Many nonprofit organizations are dependent on donors, including individuals, businesses and other charities such as foundations for their operating revenue. That funding is a fundamental pillar of what makes a nonprofit organization different from a for-profit organization. However, there are so many options available to those who want to donate. Nonprofit organizations use solicitation materials, fundraising events, marketing brochures, etc. to influence others to choose to donate to their organization versus a different one. The competition is quite fierce. Once a donor decides to make a promise to give or a pledge to a nonprofit organization, many times the form the donor sees may or may not mirror the information in the marketing materials that was used to influence their decision in the first place. Additionally, the information may simply not be clear in either the pledge form or the marketing information.
Tips for ensuring marketing information and pledge forms align and are clear to the donor:
- Use of the word “Endowment” – Define what that means to your organization. According to the AICPA Nonprofit Accounting Guide, an endowment fund is an established fund of cash, securities, or other assets to provide income for maintenance of a nonprofit organization; They can be a permanent endowment (where the corpus is never spent), or a term endowment (where they provide income for only a specific period). There are also board designated endowment funds, where the board has earmarked a portion of unrestricted funds for a particular period or purpose. Be sure your marketing materials and pledge form reflect the specific type of endowment funds used by your organization and clearly indicate the donor’s intent for their gift.
- Special campaigns – Many organizations decide to hold a special campaign for a particular purpose. They may raise funds specifically to fix or expand their capital assets, or to assist a particular group in society. Ensure that your solicitation information and pledge form mirror each other in whether that money will be considered restricted or not. In some cases, whether the income will be restricted or not may seem like an easy determination. For example, if a person donates $100 to an organization for a new roof, then that money is obviously restricted. Nevertheless, sometimes the mission of the campaign so closely aligns with that of the entire organization that the lines become blurred because there is little difference between the mission of the campaign and the entity as a whole. When this occurs, nonprofit organizations must pay extra care to the wording used in both marketing materials and pledge forms to ensure that they align and applied restrictions or lack thereof are clear.
- Multiple entities supporting each other – Many organizations include multiple organizations, similarly aligned. For example, one nonprofit “group” may include an operating entity, a foundation, and an entity that holds the real estate. Does the marketing materials and pledge form make it clear to which entity the donor is really donating?
- Various allocations for one donation – Often, a donor will donate a large sum of money that is to be allocated across multiple purposes or campaigns. A donor may promise to give $1000 to an organization, where they ask 50% to go to the building fund, and 50% to go to a special campaign to assist children in poverty. If the organization’s mission is to assist children in poverty, it could be argued that 50% of this donation is restricted while 50% is not. However, why leave this as a gray area? Identify as a restricted or unrestricted campaign depending on the intent. If it is not clear based on how the donor completed the pledge form, follow-up discussions should be done with the donor and documentation updated as necessary.
- Treatment of “Membership” into specific segments of donors – Some organizations have segments of donors that can donate a specific amount to a particular purpose or campaign and it is referred to by the organization as a membership donation. Organizations should ensure that their fundraising materials and pledge forms explain any restriction associated with this type of gift. For example, if an entity solicits donations of $20,000 for membership into an “Heirloom” group, are these funds treated differently from other donations? Are they permanently restricted with only the income from investment spent and if so, is that clear to the donor in the pledge form and solicitation information?
The goal is to be as transparent as possible to donors, and limit any confusion around how a donor’s gift is to be used by a nonprofit organization. The goal is to encourage donating, and how better to do that than by offering transparency and clear, defined intentions and objectives. Contact PBMares or your financial advisor to learn if your fundraising materials and pledge forms communicate the same message.