Fundraising. Ugh. Asking people for money was the one area Carla truly dreaded, relating to her new 501(c)(3) organization. She knew fundraising was important, even critical. But she regarded it as a necessary evil more so than a fair responsibility or fruitful opportunity. Carla had no experience asking for money and no idea how to go about it. Maybe she could find someone else to do it for her, although she suspected that doing so would cost her organization money. Carla definitely needed to get her head together on the fundraising issue, or she knew her organization was already in trouble.

Attitude

Attitude, they say, is everything. And that saying is no less true for success in charitable fundraising than for success in other endeavors. Many new charitable organization leaders profess no experience or skill in, or taste for, fundraising. You are certainly not alone, if that’s your attitude. But few experienced charitable organization leaders can make the same claim. Charitable organization leadership entails fundraising. As discussed above, the IRS public-support test ordinarily requires that 501(c)(3) public charities raise at least one third of their receipts from public donations. Your organization may successfully garner significant grant support, where you may find seeking grants to be easier than asking donors directly for money. Your organization may also generate substantial program revenue from fees and sales of charitable goods and services. But your organization will still need public support in the form of donations. To be successful, you need to ask others for charitable gifts, donations, and support. Get used to it. Develop a good attitude toward fundraising. You can do it.

Plans

Your application for your organization’s 501(c)(3) recognition required that your organization share a fundraising plan. As discussed in that chapter above, you should put good thought into your fundraising plan. IRS Form 1023, included among the other templates at the end of this guide, helps you consider traditional fundraising forms. Form 1023 provides checkboxes for mail, email, phone, and personal solicitations, donations through your organization’s website or another organization’s website, vehicle, boat, or plane donations, and private foundation and government grant solicitations. Consider all those traditional forms. But do more than check Form 1023’s fundraising boxes. Put plans in place for pursuing those donation sources. Assign responsibility to implement those plans. Set targets, review progress toward targets, and adjust accordingly. Follow that standard planning format of goal, plan, assignment, measurement, and adjustment, and you should be able to overcome your natural resistance to make a good start on fundraising.

Solicitations

Website, mail, and email solicitations are fine, as far as they go. Charitable organizations develop donor lists (mailing lists) and use those lists to make periodic solicitations. Year end is a traditional time for solicitations, given the interest of some donors to gain tax deductions for that year, before the new year. Business owners may also find year end a good time to consider donations because by then they know the year’s profit. But those who study fundraising say that effective solicitations generally require several positive contacts before the formal ask. Thus, regular newsletters are common among charitable organizations, interspersed with periodic solicitation letters or similar requests for giving. 

Content

The content of your charitable organization’s solicitations can be important. Obviously, your organization’s solicitations should clearly identify the organization, its 501(c)(3) status, and its charitable purpose. The need your organization is meeting may be the key to moving a donor’s heart. Donors tend to support causes and interests with which they identify. But donors are also generally interested in supporting people, both the people your organization helps and your organization’s volunteers, staff, and leaders. Good stories and images introducing donors to the people whom your organization serves and those doing the serving can help. Some donors also want to know the numbers, like how much your organization’s individual goods or services cost ($2 buys a meal, $5 buys a Bible, $10 buys a filtration device) and how many individuals or families your organization serves. Convenient methods for donating, including online electronically, can also be helpful or essential. Attractive, well-designed, and articulate solicitations, free of proofreading errors, can reassure donors of the care your organization takes in all matters.

Donors

While the content of your organization’s charitable solicitations can be important, donors often base giving on relationships more than on information. Thus, getting to know your prospective donors and helping them get to know your organization can be a key to effective solicitations. Facility and program tours are one popular getting-to-know-you strategy. A walk through the facility, introduction to the staff and volunteers, and meeting patrons whom the organization serves, can all help a donor form relationships with the organization on which to base giving. Extend individual and group donor invitations. Schedule and publicize open houses. Speak at community centers and churches, and contribute to local media with feel-good stories of your organization’s success, so that prospective donors meet you and learn of your organization. 

Demographics

Consider, too, the probable demographic of your organization’s likely donors. Does your organization expect many individual donors with modest income and small amounts to give? If so, then you should fashion your organization’s solicitation plans accordingly to reach those individual donors. Or does your organization expect only a few wealthy individual or family donors making substantial gifts, or substantial business or corporate donations? Then your organization should consider how to reach those donors and the type of personal outreach to which they would most likely respond. Your organization can try the shotgun approach, aiming and hoping for everything. But often, an approach refined for the donors your organization actually expects to reach and move can be more efficient and productive.

