurring because the organization is currently rallying around the need to close the budget gap? 4. If a deficit is filled in a specific year, what are the steps to ensure the following years have positive net cash flow? 5. If a deficit could be filled, how might your future dollars be used to drive forward new projects and initiatives? |
Overhead “I don’t want my charitable dollars supporting the organization’s general operations as their overhead is too high.” | The purpose of overhead in an active charitable organization is vigorously debated. Misinformation buries the importance of its vital role. Unfortunately, this stops critical funding from getting to nonprofits. Overhead refers to the amount of a nonprofit’s budget that is dedicated to overhead costs (i.e., rent and facilities, salaries, software licensing) compared to the amount dedicated to the organization’s mission-specific spending on direct services or programming. These costs are broken down in the organization’s 990 for donors to evaluate. Just like any business, nonprofits need talented and engaged employees, strong technology, and an infrastructure to support its operations. Gifting charitable dollars to help meet these needs allows organizations to allocate time toward its mission, and, therefore, is a powerful place for donors to support. These questions should give you a holistic understanding of an organization’s operational needs.
1. How has the organization’s investment in talent enabled the organization to spend more toward its mission-related spending over time? 2. How has the organization’s investment in technology created efficiencies allowing the organization to allocate its talent to its most critical, mission-oriented functions? 3. What external factors have led to a spending increase in areas like rent, building needs, and other facilities? How have these external factors limited how the organization can spend time in the areas they deem most valuable? |
The true impact of trust-based philanthropy
A lack of familiarity with trust-based philanthropy has led to the impression that this giving approach is un-strategic, under-supervised, and less likely to produce results. However, philanthropy is more impactful when it’s collaborative and when accountability is shared.
For instance, when donors take on the responsibility of learning more about a nonprofit and what is needed to make an impact, they are better equipped to efficiently provide support. This cuts out the time and resources necessary for the nonprofit to communicate needs to donors and grapple with the constrictions of restricted grants.
As communication and trust increase, nonprofits gain the flexibility necessary to adapt to numerous priorities and emergent needs. This bolsters the impact of the nonprofit while holding leaders accountable to the goals they communicated to donors.
So, does trust-based philanthropy reduce accountability? No—it encourages accountability. When there is shared responsibility and interest in the success of a grant, everyone wins. Donors feel a deeper connection to their philanthropy, nonprofit leaders are empowered to deploy funding where they best see fit based on their expertise, and communities benefit from the increased impact.
Trust is the foundation of all good partnerships
If you’re considering taking a trust-based approach to your philanthropy, take the time to truly get to know an organization and its goals. Focus on the people driving initiatives and the progress made, rather than just data-driven metrics. Trust that you, the organization, and the communities served will each bring unique experiences and insights to collaborate on powerful, mission-driven strategies.
You can learn more about this charitable giving approach in our complete guide to trust-based philanthropy.
