Fundraising -- Communication and Donor Intent
"All statements made by the member in its fund-raising appeals about the use of the gift must be honored by the member. The donor's intent is related both to what was communicated in the appeal and to any donor instructions accompanying the gift. The member should be aware that communications made in fund-raising appeals may create a legally binding restriction."
Standards 7.1, 7.2, and 7.3 reference the nature of the communication in a fund-raising appeal. Standard 7.1 relates to the truthfulness of the communication from the organization to the prospective donor. Standard 7.2 deals with donor expec¬tations as he or she responds to the organization. Standard 7.3, deals with the organization’s responsibility to fulfill the donor’s expectations.
The cycle of requesting and receiving a donation is not complete until the purposes for which the donation was given have been achieved.
The essence of this Standard is that the charitable organization is obligated to use a donation as directed by the donor or, alternatively, to choose not to accept the donation. Once the donor has indicated the intent for which the donation was given and the charity has accepted the gift, it is the responsibility of the charity to fulfill that intent.
Donor intent is normally determined in one of two ways. In most cases, the donor responds to a specific appeal with a gift. The appeal itself generally identifies the purpose for which donations are sought. If the donor simply responds to the appeal with a gift, the organization should assume that the donor’s intent is for the funds to be used as described in the appeal. Again, the need for precise communication in the appeal establishes a clear understanding between the charity and the donor on the use of the donation.
Second, donor intent can be determined from the donor’s own written or verbal communication. Whether these take the form of letters accompanying a gift, notes on the gift response card, or personal conversations with the donor, any communication accompanying the gift should be considered an expression of donor intent.
To state the principle in the negative, the charity cannot use gifts for purposes other than those intended by the donor.
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Frequently asked questions concerning the organization’s responsibility to fulfill donor expectations include:
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What should a charity do if it is unable or unwilling to honor the donor’s intentions?
The charity always has the option of returning a gift to a donor. After expressing appreciation for the gift, the charity should indicate why it is unable to meet the donor’s intentions. Two obvious reasons may be that the request does not fall within the ministry’s priorities as developed by the board of directors, or because to honor the request would require additional ministry funds that are not available.
Alternatively, the charity may suggest to the donor that it pass the donation to another charity better able to fulfill the donor’s intentions. Upon the donor’s approval of this suggestion, the charity can then make the transfer.
Charities occasionally receive “donations” intended by the “donor” to be used for the personal benefit of an employee or member of the charity. While it is permissible to pass on these “gifts” to the designated individual, such gifts are not deductible as a charitable donation under the Internal Revenue Code. The charity should inform the donor of that fact before distributing the gift to the designated individual.
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What should a charity do if donations received for a specific project are insufficient to complete the project?
Occasionally, when a charity appeals for donations for a project but does not receive enough to complete it, the charity decides against initiating the project. In this situation the charity has several options: 1) return the donation to the donor; 2) inform the donor of the situation and ask if the charity may use the donation for another project within the scope of its ministry (if not, the gift should be returned); 3) suggest to the donor that the donation be forwarded to another charity better able to fulfill the donor’s intentions.
Obviously, these options are very costly both in terms of lost donations and administrative costs. In order to avoid these kinds of situations, charities should carefully plan all projects and related appeals.
If a charity is uncertain that it will receive enough donations to start (and finish) a project, then it should take preventive steps. These might include redefining a project into smaller, achievable projects; “testing” the donor base to determine adequate interest in the project; or identifying in the appeal what the charity intends to do if it runs short of funds. In this way, the donor is kept informed before committing to a donation.
The charity should exercise caution on this last point. Having a secondary purpose for the donation should not be seen as an opportunity to use a very “saleable” appeal as a means of raising donations for a less “saleable” purpose. Truthfulness in communication is the key!
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What should a charity do if it receives more donations than needed to complete the project?
This presents a similar problem to that addressed in the previous question. The key to solving it lies in matching the typical donor expectation with the language of the appeal. The donor will have an expectation that his or her donation will, indeed, help fulfill the purpose for which the donation was sought. If the donation will not be used as such, then the organization has an obligation to inform the donor and proceed as outlined in the response to the previous question.
Very seldom does an appeal raise just the right amount of donations for a particular project or purpose. When the total of the donations received is less than the amount needed, the charity will usually supplement the donations received with other funds, limit the amount spent on the project to the total of the donations received, or respond as outlined under the previous question.
However, when the total of the donations received is more than is needed for the stated purpose, the charity has two options:
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If the over-subscription is relatively minor (perhaps less than 20 percent), it is reasonable to use the donated funds to cover other costs that are closely related to the specific project or purpose.
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If the over-subscription is material (perhaps more than 20 percent), the charity can either inform the donor and ask to use the donation for an alternative purpose, or return the donation to the donor.
Additionally, the charity should take appropriate steps to avoid the over-subscription of funds raised for similar future projects.
As seen in our previous example, these options can involve high administrative costs and lost donations. The charity can usually avoid this situation by carefully planning the fund-raising appeal.
The first step is to carefully match the appeal’s audience to the need. Projecting donor response can help the charity avoid making too broad an appeal for a specific project or purpose. Carefully wording the fund-raising appeal to inform the donor how any excess funds will be used will negate the need to return a donation at a later date. As this latter point is susceptible to abuse, the same caution mentioned under the previous question should apply.
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