Accountability

Donors also like to see and believe in a charitable organization’s accountability to properly use the donations they give. Your organization can communicate accountability in several ways. One is to track, calculate, and advertise the percentage of donations that go straight to program activities rather than overhead. Anything above 25% overhead may discourage donors. Indeed, many donors prefer to see overhead limited to around 10%. Your organization may also be able to find other funding sources for overhead, such as a generous benefactor, so that your organization can advertise that every additional donated dollar goes straight to charitable programs. Your organization may also wish to commit to financial certification by an accrediting body. Meeting an accrediting body’s financial accountability measures can reassure donors of the integrity with which your organization will treat their funds. 

Incentives

While giving is its own reward, some donors respond to specific giving incentives. Some donors give only when their donation is tax deductible. Your organization’s 501(c)(3) status is the primary step your organization can take to support deductibility. Donors must generally take care of the rest, such as ensuring that they itemize deductions to make charitable contributions deductible. But your organization’s major donors may require a copy of your organization’s 501(c)(3) determination letter to assure them of deductibility. Give them a copy. Matching donations can also incentivize some donors. If you have a donor willing to make a larger donation, consider asking the donor if you may advertise that the organization has an anonymous donor willing to match contributions up to the donor’s designated amount. Matching donations can encourage both the large donor and smaller donors.

Acknowledgment

Donor acknowledgments can be important features of charitable fundraising. First, some donors will request and require your organization’s written acknowledgment of their gift, to keep for their records and to support tax returns claiming charitable deductions. The IRS requires the charitable organization’s written acknowledgment of gifts having a value of $250 or more. Other donors will appreciate your organization’s written acknowledgment of their gift, not just for their records but for their private recognition. Draft and refine a sensitive acknowledgment and thank-you letter, not necessarily for donors of very small gifts where they would not expect a thank you, but for larger donors who might expect acknowledgment. Acknowledge the gift amount if cash or gift description if tangible items. Indicate that the donor received no goods or services back from the organization in return, if that’s the case. Sign each letter, adding a personal, handwritten note of thanks. If your organization publishes an annual list of supporters or keeps a donor wall or similar public record, be sure to ask donors if they wish to be included in that public recognition. Donors differ in that respect. Many prefer or insist on anonymity, while some of those would also prefer to be included in any group recognition. Be sensitive to acknowledgment preferences.

Property

Many charitable organizations welcome donations of property. Some donated property, like furnishings and equipment, may be directly useful to the organization, items that the organization can keep. Other donated property may be of no use to the organization other than to resell for the proceeds. You decide whether your organization has the manpower and means to accept, store, and resell donated property. That judgment may depend on a donation-by-donation judgment. If your organization cannot accept a donation of property, consider asking the donor to sell the property and donate the proceeds. If your organization does accept gifts of property, your donor may request and require a writing acknowledging the gift. As stated above, describe the gift in the acknowledgment letter, while indicating that your organization supplied no goods or services in return. Do not include a gift value in the acknowledgment unless your organization has already sold the property for the stated value. Otherwise, leave valuation to the donor, although you might help by guiding the donor to a reliable appraiser of used goods such as an estate-sale agent.

Stocks

Donors can have substantial incentives for donating shares of stock that have seen substantial appreciation in value while in the donor’s hands. The donor may be able to take a tax deduction of the donated shares at their appreciated value, while avoiding paying capital gains taxes on the appreciation, creating a sort of double win. To facilitate stock share donations, form a relationship with a local securities broker to accept the donor’s transfer of the stock shares and to promptly sell the stock shares. The broker should convey the proceeds to your organization, while both the broker and your organization acknowledge the transaction in thanks to the donor. Don’t hold onto stock shares for any reason, especially to time the market. Fiduciary duties for managing charitable funds generally discourage such speculation and risk. Sell the shares, accept the proceeds to apply to your organization’s charitable mission, and thank the donor. 

Vehicles

The IRS has special rules and forms for charitable donations of vehicles, boats, and planes. The rules and forms address the unfortunate but foreseeable practice of donors over-valuing their donated vehicles for tax deduction purposes. A $1,000 clunker becomes a $5,000 gift of a worthy vehicle. A $2,000 beater becomes a $10,000 gift of a family van. You get the picture. IRS rules and forms require the charitable organization to certify to the donor the price for which the organization actually sold the donated vehicle, boat, or plane, so that the donor can use that sale price, rather than a potentially inflated appraisal, for tax-deduction purposes. Don’t hesitate to accept vehicle donations if your organization can manage the sale and documentation. Donors may appreciate it, and your organization can benefit. Otherwise, encourage the donor to sell the vehicle and donate the proceeds.

