[Editor’s note: While it’s huge, the Susan G. Komen for the Cure/Planned Parenthood situation isn’t the only recent headline-grabbing development in the world of nonprofits. Here, our blogger talks about steps you can take to avoid some of the situations other nonprofits have found themselves dealing with lately.]
In the past week, one nonprofit was ordered by the court toreturn a $500,000 donation and pay another $500,000 in punitive damages, while another nonprofit is being sued for the return of a donation designated for a program that has since been scrapped.
These cases need to be a wake-up call to all of us in fundraising. While we can’t prevent all “bad things” from happening to our good organizations, we can take proactive steps to make them less likely.
The most important thing, of course, is to be sure any agreement you have with a donor or a major gift is spelled out in writing. Major donors make an investment for which they expect a certain “return.” Spelling out the terms of that return in writing can prevent future misunderstandings — or decisions by the nonprofit that destroy the possibility of fulfilling the agreement.
Sometimes these understandings are only verbal and may be stored only in the memory of a staff person. This is a particularly dangerous situation, as that person may leave or be hit by the proverbial bus, and the “institutional memory” is gone.
Having a policy that requires a written memorandum of understanding with the donor for any gift over a certain threshold can prevent this from becoming an issue.
This doesn’t mean you turn a gift from the heart into a document full of legalese. Your documentation should reflect your gratitude for the donor and reference the good things you anticipate happening as a result of the donation. In addition, spell out reporting you will provide, a timetable if it isn’t a project that is already underway and key milestones for the project.
You may also want to include a paragraph that states that while it is your intention to honor the donor’s designation, if circumstances arise that your prohibit that, you will seek the donor’s counsel before reallocating the gift.
Be honest — beginning and ending
Sometimes, in our eagerness to get a donation, we can promise too much. It is critical that the leadership of the organization agrees on what can be done for gifts of certain amounts. Don’t create your own disaster by committing to something that you know deep down is impossible. You only create a scenario full of potential problems in the future.
Even if your initial presentation of the gift opportunity was accurate, things can go wrong after you receive the gift. A project has to be abandoned because of circumstances that you didn’t anticipate when you raised the money. Government regulations delay the project — sometimes permanently. A lack of funding forces your board to reorganize priorities and eliminate certain projects.
Talk to the donor before he or she reads about it in your publication or the newspaper. Explain what the situation is, and have a few alternatives to offer for reallocating the money to a project that reflects the donor’s interests or addresses a pressing need. Apologize, but don’t blame anyone else.
Assume the donor will want to see the gift used by your nonprofit for an acute need, and don’t open the door for him or her to consider otherwise. However, if the donor asks about the return of the gift, be prepared to make a strong case for reallocating it. Your goal is to rekindle his or her passion for an alternative option.
Does your nonprofit have procedures in place to help prevent misunderstandings that could escalate to headline-grabbing lawsuits? Share your proven ideas in the comments.
Originally published in NonProfit Pro.