Restricted v Unrestricted Donations to a Nonprofit
1 January 2017
Julianne Shenk
JBS Nonprofit Consulting
“Where does my money go when I make a donation to a charity?”
“Can I designate any sort terms regarding my donation?”
I get messages and questions just like this one all of the
time. You want to know where your money is going, what it is being put towards,
and used for. As a donor, you have every right to know the answers to those
questions.
Most people often donate money to a charity simply by
writing a check or presenting cash with no stipulations. This is called an unrestricted
donation. You have no say in where the donation goes or how it is used. It can
go to a number of places including administrative costs, building upkeep,
community programs, grants…the list goes on.
If you would like to make sure that your donation goes to a
specific campaign, program, or usage, you will need to make a restricted
donation. I know this may sound daunting and one client actually said to me, “That
sounds like extra work that I don’t have the time for. I’ll just catch them
next year.” That made me sad. The charity would have lost out on a donation
because of a perceived burden. It isn’t
hard at all. It is as simple as a letter sent accompanying the donation expressing
your wishes.
FYI: There are two types of restricted donations, Temporary
Restricted Donations and Permanent Restricted Donations. Temporary restricted
donations contain a temporary
donor-imposed restriction for either a particular period of time or for a particular
purpose. The restriction on this type of donation expires after the passage
of the period of time or the fulfillment of the particular purpose. A permanent restricted donation are funds for
which the amount of the donation must be maintained in perpetuity, with the
purpose fulfilled using earnings from interest or investments.
If you want to support a certain campaign, project, etc. a
restricted temporary donation allows you to direct your efforts. If you wish to
establish and/or maintain a scholarship program for example, a restricted permanent
donation would be a good route.
To make a restricted donation, simply compose a letter
stating your wishes for the contribution (i.e., specific program, effort, need,
etc.) and present it to the organization with the donation. (Tip: make a copy
of the letter and check if applicable, for your records). Rest assured, the
organization is under legal obligation to use/disperse the funds per your request.
One thing to keep in mind, that nonprofits need unrestricted
donations, too. They need the discretion to make improvements, research and develop.
They need funds available for emergencies, new programs and community projects
and outreach. In short, nonprofits need, operate on, and thrive via donations.
As always, I encourage you to do your research and decide what
a comfortable donation is and where you want that donation to go. And, as I
often say, nonprofits do not just need your money, they need you. They need
volunteers. If you can, volunteer your time. You will be helping others and you
will be helping yourself, too. I even included an article about the benefits of
volunteering on my site last summer. You can access the article here:
It is the end of the year and I know folks are getting ready
to make their year-end contributions to their favorite nonprofit organization(s),
I hope that this gives you some new insight and presents options as to how your
money can and will be used.