Campaigns

Campaigns can be another useful fundraising technique. Capital campaigns to raise funds for a new building or building expansion, new equipment purchases, and the like can be especially effective. The satisfaction and excitement of participating in a capital campaign can draw both large and small donors to participate, when they otherwise would not have participated in donating regular operational funds. Charitable organizations also run special campaigns, including seasonal campaigns, for operating funds, such as Thanksgiving-season campaigns for food banks, gift drives for Christmas, and general-giving campaigns for year end. Some organizations find operating-fund campaigns effective when they have a specific shortfall to cover and can advertise the shortfall, challenging donors to help make it up, particularly around the organization’s financial year end. Otherwise, campaigns can deploy traditional means like general solicitations, targeted solicitations, tours, and events.

Fundraisers

Some charitable organizations find success with fundraising events. Events can take the form of annual fundraising dinners, fundraising walks or runs, and fundraising auctions of gifted items. Fundraising events closely connected with the charitable organization’s mission and program activities, such as fundraising dances or dinners involving the disabled youth the organization serves or a fundraising athletics competition for the disabled adults an organization serves, can be especially effective for introducing donors to the challenges and successes of the special population the organization serves. Make sure, though, that your organization’s fundraiser is an efficient use of staff and volunteer time and resources. Fundraisers can take substantial planning, execution, and cost, eating into the value of their proceeds. Consider a fundraising committee of fresh volunteers to plan and execute your organization’s fundraiser, so that it does not unduly distract from the work, energies, and attention of the organization’s program staff and regular volunteers.

Stores

Resale stores or thrift shops occupy a peculiar place in charitable fundraising. You’ve seen in a prior chapter that charitable organizations may generally not conduct business activities to generate profits to devote to funding the charity, without paying unrelated business income tax (UBIT) on the business proceeds. Yet Congress made an exception for thrift shops or resale stores. Your charitable organization may operate a thrift shop reselling donated used goods, to retain the net proceeds untaxed, to fund charitable operations. The same would not be true for any other business activity and income but is true for thrift shops. That exception is why you see thrift shops all over town, run by and for the benefit of various 501(c)(3) charities. Managing a profit-generating thrift shop can take a good location, skilled manager, and paid staff or dedicated volunteers. It can also distract from a charitable organization’s mission. But it can also generate thousands or even tens of thousands of dollars in annual support.

Expenses

Some charitable organizations spend a large percentage of their donated funds on raising more funds. In extreme cases, organizations may spend 50%, 75%, or even more of the donations they receive on additional fundraising efforts. If donors knew, they might not give. Yet some fundraising campaigns depend on mass solicitations at high cost with low transparency. Donors either give based on the slick, expensive mailer arriving in the mailbox, or the incessant telephone solicitations, or they don’t. The organization doesn’t particularly care. The mass nature and high cost of the campaign takes care of the low response rate. Beware campaigns of this type. They may be lawful, justified in part on the basis that solicitations in themselves accomplish a charitable purpose of spreading knowledge of the unmet need. But they can be hugely wasteful of donor dollars and thus ruinous of charitable causes and reputations.

Professionals

You may face the need or temptation to engage fundraising professionals to assist your charitable organization with fundraising solicitations. In many states, professional solicitors have licensing, reporting, and disclosure requirements. Be sure that you are dealing with a properly licensed and otherwise responsible professional before engaging one. Request references, and check out those references carefully. Also, in many states, charitable organizations engaging fundraising professionals must register and meet disclosure requirements. Your organization’s fundraising solicitations may also have to disclose that your organization is using a fundraising professional. Your organization may also face other state and federal reporting requirements when using fundraising professionals. These requirements are in place because of abuses in which professional solicitors or scammers posing as professional solicitors have engaged. Donors may not donate if they are aware of the involvement of a professional earning fees from the solicitation services, which is the reason for the disclosure requirements. Beware these licensing, reporting, and disclosure requirements, and reputational risks, when considering retaining fundraising professionals.

Key Points

• Adopt a positive attitude toward fundraising to help your charity.

• Develop, implement, assess, and adjust fundraising plans.

• Make clear, articulate, positive, and transparent solicitations.

• Know your donors and their needs, interests, and preferences.

• Keep your charity accountable to donors for sound stewardship.

• Recognize donor tax deduction and other incentives.

• Acknowledge donors timely, appreciatively, and appropriately.

• Consider accepting donations of property to use or promptly sell.

• Donors have incentives to donate appreciated stock shares. 

• Vehicle donations require meeting special IRS rules. 

• Fundraising capital and special campaigns can be effective.

• Fundraising events can be effective but consume limited resources. 

• Thrift shops represent a special fundraising opportunity. 

• Beware rules for employment of fundraising professionals.

Read Chapter 13.