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Responsible Fundraising Tips for Not-for-Profit Charities

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To make programs happen, not-for-profit charities have to rely on the generosity of donors. Charitable contributions are often the lifeblood of the organization. Not-for-profit organizations that build solid fundraising practices are more likely to succeed than those that do not. 

Review and address these practical guidelines, policies, and practices for responsible fundraising. 

Abide by the Code of Ethics and Donor Bill of Rights.

‚ÄčEthical standards and principles are the foundation for maintaining public trust, for every AFP member. 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) developed the Code of Ethics and Donor Bill of Rights, providing principles and standards to guide organizations and development professionals in their fundraising practices. They encourage organizations to educate their fundraisers on these standards and principles, as well as consider adopting them as policy documents. 

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. A gift acceptance policy requires that each gift be evaluated for financial value and costs as well as alignment with the not-for-profit organization'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.

What should my gift acceptance policy include?

  1. What type of gifts will we accept?
  2. What is the policy for disposition of non-cash gifts?
  3. What is the thresholds for gifts with significant purpose restrictions or endowments? These type of gifts require staff resources to properly track.
  4. What types of gifts need board approval or review by outside legal counsel?
  5. Who is responsible for administration of the gift, including any professional or other fees associated with the donation?

Be transparent with donors. 

Donors are inspired and more confident when they have access to information. By sharing information regarding the charity’s finances and operations on your website can help.

What information would be good to post on my website?

  1. Vision and mission statement
  2. Form 990 and audited financial statements
  3. Annual report
  4. Programs and achievements
  5. List of board members and staff
  6. Fundraising disclosures

Comply with donor restrictions. 

By accepting a restricted gift, a not-for-profit 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.

Properly track fundraising costs. 

Not-for-profit 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.

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 not-for-profit charity should develop benchmarks for how it would like to measure ROI and review its results over a period of time.

Register with the state. 

Prior to soliciting any contributions from the public or engaging in fundraising activities, most states and the District of Columbia require not-for-profit charities to register. 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.  

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:

  1. Name of the charity and donor
  2. Date of the contribution
  3. Description of any property donated
  4. Amount of cash contribution (never include value of noncash donations)
  5. Value of any goods or services provided by the charity to the donor
  6. A statement indicating the tax deduction may be limited 

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.

At LBMC, we provide comprehensive business support and a depth of experience from working with a wide array of not-for-profit organizations. With access to the vast resources of the LBMC Family of Companies, we can help you accomplish your mission. Learn more about our not-for-profit services.

Responsible Fundraising Tips for Not-for-Profit Charities

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