Unrestricted Money Is the Hardest Money to Spend Well

In 2022, Student Veterans of America received an $8 million unrestricted gift from MacKenzie Scott. No application. No reporting requirements. No restricted purpose. The check arrived — and then the real work began.

Most people hear that story and assume the hard part was justifying the gift, or managing the attention, or figuring out the press release. None of those were hard. The hard part was deciding what not to do with $8 million when you could, in principle, do almost anything.

Why Unrestricted Money Is the Hardest Kind

The nonprofit sector has a persistent and largely unexamined assumption that unrestricted money is the best money. Program officers at foundations will tell you privately that their grantees beg for operating support. Leaders will tell you that restricted grants tie their hands. Unrestricted funding, the conventional wisdom goes, gives organizations the flexibility to do their best work.

That’s true in the same way that a blank canvas gives a painter maximum freedom. Maximum freedom is not always what produces the best work. Constraints often do.

Restricted funding comes with a built-in decision structure. You received $500,000 to expand peer support programming in the southeast. The question isn’t whether to do it; it’s how. That focus, even when it chafes, enforces a discipline that unrestricted money does not. When the money is unrestricted, every decision is a first-principles decision. You have to decide what matters before you can decide how to spend. And in an organization where everyone has a perspective on what matters, that process can consume enormous time and internal capital if you don’t approach it with rigor from the start.

The organizations that waste unrestricted gifts don’t waste them on bad ideas. They waste them on too many good ones.

Resist the Pressure to Move Fast

The pressure at the moment of receipt is almost universally in the wrong direction. When a large unrestricted gift becomes public (and they almost always do), the phone starts ringing. Program staff have ideas. Partner organizations have asks. Board members forward articles about what peer organizations are doing. Funders who never found SVA compelling suddenly find us compelling. The natural institutional response to all of that attention is to act: to announce initiatives, to expand programs, to demonstrate that the organization is putting the gift to use.

That pressure is worth resisting, at least for the first several months.

What we did instead was slow down. The first significant deployment of the gift wasn’t a program expansion or a hiring sprint. It was an engagement with The Bridgespan Group to facilitate a five-year strategic plan. Using a portion of unrestricted money to figure out how to deploy the rest of the unrestricted money was its own form of discipline, and it was deliberate. Before we committed to where the capital would go, we wanted a structured, outside-facilitated assessment of where the organization actually was, not where the team hoped it was, and not where the most articulate program lead could make a case for it being.

The strategic plan came first. The capital deployment plan flowed from it, not the other way around. That sequencing mattered. The work surfaced, in writing, the systems that were limiting our effectiveness that we had been underfunding because we couldn’t make the case for them in a restricted grant; the staff roles we were asking people to hold that were too large for one person because we’d never had the budget to split them; the technology the organization was running on that it had outgrown two years earlier. The gift gave us the chance to repair what had been quietly deteriorating, but only after we had named honestly what was deteriorating, and only inside a plan that said where the rest of the capital was going and why.

Some of that work is unglamorous to describe to a donor. It doesn’t make a good impact report. Infrastructure often doesn’t. But infrastructure is what determines whether the programs actually work.

Operating Budget Versus Balance Sheet

The distinction that runs most decisions about unrestricted capital is the difference between operating budget growth and balance sheet strength. They are not the same thing. Organizations routinely treat them as if they are.

Operating budget growth means adding staff, adding programs, adding activity. It shows up immediately in deliverables and impact metrics. It is easy to announce and easy to evaluate in the short term. It is also, in most cases, an increase in fixed costs — costs that recur whether or not the next year’s funding arrives at the same level. If the gift that funded that expansion is a one-time event, the organization has traded a balance sheet asset for a recurring obligation.

Balance sheet strength means reserves, endowment, and capital investment in owned systems. It is slower to build and harder to explain to audiences conditioned to measure nonprofit effectiveness by program outputs rather than organizational health. But it is the thing that determines whether the organization can operate effectively when funding is uneven, as funding in the nonprofit sector almost always is.

At SVA, the $8 million gift funded both. A significant portion went into programs and expanded staff capacity that the organization genuinely needed. But a portion went to reserves, and that discipline was a board-level decision, not a staff one. The board had to hold the line against the entirely reasonable impulse to spend the full amount on mission. Its job was to think across leadership generations, not just the current fiscal year.

That reserve held value through my departure in January 2026. The incoming CEO arrived at an organization with $7 million in net assets and zero debt. The gift didn’t just fund programs. It funded the organization’s ability to survive the transition and pursue its mission with a new leader.

What Has to Be True First

The broader lesson for nonprofit leaders is about sequencing. What needs to be true before you can deploy capital effectively? The answer to that question is almost always: more than you think.

You need the management team capacity to execute without creating dependency on the gift. You need the financial systems to track deployment accurately. You need the governance clarity to make decisions fast without creating confusion about who is deciding. You need the strategic focus to say no to good ideas that fall outside the current priority. Most organizations are not fully equipped on all four dimensions when the gift arrives. The ones that take time to get there first spend the money better.

There is also a humility required that runs against the grain of how nonprofit leaders are trained to talk about their work. Unrestricted capital does not solve strategic problems. It amplifies whatever the organization already is. If the programs are working, unrestricted capital makes them work better. If the management capacity is thin, unrestricted capital will spread thin management capacity across more activity. The gift is a test of what’s already there, not an escape from having to build it.

An Organization That Deserves It

The $8 million from MacKenzie Scott was transformational for SVA. But it was transformational because of decisions made in the years before it arrived: the infrastructure built, the team hired, the balance sheet managed with enough discipline that the organization could absorb the gift without being destabilized by it.

The gift we received in 2022 didn’t come with instructions. It came with trust. Getting it right meant earning that trust backward, having already built an organization capable of using the money well.

That’s what unrestricted capital actually demands. Not a strategy for spending it. An organization that deserves it.