An ideal nonprofit funding model is grounded on a collaborative philanthropic framework between funders and nonprofits. This type of collaboration allows nonprofits to thrive by allowing them to build the needed capacity to carry out their work effectively and ethically. This partnership approach between funders and nonprofits also allows funders to make sure their dollars are being used impactfully in accountable organizations. 

In a study we conducted, we found that more collaboration, coordination, and communication with funders around funding formulas, operationalizing programs, measurement outcomes, and reporting is needed for organizations to work more meaningfully. 

In addition, our findings indicated that diversified funding, multiple-year contracts, flexible funding that adapts to changing circumstances, and unrestricted funds that allow organizations to adequately cover all costs result in more impactful organizations.

12 Key Components in A Philanthropic Collaboration Framework

Our study found the following 12 key philanthropic components nonprofits deemed as critical by nonprofits in creating robust and supportive funding systems while balancing accountability and support.

1. Multiple-year grants that afford organizations the ability to work without having to worry about fundraising allow for greater organizational stability and program continuity. 
2. Funding should be continued for existing programs instead of being defunded because they are not new initiatives if they are still needed in communities. 
3. Funding should be available to fully-fund operating costs to ensure optimal services and prevent cash-flow issues for organizations that can be destabilizing. 
4. Funders should manage funded projects with flexibility, rather than rigid micromanaging, which can hamper service delivery. 
5. Sufficient flexibility should be afforded to nonprofits during the program implementation phase so as to allow service delivery to adapt to changing circumstances.
6. Outcome measurements should be driven by the expertise of the organization.  
7. Impact expectations should be more realistic given the amount of funding organizations receive and the complexity of the complex social issues nonprofits are tackling. 
8. Nonprofits should be allowed to engage in better planning through research or pilot program grants that allow nonprofits to experiment with new techniques and approaches that will ultimately result in more impactful and sustainable programs.
9. Funders would benefit from getting input from nonprofit professionals on their funding parameters to ensure a better design of funding parameters.
10. Grant funding should cover all start-up, administrative, and programmatic expenses.  
11. Nonprofits should not be asked for matching funds because they drain the little resources they have.
12. Best practices identified by funders should be shared with nonprofits through webinars and events. 

Conclusion

There are many emerging theories about nonprofit philanthropy. Our findings suggest that currently there are several nonprofit funding models that aim to guard against financial mismanagement and corruption that are counterproductive. Many of the misguided accountability measures that are being currently employed negatively impact nonprofits by underfunding organizational administrative costs and the systems that are essential to achieve impact. Nonprofits can focus better on their missions when funders shift towards a philanthropic collaboration framework that allows organizations to focus on the mission, rather than devoting so much time to ensuring liquidity and sustainability.

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