Section 2. Strategies for Sustaining the Initiative

Finding and maintaining the resources needed to carry out community work can be challenging. Financial sustainability helps an organization or initiative maintain the staffing, services, partnerships, infrastructure, and other resources needed to produce meaningful community benefit over time.

Financial sustainability should be considered early, as the initiative is being designed, and revisited as the organization, community, funding environment, and work change.

Financial sustainability does not mean preserving every program indefinitely or pursuing every available source of revenue. The goal is to build a resource strategy that is aligned with mission, responsive to community priorities, financially realistic, and resilient enough to support the parts of the work that remain valuable.

Strategies for financial sustainability

Organizations usually rely on a combination of strategies rather than one source of support. The appropriate mix depends on the mission, legal structure, programs, community, staffing, funding restrictions, and financial risks involved.

Communicating value and building relationships

Strong relationships can support fundraising, partnerships, participation, referrals, advocacy, volunteer engagement, and community trust.

Communication should help people understand:

• What the organization does
• Why the work matters
• Who is involved and affected
• What results or learning have emerged
• How resources are used
• How people can participate, partner, donate, or obtain services

Every interaction can affect trust and organizational reputation. This includes how people are treated when they call, email, visit a program, apply for services, make a donation, volunteer, attend an event, or raise a concern.

Effective communication is not simply "image-building." It should be accurate, accessible, transparent, and consistent with the actual quality and values of the organization.

Relationship-building may include:

• Community engagement
• Donor and funder relationships
• Membership development
• Partnership development
• Public education
• Advocacy and public-policy engagement consistent with applicable law
• Communication with people who participate in or are affected by the organization's work

Sharing positions, services, and resources

Collaboration can reduce duplication, increase access to expertise, and allow organizations to use resources more efficiently.

Organizations may share:

• Office or program space
• Equipment
• Technology
• Administrative services
• Professional services
• Training
• Purchasing arrangements
• Staff positions
• Grant development or evaluation capacity

Before entering a shared arrangement, clarify:

• Purpose and expected benefits
• Responsibilities
• Supervision
• Cost allocation
• Insurance and liability
• Data privacy and confidentiality
• Ownership of equipment or intellectual property
• Decision-making authority
• Procedures for ending the arrangement

Use written agreements when the complexity, risk, or value of the shared resources makes them appropriate.

Becoming part of an existing institutional budget

One way to sustain effective work is to incorporate its costs into the recurring budget of an organization or institution that has an ongoing responsibility for the activity.

For example:

• A school district might incorporate an effective mentoring or student-support program into its regular budget.
• A health system might assume ongoing costs for a community health worker program that improves access and outcomes.
• A local government might include a successful community service in its annual operating or capital budget.
• A community or faith-based organization might incorporate a partnership activity into its regular operations.

Institutionalization can provide more stability than repeatedly seeking short-term grants, although no budget allocation should be assumed to be permanent.

Clarify what costs the host organization will assume, what outcomes it expects, who will oversee the work, and how the activity will continue to be evaluated.

Integrating activities or services into another organization

A project does not always need to become a permanent independent organization.

Sometimes the strongest sustainability strategy is to transfer or integrate an effective activity into an organization that already has the mission, staff, infrastructure, relationships, and long-term capacity to maintain it.

Whenever possible, involve the future host organization early in planning.

Discuss:

• Whether the activity fits its mission
• Evidence that the activity is useful
• Full operating costs
• Staffing
• Data and record transfer
• Participant relationships
• Funding
• Quality standards
• Community involvement
• Ownership of materials and intellectual property

Examples might include transferring an after-school activity to a youth-serving organization, incorporating a substance use prevention program into a school or health system, or transitioning a housing-stability service to an organization with established housing expertise.

Applying for grants

Grants can support new initiatives, expansion, evaluation, capacity-building, equipment, staffing, or other work.

Potential grant sources may include:

• Federal, state, tribal, territorial, or local government agencies
• Private foundations
• Community foundations
• Corporate foundations or giving programs
• Other nonprofit or philanthropic organizations

Grant funding is not automatically sustainable funding. Grants may be temporary, restricted, reimbursement-based, highly competitive, or administratively demanding.

