Finding Sources for Donated Yarn?

First off, where are you? I ask because if you aren't too far away, I can send you some.
That said, go to thrift stores and ask them to donate. They also sell a lot of yarn still skeined and rolled for uber cheap. I once got a big bag of unskeined for 8.99 and it had 56.00 of yarn inside if I had bought it new.

Also, you didn't say what the craft is. If it's for pets, I suggest you repurpose yarn and buy all the mufflers, hats, and afghans in good shape you can and have a "frogging" party where you unravel everything (rip it rip it rip it) and make your crafts.
If they are for babies, this won't work. Don't over look Walmart, Micheal's or JoAnn's crafts. Offer them advertising chops for donating. Good PR is never wasted and if your crafts are for babies or pet...it's also great for them to participate.
I sure hope you do well. You can contact me through here if I can help further.
PBP
PS: I am including three shots of yarn I have to frog. Some closeups give you an idea of the prices I have paid which aren't much. I make cat mats for my local shelter so the quality isn't an issue but of course, it might be for you folks.

Different places (like churches, thrift stores) will usually gladly help if the cause is a good one - especially if it involves children but since we do not know where you are located (US?) all suggestions may not be available for you.

Freecycle and Craigslist are both very good sources for free stuff but there is also another site that is not always mentioned but it is very good for stuff like this. You may want to check it out:

www.listia.com/?SSAID=389818