Principle 28: Donor’s Money, Donor’s Way

Keeping It Ethical is our weekly blog series highlighting the 33 Principles for Good Governance and Ethical Practice. Throughout the series, we hope to highlight the importance of each Principle and the helpful resources associated with it and learn more from you about how you’ve incorporated these Principles into your charitable organization.

I sort of liked the approach I took in Principle 26, where I gave the “Official” and “Straight, no chaser” explanations of the principle’s intent. So, I’m going to try it again with Principle 28 – because isn’t the “short and long of it” the quickest and easiest way to grasp the principle’s purpose? So, here we go:

Official Explanation: Contributions must be used for purposes consistent with the donor’s intent, whether as described in the relevant solicitation materials or as specifically directed by the donor.

“Straight, No Chaser” Explanation: If a donor wants their contribution used a specific way – do what the donor expects.

Basically, donors have the right to expect that their funds will be used as promised. So solicitations by your organization for funding should clearly state how the funds will be used — whether to further general programs and operations, or to support specific programs initiatives.

And sometimes, you don’t tell them, donors tell you — in writing, or through personal conversations, how they expect their funds to be used.

So before your organization accepts a gift, make sure it’s in accordance with your nonprofit’s gift acceptance policy (we’ll discuss that more when we get to Principle 30), and that you’re clear about any stipulations a donor has placed on their gift. If there’s a discrepancy about that between the organization and donor, don’t conclude the transaction until necessary changes are made and agreed upon by both sides.

In fact, if the contribution is substantial, it’s a good idea for your nonprofit to develop an agreement that states any rights it may have to modify the terms of the gift if circumstances warrant. Some organizations include provisions about the right to modify conditions on the use of assets in their governing documents. If yours does, make sure that you advise donors of that through a written agreement.

There are times when a donor expects their gift to be maintained in a separate account or fund, and that they’ll have say over how the funds are distributed or invested (sometimes defined as a Make sure you consult with your legal advisors if this is the case.

And if for some reason, your nonprofit isn’t able to use contributions as indicated in your solicitation, or as the donor has requested (maybe you didn’t receive sufficient funding for a given proposed project), be sure to let the donor know, ask whether you may apply the gift for another purpose, or offer to return their gift. And for good measure, include how you’ll handle this situation, if it arises, in your solicitation materials.

As always, we make other resources available that might be helpful to you on this topic. Here are some additional reference materials regarding donor intent:

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There’s more about Principle 28 on Independent Sector’s Principles Resources Center.

If you have additional helpful resources that support Principle 28, share them below, as well as any comments you may have. You also can use #npethics on social media.

 

Types: Blog
Global Topics: Ethics and Accountability
Focus Areas: Principles for Good Governance and Ethical Practice