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Practical Tips for Managing Restricted Gifts

best practices board finances funding reporting May 11, 2023


Go Beyond Narrowly Earmarked Gifts: Practical Tips for Managing Restricted Gifts


     Donor restricted gifts can have many advantages for nonprofits, but they often come with too many restrictions and leave you stuck trying to figure out how to use those funds for what you need versus the  minutia they were designated for. Today, let's dive into how to maximize your donations and keep those unrestricted gifts flowing. 

In my work with nonprofits, there are two guidelines I always emphasize when discussing restricted gifts. 

  1.  You absolutely do want to create moments where you ask donors to give to something inspiring.
  2.  But, you don’t want to put yourself in a position of receiving such narrowly restricted gifts that you’re stuck holding funds that can never be used for the very existence of your mission in day to day operations. 

Define restricted giving opportunities

      I would first recommend that the board and leadership start by defining restricted giving opportunities. What does that mean? Well, you’ll first want to decide on which areas you’re open to receiving restricted gifts for.  In other words, before that gift even comes in, you’ll have already decided if you’re willing to accept restrictions for that area. Restricted gifts should be for major initiatives or enduring projects that will continue beyond the current moment or season. You don’t want restricted gifts designated for one-time or occasional activities or for specific elements of how you do your program. 

Here’s a few examples of broad categories for which you may be willing to take donor restrictions: 

  •  Building Funds & Capital Campaigns- Chances are, you operate some sort of facility, regardless of your mission. These are ideal situations to open up restricted giving opportunities. Capital campaigns often inspire both first-time givers and very large gifts. 
  •  Enduring Programs- Does your nonprofit have a longstanding program at the heart of your mission that is known as your niche in the community? It may be a particular educational program, an outreach strategy or a benevolence fund. A well-established program with ongoing expenses can be another appropriate place to open a restricted giving opportunity. 

How to Communicate Restricted vs. Unrestricted Giving Opportunities

     As I’ve shared before, you definitely want to communicate those specific and meaningful opportunities to give. Why? because we know that donors are inspired to give when you tell a story- when you help them to feel the very reason why you exist and how it impacts a life. So of course, you want to cast vision by telling stories and sharing real-world impact. Then naturally, you want to highlight that vision within the context of your budget. For example, let’s just say you have a budget that includes  a rehabilitation program for victims of human trafficking. Well, if that was your program, you’d definitely want to communicate that specific example of personal impact, while still creating an unrestricted gift. Now, this may seem tedious, but the way in which you present this same opportunity will determine whether the resulting gift is restricted.

Here's how I would share that opportunity in order to inspire an unrestricted gift: 

     I would share the opportunity with a donor by telling the story of a life change. I’d talk about the cost of your budget for this program, and then I’d say this, “Your gift to ________ (our organization), helps to make these things possible.”  This solicits an unrestricted gift to your nonprofit by also telling a story that inspires.

Here’s how unnecessary restrictions are typically created: 

Continuing with our same example, this is how I typically see nonprofits present opportunities like this: 

“If you give a gift of $1,000, your gift will allow us to do ______, ______, and ______.”

     When you present an opportunity in this manner, you’re actually soliciting very narrowly restricted gifts, which commit you to doing very specific things. But if these things cost less than $1,000, you’ll be left holding money that you can not use. 

     So again, I want to encourage you to tell the stories. Talk about the costs within your budget. Then emphasize that their gift to your organization helps ensure that things like this are possible. 

     For more tips about restricted gifts, which I’ve written about extensively, you can visit my blog or my Youtube channel. If your situation is very unique and you'd like to discuss your specific concerns in your organization, feel free to book a strategic consult with me HERE, and let's brainstorm a plan that will work best for you!

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