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Think twice about restricting charitable gifts

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It’s tempting for organizations to want to steer their gifts to a charity or non-profit in a specific, strategic direction.

 

After all, companies that embrace philanthropy also like to see the impact of their generosity. That could be providing funding for a children’s summer camp, for example, or footing part or all of the bill for an MRI machine at a local hospital. These are important, tangible accomplishments that satiate companies’ desire to demonstrate a return on every investment they make. It’s a completely logical approach.

That’s why many organizations will attempt to place restrictions on their donations. That could mean specifying that their donation must go to funding a specific capital investment or initiative, such as that aforementioned MRI machine. In many cases, the recipient charity or non-profit will agree to the terms, in whole or in part. Some companies will also require a certain degree of brand recognition with their gift—from a mention in marketing materials to naming rights on buildings.

Arguments can be made on both sides of the restricted vs. unrestricted gift debate. The former ensures that funding goes to a defined cause or need that likely aligns with the donor organization’s values and corporate mission statement. Doing so also delivers quantifiable benefits that can help the donor boost their community bona fides or attract socially-conscious talent.

But while it’s true that many donors prefer directing a gift to ensure that money is being used to address targeted needs, they also need to understand that charities require unrestricted funds to operate and carry out their good work. Often times it’s the administration, marketing or payroll expenses that require a level of funding that isn’t always easy to acquire through grants or donations. But without that necessary infrastructure, a charity simply can’t function.

Here at Canada Gives, for example, we’ve had donors provide funding precisely to fund ongoing research and development of our programs and other operational needs. They know full well that by getting our message out and building brand awareness, we can create a greater impact in the not-for-profit sector and continue to appeal to new donor clients.

The trouble is that back-end funding requirements are far less appealing to some corporate donors than major capital investments or donations that flow immediately to the individuals or causes the charity supports. In fact, some see these expenditures as wasteful, determining that every cent of donations should be distributed into the field. In a perfect world, that would, of course, be the case. But charities are like businesses in the sense that they require sustained investment to maintain and grow. As long as the charity’s leadership is transparent, accountable and strategic in the way they use these funds, building that infrastructure is a worthwhile investment.

That’s why small and medium-sized businesses that demonstrate their generosity and a keen sense of corporate social responsibility through a donation should think twice before placing tight restrictions on their gift. Those conditions ultimately limit the charity’s ability to operate, grow and do even more good.

Fewer, simpler (or no) restrictions can be the focus if you hope to make a real difference with your company’s next charitable gift.


J. Denise Castonguay is the Executive Director and CEO of Canada Gives, a federally registered not-for-profit organization committed to helping philanthropists build and grow high-impact foundations. For more information, visit www.canadagives.ca

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