What it looks like
Imagine a grant for one project, for one year, with a budget the charity can’t change. Halfway through, the charity learns a different approach would work better, but it can’t switch. Its accounting system breaks, and there is no money to fix it, because the grant does not cover accounting systems.
Why it happens
Restrictions feel like accountability: the funder can see exactly what its money bought. Many restrictions can make planning, adaptation and shared costs harder to fund. Some restricted grants retain flexibility, so the terms matter. Attitudes are shifting faster than practice. In a 2020 study by the Center for Effective Philanthropy, about 58 percent of foundation CEOs said they provide some multi-year general operating support, but only 11 percent of those gave it to more than half their grantees.
Restriction also feeds the Symptom Trap. A short, fixed grant is easiest to justify for work with quick, countable outputs, and sources rarely produce those.
No one is to blame
Funders restrict gifts because they want to be responsible stewards. Whether a restriction helps depends on the purpose, the terms and the evidence.
What we don’t know yet
When does a restriction help, and when does it harm? That is Open Problem 8, the Optimal Restriction.
Funders who trust an organization’s judgment give flexible, multi-year support and hold it accountable for results rather than line items.