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Gift Agreements: Is it Legal, Possible, Practical?

By Jan McGuire

What do we mean when we raise the question, is it legal, possible, or practical?

Cue the Law & Order theme music—we're talking about patrolling our gift agreements to review the fund purpose and criteria. Why do we need to do this? One reason is to determine if our organization is taking unnecessary risks in administering the fund based on the stated criteria. Think compliance with IRS or federal regulations.

Another reason is to ensure that the criteria are quantifiable instead of unmeasurable. An example we often see in gift agreements is, "the recipient must display good moral character." Good moral character according to whose standards? And how do we determine whose character is more moral than another's?

In the countless fund audits conducted by the DRG Group, we've yet to come across an organization that doesn't have issues in at least some of their existing gift agreements. As an industry, we might ask ourselves how we got here and how we prevent it moving forward. We need to step back and think about what is at the heart of the donor's decision to support our organization. Chances are excellent that they believe in our cause or have a personal connection to some aspect of our work, but that doesn't mean we must craft criteria to mirror the donor themselves.

Let's face it, fundraisers need to raise funds and often find themselves overpromising to close a gift. And in an industry filled with people-pleasers, our organizations may focus more on accommodating exceptions versus adhering to policies or best practices.

That's likely how we got here—now, how do we prevent it moving forward? Let's turn our focus back to the donor. They give us their money for it to be USED, not saved. When criteria are too narrow or specific, funds can go unspent (which makes showing impact impossible, but that's a subject for another blog). If specific stipulations must be included in gift agreements, they should be included as "preferences" and not requirements for using funds.

Gift agreements may or may not be under the purview of Donor Relations at your organization, BUT you are likely involved with stewarding funds and engaging donors. We hope you'll join us on September 13 to learn more about what's legal, possible, and practical in gift agreements and why you need to advocate for best practices in this space at your organization.


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