Brad, the development director of an international environmental charity, was excited to hear that a past supporter was pledging a new, six-figure donation. But there was a catch: the donor wanted to restrict how and where her donation was used.
While Brad welcomed the donation, he knew that restricted gifts come with specific responsibilities. If your nonprofit receives donations with strings attached, it’s important to handle them with care.
Establish Clear Procedures
Donors of restricted gifts expect nonprofits to adhere strictly to the conditions of their contributions. Misuse of restricted funds can lead to legal issues, negative publicity, and loss of trust.
To maintain transparency and accountability:
- Train staff to identify and properly label restricted gifts.
- Ensure the appropriate team documents the restrictions and plans for fulfilling them.
- Regularly review and track expenditures related to restricted funds, using tools like spreadsheets or fund-specific accounts in your general ledger.
- Implement a reminder system for donor reporting requirements to stay compliant.
Demonstrate Responsible Use
It’s essential to show how funds are being used to meet donor intentions. Proper tracking and reporting can also strengthen your relationship with donors and help secure future contributions.
Encourage Unrestricted Gifts
While restricted gifts can be valuable, they can also complicate your nonprofit’s operations. In cases where fulfilling restrictions is difficult or impossible, it’s often best to politely decline the donation. A one-on-one discussion with the donor can help you explain the situation and explore alternative ways they can support your cause.
To maintain flexibility and ease of operations, encourage donors to contribute unrestricted gifts. With clear communication and trust, many donors will be willing to support your cause without specific conditions.
Reach Out for Help
For more information on managing restricted and unrestricted gifts, reach out to your team at Accavallo & Company LLC. We are available by email at [email protected] or call us at 203-925-9600.
