Editor's Note

A recent survey conducted by The Association of Fundraising Professionals underscores donors' growing concern regarding how charities use their contributions. In this month's issue, we'll review the survey results and explore the impact of ignoring donors' intent. Because donors must be able to trust the nonprofits that they support, every nonprofit should have policies and procedures in place to assure their donors that every donation is spent according to their wishes.

Continuing with the theme of nonprofit accountability, the second part of this issue outlines concrete steps you can take to improve accountability at your organization. Also, if you want to identify specific areas where your organization can improve accountability, take our accountability assessment online.

We'd love to hear from you. Send your thoughts to fiscalfitness@blackbaud.com.

Nonprofit Accountability: Are You Doing Enough?

Accountability in the nonprofit world means consistently being prepared to answer to those who have invested their trust, faith, and money in your organization. Take this 25-question Nonprofit Accountability Assessment to identify areas within your organization to improve accountability and help ensure your organization’s long-term health and well being.

The following article first appeared on The Association of Fundraising Professionals Web site on January 9, 2006.

(Jan. 9, 2006) A new survey shows that donors are very concerned with how charities use their contributions and consider it a serious matter if organizations use donations for unauthorized purposes.

The survey was conducted by Utica, N.Y.-based Zogby International, a polling and research firm. According to the survey, 97 percent of respondents consider it a 'very' or 'somewhat' serious matter if charities use contributions in ways unintended by donor. Of particular interest to charities, an additional 78.7 percent of respondents said they would 'definitely' or 'probably' stop giving to charities that used contributions for purposes for which they were not intended.

However, when asked what should happen when charities intentionally misuse funds, only 59.3 percent said organizations should 'definitely' or 'probably' return the contributions. More than one-third of respondents said the charity should 'definitely' or 'probably' keep the money.

However, respondents were not as forgiving when asked if nonprofit managers should be legally or criminally liable if they intentionally misused contributed funds. Nearly half (46.6 percent) said nonprofit managers should be held legally and criminally liable in this case, and 23.8 percent said they should be held legally liable only. Only 18.3 percent said they would ignore the misuse of funds.

The survey also asked general questions about how Americans donate. Approximately eight out of 10 Americans donate to charities either frequently (45.8 percent) or occasionally (36.7 percent). More than 57 percent typically contribute with no strings or conditions attached to the gift, but just over 40 percent reported they have made a donation and restricted it for a specific purpose.

'This survey is a reminder that we can never take the public trust lightly or for granted,' said Paulette Maehara, CFRE, CAE, president and CEO of AFP. 'There's a reason that donor intent is addressed both in our Code of Ethics and A Donor Bill of Rights. It's critical to ensuring public confidence, and fundraisers need to always take into account the needs and wants of donors.'
The survey of 1,216 voting-age American adults was conducted Nov. 20-22, 2005, with a margin of error of plus or minus 2.9 percent.

1. Keep restricted funds separate from operating funds and unrestricted funds.

2. Make sure you have a solid accounting system in place. In the face of major crises and an increased demand for accountability, there is an increased burden on your accounting software to produce more detailed, reliable information in a timely manner. Having a good system in place increases the odds that you’ll be able to meet the demand for accurate information.

3. Maintain complete documentation regarding the donor's intent for each gift. When a gift is made subject to restrictions, document all of the terms. If you frequently receive restricted gifts, develop standard documentation to facilitate tracking, management, and administration of each gift.

4. Employ a review and approval process for donor restrictions. Whenever a donor-restricted gift is received, carefully review the terms to ensure that the following questions are addressed:

• Are the restrictions charitable?
• If so, are the restrictions in line with the purposes of your nonprofit?
• Are the restrictions both possible and practicable?
• If yes, are the restrictions acceptable to your nonprofit?
• If the answer is no to any of the above questions, respectfully decline the gift or offer alternatives.

5. Don’t be afraid to discuss restrictions with the donor. There may be some gifts you choose not to accept, either because you cannot adequately deal with them or because you cannot honor the restriction. It is better to be up front with the donor and explain why you must decline the gift. Hopefully, the donor will understand and modify or remove the restrictions. Since donor-restricted gifts involve considerable responsibility, an important question that a nonprofit should ask is what can be done to encourage donors to give unrestricted gifts instead of restricted gifts.

6. It is important to maintain ongoing communication with your donors to provide information and confirmation of compliance. Good communication can help avoid misunderstandings and increase donor confidence. It can also be used as good public relations and/or marketing for your organization.

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The information contained herein should not be construed as legal or professional advice. If you have questions about how this newsletter's content applies to your organization, you should seek advice from appropriate professional counsel.

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