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Why It Matters What Your Charitable
Solicitation Says
July 23, 2015
© ECFA 2015. All rights reserved.
Today’s Presenters
Dan Busby, PresidentECFA
John Van Drunen, Executive Vice President and General CounselECFA
Michael Martin, Vice President and Legal Counsel ECFA
ECFA.org/ECFAPress.aspx
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How we communicate our giving opportunities
demonstrates truthfulness or…
Reason #1
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Giving Appeals Must Be:
• Current and relevant
• Complete
• Accurate
ECFA Standard 7.1
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• An appeal for charitable gifts should only contain information that is specifically relevant to the purpose of the appeal. When addressing financial information, the appeal should provide information that is as current and timely as possible.
Current and Relevant
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• The appeal should include all of the information necessary for the prospective givers to gain a full and total understanding of the appeal. Consider the following:
The purpose(s) for which the funds will be used
The means by which the program goals will be accomplished
The financial need and condition of the organization
Complete
1.
2.
3.
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• All information included in an appeal should be accurate; that is, factual, correct, exact and precise. The appeal shouldn’t contain any information that misleads the prospective donor into believing something other than the facts as they actually exist.
Accurate
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A gift solicitation is the basis to communicate an unrestricted
or restricted giving opportunity.
Reason #2
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• “Statements made about the use of gifts by an organization in its charitable gift appeals must be honored. A giver’s intent relates both to what was communicated in the appeal and to any instructions accompanying the gift, if accepted by the organization. Appeals for charitable gifts must not create unrealistic expectations of what a gift will actually accomplish.”
ECFA Standard 7.2
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• From the point when the resource-raising opportunity is conceived, the ministry should be clear in its intent to request gifts for general purposes or for specific purposes.
• Clarity of the purpose should define the narrative and giver response options.
• This will drive how the funds will be used; the identification of gifts in the accounting records; and the reporting to givers.
Communicate With Clarity
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• An organization should ensure consistency in the resource raising appeals, response devices, and all other communications related to an appeal, as well as accounting for the gifts received.
– For example, if certain needs are communicated in the appeal that could give rise to a restricted gift, the response opportunity should communicate the same needs.
Appeals Should Be Consistent
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• A gift in response to a specific appeal is unrestricted and may be spent anywhere if the giver:
Checked the “where needed most” box, or
Wrote “unrestricted gift” or similar wording on the memo line of the check, or
Left the memo line blank on the check but enclosed a memo, letter, or other writing instructing that the gift is for unrestricted purposes.
Unrestricted vs. Restricted Gifts
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• Typically, a gift is restricted for the purpose indicated in the appeal if the giver responded to a specific appeal and:
Checked the box for the indicated project/purpose on the response form,
Didn’t check any box on the response form, or
Didn’t use the response device, but you know otherwise that they are responding to the appeal.
Unrestricted vs. Restricted Gifts
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• An organization should review an appeal to determine whether the appeal is more specific than the broad limits imposed by the ministry’s purpose and nature. If so, the gifts resulting from the appeal are generally restricted.
Link 2
Unrestricted vs. Restricted Gifts
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□ I/We praise God with you for the way He is at work! I/We want to make sure that these efforts can continue to move full speed ahead, unhindered by lack of funding for basic building blocks of ministry. Enclosed is a gift of:□ $50 □ $100 □ $250 □ $500 □ $1,000 □ $________
Mr. and Mrs. John Smith1234 Main Street, #123Orlando, FL 32832-1000
Appeal #1 – Building Campaign
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The response opportunity is general and does not mention the capital campaign or the building.
The Problem
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Appeal #2 - Endowment
□ I/We praise God with you for the way He is at work! I/We want to make sure that these efforts can continue to move full speed ahead, unhindered by lack of funding for endowment purposes. Enclosed is a gift of:□ $50 □ $100 □ $250 □ $500 □ $1,000 □ $________□ $_______ Please use where needed most.
Mr. and Mrs. John Smith1234 Main Street, #123Orlando, FL 32832-1000
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None! The response opportunity properly references the endowment fund, corresponding to the appeal.
