To make programs happen, non-profit organizations must rely on the generosity of donors. Charitable contributions are often the lifeblood of the organization. Non-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.
Ethical standards and principles are the foundation for maintaining public trust. 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 is evaluated for financial value and costs, as well as alignment with the non-profit organization’s mission, goals, and strategies. Every organization should have a gift acceptance policy that provides the organization with a decision-making tool for when to accept or reject a gift.
What should my gift acceptance policy include?
- What type of gifts will we accept?
- What is the policy for disposition of non-cash gifts?
- What are the thresholds for gifts with significant purpose restrictions or endowments? These types of gifts require staff resources to properly track.
- What types of gifts need board approval or review by outside legal counsel?
- Who is responsible for the 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. Sharing information regarding the charity’s finances and operations on your website can help.
What information should be posted on my website?
- Vision and mission statement
- Form 990 and audited financial statements
- Annual report
- Programs and achievements
- List of board members and staff
- Fundraising Disclosures
In addition to your organization’s website, updating your organization’s profile on websites such as Guidestar.org provide potential donors or others detailed information about your organization’s activities, governance, and finances.
Comply with donor restrictions.
By accepting a restricted gift, a non-profit organization has a fiduciary responsibility to ensure contributions get used as intended. If an organization 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.
Non-profit organizations 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 non-profit organization should develop benchmarks for how it would like to measure ROI and review its results over a period.
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 non-profit organizations 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 and may have other requirements such as annual financial statement audits by an independent auditor.
Provide donor acknowledgments and receipts.
Donors like to be thanked and expect an acknowledgment 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 the 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
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). Some donor donations or pledges may be accepted by development staff that are not reported under GAAP due to certain conditions that must be met before they qualify for recognition in the organization’s financial statements. Have routine cross-department meetings to review gifts for proper accounting recognition and reconcile the accounting and development records at least quarterly.
Non-profit organizations 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 non-profit organizations. With access to the vast resources of the LBMC Family of Companies, we can help you accomplish your mission.