Learning Center: Understanding Donors – Put the Shoe on the Other Foot

This article comes to us from the National Council of Nonprofits.

 

Understanding Donors: Put the shoe on the other foot

In the past year there has been widespread encouragement (in this newsletter and elsewhere) for charitable nonprofits to measure their performance, tell stories about their effectiveness, focus on impact, and explain why their work is vital to individuals and communities. These are all important ways to encourage support of charitable nonprofits, whether with monetary donations, pro bono expertise, or volunteer service. But there is another fundamental way that nonprofits can encourage public support: Ask the question, “What do our donors want and expect from us?”
If we fail to put the shoe on the other foot, we’ll miss an important perspective. As public charities, our sector’s work depends on understanding and meeting the needs of our public stakeholders. Just as voters all around this country soon will cast their ballots in the general elections, so too in the coming nine weeks of 2012 the majority of individual donors will “vote” with their wallets. The year-end giving season is upon us, so it’s time to think like our donors.
Donors like to feel connected. Many fundraising and marketing gurus, including Kivi Miller Leroux, in her excellent article for Guidestar, “Nine Clever Ways to Thank Donors,” point out that donors are eager for updates on progress. Donors want to feel a personal connection with those helped by the nonprofits they supported. Jeff Brooks recommends in his recent Guidestar article, “Why Long Fundraising Letters Outpull Shorter Ones,” to feel free to write longer updates and appeals rather than relying on short tweets or brief letters.
Whatever you do, keep connected with your existing donors. The 2012 AFP Fundraising Effectiveness Survey recently startled many by pointing out that during the period studied (2010 – February 2012), for every $100 of new dollars raised, $100 was lost in downgraded or lapsed gifts. Additionally, the report documented that for every new 100 donors recruited, nonprofits lost 107 donors through attrition. The authors of the report observe that it “usually costs less to retain and motivate an existing donor than to attract a new one.” Therefore, ”taking positive steps to reduce gift and donor losses is often the best strategy to increase net fundraising gains.” This report underscores that charitable nonprofits must continuously nurture the very important relationships they have with existing donors to maintain those donors as active supporters. Keep your friends close!
Donors want  – and deserve – respect. What do donors want? A recent donor survey by Cygnus tells us that one of the top two reasons donors stop contributing is because a nonprofit has “over-solicited.” When donors ask to be solicited less frequently, we should respect that request. The same report suggests that we also should respect donors’ time. Almost half (42 percent) of respondents said they would prefer to download a gift receipt from an email message, and that they would even be willing to share their email address with the nonprofit just so they could receive a confirmation of their gift via email. Those types of informal donor requests should be honored as a matter of politeness and relationship-building. But other donor “requests” – such as instructions on how the funds are to be used – carry more significant legal implications that must be followed as a matter of law. Although relatively rare, any lawsuit filed by a donor or a donor’s family that claims that a nonprofit did not treat a contribution consistently with the donor’s intent or did not adhere to restrictions is one lawsuit too many. Nonprofits that fail to carefully monitor and document the use of restricted funds are playing with fire – and acting as poor stewards of the trust that the public places in the charitable nonprofit sector. Many nonprofits adopt AFP’s donor bill of rights, which spells out the various ways that charitable nonprofits can demonstrate respect for donors through their fundraising practices.
More transparent than Wall Street. Ironically, even while there is a relentless chorus urging nonprofits to act more like businesses, because of existing IRS regulations, charitable nonprofits are actually more transparent than most private companies. Many donors reach their conclusions about whether to donate by first looking at a nonprofit’s most visible presence: its website. There are very simple things that every nonprofit can do to ensure that its website includes the basic elements that inspire trust and lead to a conclusion that the nonprofit is credible and transparent. First among them is to include contact information. It’s very disconcerting when a nonprofit’s website doesn’t include an address or contact information, and borders on being misleading. So posting names of staff and board members should be a given, as well as a phone number and email address to contact the organization. Second, it’s not difficult to upload and post either a recent annual report and/or the organization’s annual financial reports filed with the IRS (the Form 990, or 990-EZ). Finally, for those charitable nonprofits that conduct an independent audit, it’s common to post those on the nonprofit’s website also. Read more about what documents the IRS requires to be disclosed to the public.
Gift acknowledgements. Put yourself in their shoes: Donors want exactly what you would want. At the top of their list is a respectful and prompt ”thank you.” While the current vogue may be to send an eye-catching, video-popping ‘thank you’ message, what is actually required by IRS regulations is very straightforward:
  • Name of the organization;
  • Amount of cash contribution;
  • Description (but not value) of non-cash contribution;
  • Statement that no goods or services were provided by the organization, if that is the case;
  • Description and good faith estimate of the value of goods or services, if any, that organization provided in return for the contribution; and
  • A statement that goods or services, if any, that the organization provided in return for the contribution consisted entirely of intangible religious benefits, if that was the case.
Caution: If urged by a donor to assign a value to a gift-in-kind/non-cash contribution – resist. Since the donor generally expects to claim a tax deduction for the non-cash gift, the donor, not the nonprofit, should be responsible for assigning a dollar value to what was donated. Why? Because the nonprofit could unwittingly be accused of allegedly acting as a co-conspirator to a fraud if it puts a dollar value on property that is in excess of the actual market value of the donated goods. It’s always safest for the nonprofit to simply describe the goods that were donated and let the donor assign the value. In contrast, whenever a nonprofit provides a donor with something of value in return for a contribution (referred to as a “quid pro quo” contribution), the nonprofit is required to disclose to the donor in writing what portion of the contribution is deductible. (See second-to-last bullet above.) Learn more about the requirement for disclosure statements relating to quid pro quo contributions, including the fact that when a donor receives something of “insubstantial fair market value” from the nonprofit, the disclosure requirements do not apply.
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