Before applying, consider:

• Mission alignment
• Allowable costs
• Whether indirect and administrative costs are adequately covered
• Reporting requirements
• Payment timing
• Staffing required to manage the award
• Whether matching funds are required
• What happens when the award ends

Avoid pursuing grants simply because funding is available. Funding that pulls an organization away from its mission or creates obligations it cannot sustain may weaken rather than strengthen financial sustainability.

Using shared staffing, volunteers, interns, and other personnel resources

Personnel arrangements can expand capacity, but each should be used for an appropriate purpose.

Possibilities may include:

• Shared staff positions
• Volunteers
• Internships
• College work-study positions
• Fellowship or service programs
• Temporary staff assignments from partner organizations
• Donated professional services

Clarify supervision, training, confidentiality, insurance, accessibility, responsibilities, employment classification, and applicable wage and labor requirements.

Volunteers and interns can contribute meaningful expertise and community participation, but they should not automatically be treated as a substitute for paid staff. Essential work that requires consistent professional capacity should be included realistically in the organization's staffing and financial plan.

Soliciting in-kind support

In-kind support includes donated goods, equipment, facilities, or qualifying services that the organization would otherwise need to purchase.

Examples may include:

• Donated meeting space
• Equipment
• Food or supplies
• Printing
• Technology
• Professional services
• Transportation

Evaluate in-kind contributions based on usefulness, quality, ongoing maintenance costs, storage needs, restrictions, and whether accepting the contribution actually reduces expenses.

Organizations should also maintain appropriate documentation and accounting for donated goods and services when required. Donors should receive accurate information about tax treatment rather than assuming that all donated time, goods, or services create the same charitable deduction.

Developing individual giving and recurring-donation programs

Individual giving can provide flexible support and may reduce dependence on institutional funders.

Strategies may include:

• One-time donations
• Monthly or recurring giving
• Major gifts
• Peer-to-peer fundraising
• Digital giving
• Donor campaigns tied to specific organizational priorities

Sustainable individual giving depends on trust, communication, responsible stewardship, appropriate donor acknowledgment, and relationships rather than repeated emergency appeals alone.

Developing fundraising activities and campaigns

Fundraising may involve events, campaigns, merchandise, benefit activities, peer-to-peer outreach, crowdfunding, or other methods.

Evaluate fundraising based on net revenue, not simply gross receipts.

Consider:

• Staff and volunteer time
• Event and platform expenses
• Donor acquisition and retention
• Accessibility
• Insurance and risk
• Tax and disclosure requirements
• Whether participants receive goods or services in return
• Whether the activity strengthens or distracts from the mission

Fundraisers can also build relationships and community awareness, but those benefits should not be used to justify activities that consistently consume more organizational capacity than they produce.

Pursuing reimbursement, contracts, sponsorships, and other third-party funding

In some situations, the person receiving a service is not the organization or entity paying for it.

Funding may come through:

• Government service contracts
• Insurance or health-plan reimbursement
• Schools or educational systems
• Employers
• Businesses
• Managed-care organizations
• Other institutions purchasing or supporting services

Before relying on this revenue, understand eligibility, billing requirements, reimbursement rates, documentation, payment timing, contractual obligations, privacy requirements, and administrative costs.

A funding arrangement should support rather than distort the quality and mission of the service.

Developing fee-for-service and other earned-revenue activities

An organization may charge for services, training, products, memberships, consulting, facility use, or other activities.

Earned revenue can provide flexible resources, but fees can also create access barriers.

Depending on the mission and service, organizations may use:

• Sliding-scale fees
• Scholarships
• Fee waivers
• Third-party reimbursement
• Different pricing for individuals and institutions
• Cross-subsidization, in which revenue from one activity supports another

Establish transparent policies and consider the effect of fees on equity and participation.

Tax-exempt organizations should also determine whether a revenue-generating activity furthers their exempt purpose. Regularly carrying on a trade or business that is not substantially related to the organization's exempt purpose may create unrelated business income tax and reporting obligations.

Acquiring public funding

Public funding may come from federal, state, tribal, territorial, or local governments.

Depending on the program, funding may take the form of:

• Appropriations
• Grants
• Contracts
• Cooperative agreements
• Reimbursement
• Public insurance payments
• Recurring agency or departmental budget allocations

Public funding can provide significant support but may also be affected by annual appropriations, political priorities, procurement rules, reporting requirements, reimbursement delays, or policy changes.

