Matching funds
Matching funds are funds that are set to be paid in proportion to funds available from other sources. Matching fund payments usually arise in situations of charity or public good. The terms cost sharing, in-kind, and matching can be used interchangeably but refer to different types of donations.
Charitable donations
Concept
In philanthropic giving, foundations and corporations often give money to non-profit entities in the form of a matching gift. Corporate matches often take the form of employee matching gifts, which means that if an employee donates to a nonprofit, the employee's corporation will donate money to the same nonprofit according to a predetermined match ratio. For foundations, matching gifts are in the form of grants made directly to nonprofits if that the nonprofit raises a set quantity of money before the grant is bestowed.The benefit of foundation matching grants is that they provide greater incentive leverage when a nonprofit is fundraising from its constituency. If a foundation approves a 1:1 matching grant, donors know that their dollars will be doubled. On the other side, foundations who give matching grants receive assurance of the nonprofit's capacity to raise adequate funds.
Some companies facilitate the process, allowing employers to match the gifts of their employees. A matching gift, typically a one-time charitable gift made by an employee and matched by the employer, should not be confused with an employer matching program, which has to do with the employee's 401 plan and retirement.
History
Dr. Booker T. Washington, a famous African-American educator, had a long-time friendship with millionaire industrialist Henry H. Rogers, who provided him with substantial amounts of money to be applied for the betterment and education of black Americans in the late 19th and early 20th centuries.Washington later wrote that Rogers had encouraged projects with at least partial matching funds'' so that two ends were accomplished:
- The gifts would help fund even greater work.
- Recipients would have a stake in knowing that they were helping themselves by their own hard work and sacrifice.
In 1954, the General Electrics Foundation created the Corporate Alumni Program to match donations to the colleges and universities that employees graduated from. This eventually broadened to other charities. The foundation is one of the most generous, with a $25,000 match per employee or retiree.
Countries
United States
In 2014, corporations donated $17.8 billion to nonprofit organizations. This was a 13.7% increase over 2013 corporate giving levels. In 2010, matching gifts represented about 20% of corporate cash donations. In 2016, over 65% of Fortune 500 companies offered an employee matching gift program.United Kingdom
In the UK, the not-for-profit organisation, the Big Give, have used match funding to raise over £97m for thousands of different charitable projects. The match funding is provided by a network of philanthropists and funders, called 'Champions'. Research commissioned by the Big Give shows that more people give when donations are matched and people give more.Government projects
In the United States, many projects in the various states and communities are partially funded with federal grants with a requirement for matching funds. For example, the Interstate Highway System was primarily built with a mix of 90% FHWA funds from the Highway Trust Fund and 10% matching state DOT funds. In some cases, borrowed money may be used to meet criteria for a matching grant; the $550 million Canadian federal government investment to connect a Detroit River International Crossing to Interstate 75 in Michigan qualified the state for US$2 billion in US federal matching grants that coul rebuild other Michigan highways even though the Canadian money was nominally a loan, to be repaid by tolls on the new bridge.Government grants
US federal matching grants have also funded historic preservation initiatives; a local historic property may be able to seek a 1:1 federal matching grant for specific capital projects, such as restoration of structures on the National Register of Historic Places.Political contributions
Federal funds for presidential candidates (US)
In American politics, the term refers to the money a presidential candidate is given by federal government to match the money they have raised personally. Candidates can expect up to US$250 extra from public funds for each contribution from an individual they receive.That usually applies to the two main parties; as in order for a candidate to gain the benefits of matching funds, they must raise $5,000 from 20 states during the primaries or have received 5% of the popular vote in the general election. Pat Buchanan, running as the Reform Party candidate in 2000, received matching funds despite winning only 0.4% of the vote.
The source of the funds comes from a $3 voluntary checkoff on the US Income tax form. The program was established by the 1971 Federal Election Campaign Act. The law also "established overall spending limits for eligibility to receive matching funds, and provided for public funding of major party candidates in the general election for president".
The effect that these have on the candidates for presidential campaigns is to strengthen the role that the party plays in raising money.
Former New Mexico Governor Gary Johnson, the Libertarian Party candidate for president, qualified for federal matching funds in the 2012 US presidential election.
State funds for state and local candidates (US)
Prior to a 2011 Supreme Court decision, states like Arizona, Maine, New Mexico, North Carolina, and Wisconsin were using a system that distributed "additional funding to publicly financed candidates when they face big-spending opponents or opposition groups". The combined cases, Arizona Free Enterprise Fund v. Bennett and McComish v. Bennett, held that "the law impermissibly forces private candidates and independent political organizations to either restrain their spending or risk triggering matching funds to their publicly financed opponents".An alternative is a program like New York City's public financing model: public funds are used to multiply the impact of small donors. The program is administered by the New York City Campaign Finance Board, which has avoided partisan divisions. The programs work by making each contribution worth more than their current value, thereby increasing the proportional impact of the contribution. In New York City, for example, a $6-to-$1 program has resulted in "small dollar donors constitute the vast majority of spending in New York City elections, representing 73% of all contributions in 2013 and 80% specifically to City Council race". A report by the Brennan Center found that "by pumping up the value of small contributions, the New York City system gives an incentive to reach out to their own constituents rather than focusing all their attention on wealthy out-of-district donors, leading them to attract more diverse donors into the political process".
Programs of this type incentivize candidates to "fuse fundraising with voter outreach" and incentivize political engagement by communities that can afford only modest contributions. Candidates may then have more an incentive to reach out to their constituents rather than devoting their energy to financing their campaigns. The Election Law Journal found that matching funds through a multiplier has increased the proportional role of small donors as well as the number of small donors. The programs have also helped to shift the demographic and class profile of those who give. Finally, besides diluting the power of major givers, these programs led candidates to reach out and engage a more representative set of constituents during fundraising.
There is some dispute regarding the impact of matching funds programs like the one implemented in New York City. For example, "after implementing the public matching funds program in NYC, most recent mayoral election of 2009 witnessed the lowest voter turnout it's had since the 1960s".
Others argue that the matching funds system benefits candidates with higher name recognition, especially if they are tied to a measure of popular support. Some have suggested that public funding actually has a negative effect on the perceptions the public has of the government, perhaps because public funding programs do not meet "the expectations set by reformers".