For many public charities, fundraising is their lifeblood. They rely upon the generosity of donors to support their programs and to help them fulfill their missions. Consequently, organizations that build solid fundraising practices are more likely to succeed.
Here are nine practical guidelines, policies, and practices that charities soliciting funds should consider:
- 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 discussed and frequently communicated within your organization. The Association of Fundraising Professionals (AFP) has developed a Code of Ethics and has co-authored the Donor Bill of Rights. Many charities have adopted and posted a link to these documents on their websites to communicate their organizational integrity to donors. The Code of Ethics and the Donor Bill of Rights can be found at www.afpnet.org.
- Adopt a gift acceptance policy. Have you ever received a call from a donor offering to donate property in Timbuktu, a timeshare in the Bahamas, or an interest in a privately held company? Accepting the wrong gift can result in some unintended consequences such as environmental liabilities, property taxes, and unrelated business income tax. The bottom line is that each gift needs to be evaluated for financial value and costs as well as alignment with your mission, goals, and strategies. Make sure you have a gift acceptance policy that provides a tool for deciding when to accept or reject a gift.
- Be transparent with donors. Donors are inspired and more confident when they have access to information. Use your website to share information regarding finances and operations, such as:
- Vision and mission statement
- Form 990 and audited financial statements
- Annual report
- Programs and achievements
- List of board members and staff
- Comply with donor restrictions. You have a fiduciary responsibility to ensure contributions are used as the donor intended. If this is not feasible, you are obligated to contact the donor for permission to use the donation for other purposes or offer to return it. Take special care when composing solicitation and campaign materials.
- Properly track fundraising costs. Fundraising costs are necessary to ensure an organization can meet the continued demand for its services. You need to spend money to raise money. Develop internal policies and procedures for tracking fundraising costs, which are the direct and indirect costs incurred to solicit and collect contributions such as salaries, postage, printing, rent, depreciation, utilities, etc.
- Evaluate return on investment from fundraising activities. Charities are responsible for monitoring and evaluating fundraising success. 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. However, this ratio does not take into account the maturity of the fundraising program, mix of fundraising activities, and size and type of charity. It also does not consider achievement of goals, outcomes, and impacts. Other measurements to consider include donor retention rates, number of new donors, and median gift sizes. Develop benchmarks for how you would like to measure ROI and review the results over a period of time.
- 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. Once a charity is registered, most states require annual renewal. Organizations that solicit in more than one state can sometimes use a common form called the Unified Registration Statement, although some states will still require specific forms to be filed.
- Provide donor acknowledgements. Donors like to be thanked and expect an acknowledgement of their gift. The IRS can deny charitable deductions that do not have adequate documentation. Donor acknowledgments should include:
- Name of the charity and donor
- Contribution date
- Description of property
- 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
- Bridge the “GAAP” between accounting and development. Provide training to 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.