Organizations may educate policymakers and advocate for public investment in accordance with the rules applicable to their tax status and funding.

Building reserves and financial resilience

Financial sustainability is not only about bringing in new revenue. Organizations also need enough liquidity and reserves to manage delayed funding, unexpected expenses, economic changes, or temporary revenue declines.

A reserve strategy may address:

• The purpose of reserves
• Target reserve levels
• Who may authorize use of reserves
• How reserves will be replenished
• Where funds will be held or invested

Reserve goals should reflect the organization's actual revenue volatility, obligations, risk, and operating model rather than one universal rule.

Establishing endowments

An endowment is a fund established to provide financial support over an extended period.

Endowments may include donor-restricted permanent or term endowments and board-designated funds that function like endowments.

The amount that may be spent and the purposes for which funds may be used depend on donor restrictions, governing documents, board policy, applicable accounting standards, investment policy, and state law.

Do not assume that every endowment simply requires preserving the original principal and spending only interest.

Endowments can provide long-term support but also require:

• Investment governance
• Spending policies
• Accounting and reporting
• Donor-restriction tracking
• Fees and professional management
• Long-term stewardship

Organizations should determine whether building an endowment is appropriate before restricting resources that may be needed for current operations or reserves.

Developing planned-giving opportunities

Planned giving refers to charitable gifts structured as part of a donor's financial, estate, or legacy planning.

Arrangements may include:

• Bequests
• Beneficiary designations
• Charitable gift annuities
• Charitable remainder or lead trusts
• Gifts of securities or other property
• Other arrangements permitted under applicable law

Planned gifts can involve significant tax, legal, investment, disclosure, registration, and administrative considerations. Organizations should use qualified legal, tax, accounting, and gift-planning expertise as appropriate.

Establishing membership dues or fees

Membership dues can provide recurring revenue for organizations whose structure and mission include membership.

Potential advantages include:

• Predictable recurring revenue when membership is stable
• A direct financial relationship between members and the organization
• Support for member benefits, activities, or shared infrastructure

Potential concerns include:

• Dues may create participation barriers
• Revenue may be modest relative to administrative effort
• Members may receive benefits that affect the tax treatment of their payment
• Mandatory payment may conflict with an organization's accessibility or inclusion goals

Sliding scales, organizational rates, hardship waivers, or voluntary supporting memberships may be appropriate.

Describe payments accurately. Do not relabel required dues as "donations" simply to avoid acknowledging that payment is a condition of membership or that members receive benefits in return.

Developing mission-aligned earned-income or social-enterprise activities

Some nonprofits generate revenue through commercial or business-like activities.

Examples may include:

• Training
• Consulting
• Publications
• Products
• Facility rental
• Employment or social-enterprise programs
• Other mission-aligned services

A business plan can help assess:

• Mission fit
• Demand
• Pricing
• Startup and operating costs
• Staffing
• Cash flow
• Competition
• Risk
• Expected net revenue
• Tax and legal implications

Revenue-generating activity conducted directly by a tax-exempt organization may create unrelated business income tax when it is regularly carried on and not substantially related to the organization's exempt purpose.

Some organizations establish a separate taxable subsidiary for particular commercial activities. A subsidiary should not be created merely as a way to "avoid" nonprofit regulation. The legal, tax, governance, liability, capitalization, staffing, and financial relationships between the entities require careful planning and professional advice.

Choosing among strategies

No single financial sustainability strategy is right for every organization, and combining revenue sources can reduce dependence on one funder or funding type.

Diversification, however, should not be pursued for its own sake. Every revenue source has benefits, costs, restrictions, risks, and administrative requirements.

Decide who will participate in the decision

Depending on the organization, financial sustainability planning may involve:

• Board members
• Executive and financial leadership
• Program staff
• Fundraising or development staff
• Community partners
• Participants or community advisors
• Qualified financial, legal, tax, or fundraising advisors

Shared decision-making can help prevent financial strategy from becoming disconnected from programs, community priorities, or organizational capacity.

