Fundraising is at the core of most nonprofit organizations’ success. Yet, finding the individuals and companies that believe in your mission enough to support you financially is only the start. Keeping them involved with your organization as active donors, involving the board in raising funds, utilizing the funds in a way that honors both the organization and its supporters and managing government requirements are also vital components to maintaining momentum. To help nonprofits strengthen the effectiveness of fundraising and other processes, a panel of experts created a guide with principles that can successfully direct the efforts of the organization. To help our nonprofit clients, prospects and others, Barnes Dennig has provided a summary of key fundraising principles below.
Effective Fundraising Principles
- Solicitation Materials – A charitable organization must make a variety of information clear to donors when soliciting donations, including who is requesting the donation and where and how the donation will be used. The donor has a right to know the name and location of the organization receiving the donation, a description of its mission and related activities, the intended use of funds, additional contacts and whether the person doing the fundraising is a paid employee or volunteer. To keep donors educated with this information, it’s important that organizations ensure their online, mobile and print communications contain accurate information.
- Donor Intent – The intent of the donor needs to be honored, so donations should be allocated and used accordingly. Ensure that solicitation materials indicate whether the funds will be used for a general or specific purpose. The organization should be comfortable with the special requests of the donor and clearly communicate any changes to how the funds will be used prior to concluding the transaction. In the case of substantial donations, it’s crucial to have a policy in place that allows management to change the use of an asset as need and priority dictate.
- Donation Receipts – A charitable organization must acknowledge a donor’s contribution as part of IRS regulations. Developing a process to acknowledge all contributions made in a timely manner, regardless of how they are received, will ensure that the organization remains compliant. Remember, donors must have written acknowledgement to claim a deduction on their tax return for any contribution over $250. In some cases, organizations are required to make a good faith estimate on the value of goods donated. Providing donors with the documentation they need to claim the deduction on their income tax return in a timely manner will ensure they receive the full benefit afforded them.
- Gift Acceptance Policy – A formal policy should be created to protect both the donor and the organization in cases when accepting a gift would compromise the organization’s ethics, financial circumstances, program focus or other interests – whether intended or not. Moreover, there could be significant tax consequences if the organization is not able to utilize certain gifts in an established period of time. The policy needs to be clear about the terms of relationships and sponsorship offers from businesses and others to ensure there are no miscommunications between the parties regarding payments, tax consequences and other matters.
- Donor Privacy – Maintaining the privacy of donor information is essential to growing a consistent pipeline of funds. It’s important to ensure that such information is handled with respect and kept confidential to the maximum extent permitted by law. Let donors know if their names will be used for future fundraising, if the information will be sold or shared and how they can “opt out” of future communications. It’s best practice to ensure that all donors are sent an annual notice to allow them to request that their names and contact information be removed from marketing and other communication lists.
Most nonprofit organizations rely in whole or at least in large part to the generosity of donors. With changes in recent years to more online communication and solicitation, additional government regulation and the need for increased transparency, nonprofits must ensure their fundraising practices are both ethical and effective. To learn more about fundraising and other essential nonprofit administration principles, the full guide can be found at PrinciplesForGood.com. For additional information about nonprofit management or for assistance with your next audit, Barnes Dennig can help. Call us at 513-241-8313 or click here to contact us. We look forward to speaking with you soon.