The Problem
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A gift solicitation creates giver expectations and intent that
must be honored.
Reason #3
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The cycle of requesting and/or receiving a charitable gift is not
complete until the intent and expectations of givers have
been met.
Expectation & Intent in the Gift Cycle
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• An appeal often generates certain expectations as to what a gift will accomplish.
• The key question to ask in preparing the appeal is: “Will the expectation generated in the mind of the giver match the reality of what will occur?”
Giver Expectations
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Organizations are obligated to use gifts as intended by givers or to choose not to accept the
donation.
Giver Intent
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1. Giver responds to a specific appeal with a gift.
2. Giver’s own communication (verbal or written) or other circumstances surrounding the gift may evidence different intent.
When in doubt, follow up with the giver!
Determining Giver Intent
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Appeal #3
Response Opportunity
The appeal created an expectation for the giver that their gift would be used for the specific
project mentioned in the appeal, but the response form creates an unrestricted gift.
The Problem
The response form does not give a place for the giver to restrict their gifts to the project
mentioned. The form only includes a box “where most needed.”
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• A ministry is obligated to use a donation as directed by the giver or, alternatively, to return the donation. Once the giver has indicated his or her intent for the donation and the ministry has accepted the gift, it is the responsibility of the ministry to fulfill that intent.
• The ministry should not use gifts for purposes other than those intended by the giver. Link 3
Honoring Giver Expectations and Intent
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Ministries should follow these “5 Commandments of Honoring Giver Intent”:
1. Thou shalt be very intentional in communicating giving opportunities, so it is clear to potential givers whether general-purpose or specific-purpose gifts are sought.
2. Thou shalt expend specific-purpose gifts in consistency with the giver’s intent.
5 Commandments of Giver Intent
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3. Thou shalt segregate the revenue and expenses relating to each type of specific-purpose gift in the accounting records to document compliance with giver intent.
4. Thou shalt give special attention when specific-purpose gifts are insufficient to carry out giver intent or when specific-purpose gifts exceed the amount required to carry out giver intent.
5. Thou shalt not use a policy or board decision as the basis to override giver intent.
5 Commandments of Giver Intent
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• The board must control all contributions to an exempt organization, unrestricted and restricted to be used exclusively for its exempt purposes (see ECFA Standards 3 and 4). Link 4 and Link 5
• In addition, the board must provide reasonable measures to assure that giver-restricted gifts are used for the intended exempt-purpose(s).
Board Responsibility
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• Transparency of an organization’s financials and use of donors gifts is essential to enhancing trust.
• ECFA Standard 5 requires ministries to provide reports to donors when requested on specific projects for which it has sought or is seeking gifts. Link 6
Transparency
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Mississippi Court Ruling
Image of Holy Family Parish: JH&H Architects
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• Following Hurricane Katrina in 2005, the diocesan bishop issued a decree to merge the St. Paul Catholic Church with Our Lady or Lourdes church to form the Holy Family Parish.
• Parishioners were solicited for contributions, specifically for the construction of the new church.
• More than one year later, the bishop issued a second decree stating that the St. Paul Church would no longer be part of the Holy Family Parish.
• 157 former parishioners filed suit against the Catholic Diocese of Biloxi, the pastor of St. Paul church, and the bishop for not acting in accordance with restrictions on gifts specifically for rebuilding efforts.
Mississippi Court Ruling
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1. A religious organization may not solicit funds for one reason and then divert them for another purpose.
2. If the organization later abandons the stated purpose (which they have the right to do), givers may reclaim their donations.
3. Givers who ask for a refund and are refused may have a claim for diversion of designated funds.
Mississippi Court Ruling Lessons
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For more information on the Mississippi Supreme Court ruling and a review of its impact on churches and ministries, see Liability for Ignoring Donors’ Designationsby Richard Hammar in the July/August 2015 Church Law & Tax Report.
“Liability for Ignoring Donors’ Designations” Article
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Future Webinars
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Date Topic Speakers
August 4, 2015 Would You Leave Your Car Running? (Internal Controls) Vonna Laue
August 25, 2015 1st Annual Church Financial Management Survey Results
Cameron DoolittleJohn Pearson
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