Begin with mission and sustainability goals

Review the organization's mission, strategic priorities, current financial position, and what programs or benefits it intends to sustain.

Revenue should support the mission rather than become the mission.

Assess the full cost of the work

Before selecting revenue strategies, understand what the organization actually needs to fund.

Include:

• Salaries and employee benefits
• Facilities
• Technology
• Insurance
• Administration
• Evaluation
• Fundraising
• Communications
• Accessibility and language access
• Training
• Equipment replacement
• Participant supports
• Reserve contributions

Funding strategies that cover only visible program expenses while leaving essential administrative and infrastructure costs unfunded may not be sustainable.

Evaluate each potential strategy

Consider:

• Mission fit: Does the funding support or distort organizational priorities?
• Flexibility: Is the revenue unrestricted, restricted, reimbursement-based, or otherwise limited?
• Predictability: How stable is the source from year to year?
• Net financial benefit: What remains after staffing, compliance, fundraising, service-delivery, and administrative costs?
• Cash flow: When does money become available relative to expenses?
• Capacity: Does the organization have enough staff and systems to manage the source responsibly?
• Equity and access: Would the strategy make services or participation less accessible?
• Legal and tax implications: What registrations, contracts, tax rules, disclosures, or other requirements apply?
• Risk: What happens if the source ends or changes?
• Community impact: How does the strategy affect relationships, trust, and the people connected to the work?

Examine revenue concentration

An organization that depends heavily on one grant, contract, donor, customer, or public funding stream may face significant risk if that source changes.

Consider whether additional revenue sources, reserves, multiyear commitments, partnerships, or other strategies could reduce that concentration.

At the same time, adding many small funding sources can create substantial administrative burden. Diversification should improve resilience, not simply create more work.

Gather input

Talk with people who understand different parts of the organization, including staff, board members, funders, donors, partners, participants, and community members when appropriate.

Ask not only where money might come from but also how proposed revenue strategies could affect programs, accessibility, staffing, community relationships, and mission.

Select a balanced resource strategy

A sustainable strategy might combine:

• Grants or contracts
• Individual giving
• Earned income
• Public funding
• Membership revenue
• Partnerships
• In-kind support
• Reserves
• Planned giving or endowment resources

The right mix depends on the organization. A strategy that is highly effective for one organization may be inappropriate for another.

Build on strengths without becoming dependent on them

Organizations should learn from strategies that have worked well, but they should also examine concentration risk.

A strong grant-writing team may make grants an important part of the strategy, for example, but applying for every available grant can consume substantial staff time and create mission drift.

Strong relationships with public officials may support public funding, but annual appropriations can change.

Use organizational strengths while building enough flexibility to respond when circumstances change.

Monitor and revise the strategy

Financial sustainability planning should be ongoing.

Monitor:

• Revenue by source
• Restrictions
• Net revenue
• Fundraising costs
• Cash flow
• Reserves
• Revenue concentration
• Grant and contract renewal risk
• Earned-income performance
• Staffing capacity
• Administrative burden
• Equity and accessibility effects

Revise the resource strategy when community needs, programs, costs, laws, funding conditions, or organizational priorities change.

In Summary

Financial sustainability is the ability to maintain the resources and financial capacity necessary to carry out valuable work over time. It should be planned for early and reviewed throughout the life of an initiative.

Organizations may use grants, public funding, individual giving, fundraising activities, earned revenue, fees for services, membership dues, shared resources, partnerships, in-kind support, reimbursement, reserves, endowments, planned giving, or other strategies.

No source is automatically sustainable. Each has different levels of flexibility, predictability, administrative burden, legal and tax requirements, access implications, and risk.

A strong financial strategy begins with mission and the full cost of the work. It considers net revenue rather than gross revenue, avoids relying on chronic unpaid labor, protects accessibility and equity, and ensures that new funding does not create obligations the organization cannot sustain.

Diversification can reduce dependence on a single source, but more revenue streams are not always better. Organizations should develop a balanced mix they have the capacity to manage, maintain appropriate reserves, monitor concentration and cash-flow risk, and update the strategy as circumstances change.

Ultimately, financial sustainability is not about raising money for its own sake. It is about creating a reliable resource base that allows the organization and its partners to sustain meaningful community benefits for as long as those benefits remain needed.