The 501 S(c)ene

The latest view on not-for-profit accounting issues

Ethical Fundraising Practices

Recently, I overheard two individuals discussing ethical fundraising practices for their small nonprofit organization over lunch. As an auditor specializing in non-profit, you can imagine how quickly this caught my attention. I was grateful for the noise of the restaurant and the influx of customers as I scooted my chair a little bit closer to hear their conversation. If it wasn’t for the dab of freshly dropped Dijon mustard down the front of my shirt, I might have introduced myself rather than awkwardly listened. I thought I would share some of their thoughts with you, while adding some of my own in italics:

  1. Maintain donor trust by respecting their requests and intent of the donation.
    It is a legal/fiduciary obligation of the non-profit to honor donors’ requests; therefore, it is essential that your staff understand what a restricted gift is and its significance. Keep in mind – a verbal agreement between a donor and a non-profit regarding the use of donor funds is enforceable. To protect the organization, I suggest implementing written agreements to describe how funds will be used and as a way to help manage donors’ expectations.
  2. Send gift acknowledgements timely.
    The National Council of Nonprofits’ has a tip sheet on “Saying Thank You to Donors”.
    Also, certain gifts have a legal requirement to acknowledge donors’ charitable gifts. The IRS details when those acknowledgements are required and has examples of written acknowledgements non-profits can use.
  3. Respect donors that wish to remain anonymous.
    A donor could wish to remain anonymous for a number of reasons. As a non-profit, it is your obligation to respect their right. To address donors’ concerns, the Association of Fundraising Professionals (AFP) created a Donors’ Bill of Rights and encourages non-profits to adopt the policy.

To add my own – be transparent with financial information and fundraising practices as it inspires confidence from the public. This prevents myths about misuse of funds and inspires donors to make contributions if they can see how their funds are impacting the community and organization.

By Kristian Haralson