Regarding philanthropy, it’s essential to consider the various factors that affect a donor’s impact on an organization’s mission and vision. Having the proper resources and practices in place minimizes risk and ensures that your gifts support your organization’s goals and mission.
As we develop and manage our prospect pipelines, it’s vital that we thoroughly consider the backgrounds of our potential donors. This is especially important when it comes to large gifts.
Before accepting a gift or soliciting a new donor, nonprofits must take the time to consider the various factors that affect an organization’s mission and vision. While predicting how a gift or donation affects an organization is impossible, the 24-hour news cycle can provide important information about a potential donor.
Financial and Legal Risks
There are many risks associated with accepting a donation to a nonprofit organization, and it’s usually not worth the risk to accept it if it could affect the organization’s financial stability or lead to an issue with the law. To minimize these risks, the development department, leadership team, and individual fundraisers should thoroughly investigate the potential donors’ backgrounds and follow established policies.
A strong donor acceptance policy is critical to protect the organization’s goals and mission. It should include rules about the types of accepted gifts and guidelines for naming and anonymity. Proper procedures can minimize risk and ensure donations support the organization’s goals and mission.
Reputation and Ethical Risks
Different standards and methods should be used by each organization to determine when a gift or donation can be considered harmful. Some nonprofits will only accept contributions from individuals who support the organization’s values or mission, regardless of their motives.
Nonprofit organizations should consider the reputation of their potential donors by checking into financial difficulties and criminal activity. A foundation or organization should consider the ethical nature of its funding source. Check if the potential donor support groups or candidates whose agenda is out of sync with your nonprofit. These are some of the questions that leaders and fundraisers should ask during the donor vetting process to help protect their organizations from potential ethical and reputational risks.
Conducting prospect research before asking for donations can help identify potential donors who may pose ethical, legal, and financial risks. It can also flag prospects who have unclear or inaccessible wealth sources.
To check for adverse press reports, an organization should conduct a news search and review recently published articles.
Before conducting prospect research, an organization should thoroughly check the sources of the potential donors’ previous funding and their current involvement with various charitable activities.
Although donor vetting can be a multi-faceted process, organizations must clearly understand their goals and the resources they need to make informed decisions. A strategic plan and asking the right questions can help ensure a successful process.