Many well-intentioned donors prefer “restricted” gifts earmarked for a specific program or initiative. Yet unrestricted gifts provide the flexibility nonprofits need to direct resources where they’ll do the most good—supporting multiple programs or stabilizing the general operating fund as needs change. By contrast, using restricted funds for other purposes is both unethical and risky, jeopardizing your reputation and future support if a donor’s wishes aren’t honored. To encourage unrestricted gifts, educate donors on how flexible dollars maximize impact, share clear use-of-funds examples and outcomes, and bolster trust with independent verification through nonprofit audit services.
Educate about your mission – Unrestricted Gifts
Some donors may have a laser focus on one issue, while your nonprofit is approaching that issue from a more holistic lens. In cultivating donor relationships and in fundraising material, it is important to share your view of the issue and the ways its solutions are integrated into your mission. For example, an organization that focuses on issues of homelessness may also wish to ensure its employees have a living wage and secure housing, as these are important parts of the same mission. A donor wishing to apply restricted funds for an affordable housing initiative may be persuaded, after better understanding the mission, to provide unrestricted funds that allow your nonprofit to offer wages that ensure housing stability for its employees while also funding affordable housing initiatives.
The overarching and integrated nature of many nonprofits’ missions can be a helpful foundation for conversations about unrestricted funds. We know there is rarely a silver bullet solution for the issues we confront, so letting donors know in fundraising materials and even thank you’s for donations how funds are used can help educate donors as well. This education can be supplemented with hard numbers and examples, as well as example wording for bequest clauses that suggest rather than insist the avenue for the allocation of donations.
Educate about your operations
In the same way the issues nonprofits work to remedy are not siloed, so too are their operations. Donors who may wish to assign restricted funds may be persuaded to funnel their dollars toward unallocated or operational funds if they better understood the operations of the organization. Donors may be surprised to understand the importance of unrestricted operating funds, and the way these funds meet the needs of diverse programs in a flexible, immediate way, and therefore further the overall mission and work of the nonprofit they support.
Clearly, an organization needs to be respectful if a donor is determined to attach strings to a gift, and needs to make sure they can carry out the donor’s wishes before accepting the gift. But if contributors can be educated about how their gifts will be used in a responsible and mission-enhancing way, many donors are likely to remove restrictions. It may be helpful to contact a California nonprofit audit service to create a transparent illustration of how unrestricted operating funds are used to further your nonprofit’s mission.
Ernst Wintter & Associates LLP specialize in California non-profit audits and tax preparation. Contact us today for help with your non-profit audit or tax prep needs.
