Donors give to nonprofits in lots of different ways — at different times, in different amounts, and for different reasons. Given this reality, it’s up to the fundraisers to adjust to donors’ differences.
But what is a nonprofit to do when a donor calls the shots in terms of recognition of their donation? As a nonprofit, what’s the “right answer” when a donor says that they want a press release, a plaque on the wall, or another form of public acknowledgement for their donation — regardless of whether that’s standard practice for the organization? What do you say when you’re in the middle of an annual fund drive and a prospective donor demands to know how they’ll be recognized before they agree to donate?
Conversely, what happens when a donor donates anonymously? Do you accept the gift, or do you worry? After all, many major institutions have gratefully accepted anonymous gifts for decades (or more), without incident. But what happens if the donor turns out to be someone who the institution doesn’t want to be associated with? The media might not be so kind when nonprofits accept money from molesters or money launderers — even if they don’t know the source when they accept the check.
Nonprofit organizations today face a real conundrum. They all need money to further their cause and help their clients. So where do you draw the line that determines if you accept a donation or not?
In the past, examples like those above have happened infrequently, relative to the number of donors that any given organization has worked with. Until recently, the decision to take the money or not could be made on a case-by-case basis. Sometimes the decision was prudent, and sometimes not, but most organizations survived, regardless of their decision.
But then came the advent — and astronomical growth — of Donor Advised Funds. There is now over $120 billion sitting in DAFs, and over 12% of all individual charitable giving coming from DAF accounts (with that percentage having grown over 300% in the last 10 years). A large number of the checks that come from those DAF accounts do not identify the donor, and there’s nothing that a nonprofit can do to get that information. At the current rate of growth, many, if not most, nonprofit organizations are likely to face the reality of receiving a check from a donor who can’t be traced.
This is just part of the reason that the US Congress and the State of California, in separate cases, have attempted to pass legislation forcing Donor Advised Funds to be more transparent about their ownership.
Donor Advised Funds, as a financial vehicle, are not the problem. DAF’s provide a great way for donors to manage their charitable giving, and the concept is here to stay. Knowing that just means that we have to deal with the transparency issue sooner than later.
For me, as a donor, board member and businessperson, it’s challenging to decide what the right answer is. One one hand, accepting a donation from someone who chooses not to identify themselves might be fine — in fact, as most of you might know — donating anonymously is near the top of the Maimonides “Eight Levels of Charity”. It’s nice to think that someone who donates without conveying their identity is just a good person who doesn’t want (or need) the accolades associates with giving. Also, many donors specifically donate anonymously so that they don’t become a target for myriad charitable organizations looking for money — especially when many charities make money selling the names of their donors. Fair enough.
However, putting a nonprofit at risk when they accept an anonymous donation doesn’t seem right either. If, via due diligence, a charity can identify the source of the donation, but they don’t take the time to do the research, then shame on the charity. But if you simply can’t get that information, however hard you try, it seems unfair to punish the organization for accepting the money to fund their good work.
Recently, I’ve been speaking to several donors, nonprofits, and fundraising professionals, with the hope of finding some consensus on the question of anonymous vs. identifiable donations. I’ve heard a few creative ideas of how to find a palatable middle ground, but I’m not sure how viable they are. The truth of the matter is that the answer remains elusive. Let’s get the conversation going, so that we can determine an industry standard that makes sense, and then get back to focusing on our missions.
Next week I'll be be discussing the dynamic between fundraisers and donors. We have the same end-goal, so one would think the relationship would be harmonious. However, both sides are often on edge. Why is that?
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- Lisa