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Nine Best Practices in Responsible Fundraising

12/30/2015

Charities rely on the generosity of donors to make programs happen, and contributions are often the lifeblood of the organization. Organizations that build solid fundraising practices are more likely to succeed than those that do not.  The following are practical guidelines, policies, and practices that charities soliciting funds should review and address: 

What are the nine best practices in responsible fundraising? 

  1. Abide by the Code of Ethics and Donor Bill of Rights.Without public trust and confidence, fundraising would not be able to exist.  Ethical fundraising practices should be openly talked about and frequently communicated within each organization.  The Association of Fundraising Professionals (AFP) has developed the Code of Ethics, providing principles and standards to guide organizations and development professionals in their fundraising practices. The AFP also co-authored the Donor Bill of Rights.  The AFP encourages organizations to educate their fundraisers regarding the Code of Ethics and Donor Bill of Rights and to consider adopting them as policy documents. Many charities have also posted a link to the Code of Ethics and Donor Bill of Rights on their website as a way to communicate organizational integrity to donors.  Both the Code of Ethics and Donor Bill of Rights can be found at www.afpnet.org.
  2. Adopt a Gift Acceptance Policy.  Accepting the wrong gift can potentially result in some unintended consequences, such as environmental liabilities, property taxes, and unrelated business income tax. The bottom line is each gift needs to be evaluated for financial value and costs as well as alignment with the nonprofit’s mission, goals and strategies. Every organization should have a gift acceptance policy that provides the organization a decision-making tool for when to accept or reject a gift.

    A sound gift acceptance policy should include:
    • What type of gifts the organization will accept
    • What is the policy for disposition of non-cash gifts
    • Thresholds for gifts with significant purpose restrictions or endowments as these require staff resources to properly track and account for
    • What types of gifts need board approval or review by outside legal counsel
    • Who is responsible for administration of the gift, including any professional or other fees associated with the donation
  3. Be transparent with donors. Donors are inspired and more confident when they have access to information. Use the website to share information regarding the charity’s finances and operations, which could include:
    • Vision and mission statement
    • Form 990 and audited financial statements
    • Annual report
    • Programs and achievements
    • List of board members and staff
    • Fundraising disclosures
  4. Comply with donor restrictions. By accepting a restricted gift, a charity has a fiduciary responsibility to ensure contributions get used as intended.  If a charity is unable or unwilling to use the contribution as the donor intended, it is obligated to contact the donor for permission to use it for other purposes or offer to return the gift.
  5. Properly track fundraising costs. Charities should develop internal policies and procedures for tracking fundraising costs.  Fundraising costs are the direct and indirect costs incurred to solicit and collect contributions and can include salaries, postage, printing, rent, depreciation, utilities, etc.
  6. Evaluate return on investment from fundraising activities.  The most common benchmark used to measure return on investment (ROI) from fundraising is the ratio of fundraising costs as a percentage of funds raised.  A charity should develop benchmarks for how it would like to measure ROI and review its results over a period of time.
  7. Register with the State. Forty states and the District of Columbia require charities to register prior to soliciting any contributions from the public or engaging in fundraising activities.  The registration is usually with the Secretary of State or the Attorney General’s office and consists of providing the state with detailed information regarding programs and finances.  Once a charity is registered, most states require renewal annually.  
  8. Provide donor acknowledgements and receipts. Donors like to be thanked and expect an acknowledgement of their gift. The IRS can deny donors charitable deductions from not having adequate documentation.  Donor acknowledgments should include:
    • Name of the charity and donor
    • Date of the contribution
    • Description of any property donated
    • Amount of cash contribution (never include value of noncash donations)
    • Value of any goods or services provided by the charity to the donor
    • A statement indicating the tax deduction may be limited 
  9. Bridge the “GAAP” between accounting and development. Provide training to both your accounting and development staff on which gifts can be reported under generally accepted accounting principles (GAAP).  Have routine cross-department meetings to review gifts for proper accounting recognition and reconcile the accounting and development records at least quarterly.

Charities that are committed to responsible fundraising practices will foster the trust of the public, increase donor confidence and ultimately have more successful fundraising programs.

Nine Best Practices in Responsible Fundraising

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