A few weeks ago, one of our members in The Fundraisingology Lab asked a question: The organization had done a highly successful appeal to raise funds for a specific person facing extraordinary need. Funds poured in from energized donors who wanted to help.
Normally, their campaigns raised enough to fund or almost fund the needs they described. This time was different. They raised more than was needed. Like twice as much.
What were they to do? Donors had given, expecting their money to go to that specific need. Ethically, they wondered if they should just give it all to the person in need, even though it was too much.
Then things got worse. The person they’d raised funds for turned out to be not telling the truth.
So now they not only had too much money, but they really couldn’t spend any of it on the project that had motivated so many donors to act.
What was the right thing to do?
I’ll tell you a possibly “wild” solution to their problem at the end of this post. But what they really needed to do, they should have done a long time ago, before this problem came up:
They should have been raising unrestricted funds in the first place.
Definition: unrestricted – or undesignated – funds from supporters than can be spent on any organizational activities. That’s anything from core mission activities to “overhead.” Unrestricted funds are critical to your survival.
But it’s challenging to raise unrestricted funds. Donors are much more responsive to specific needs than they are to “keep us going.” (Professor Russell James explains the psychology of this phenomenon in this excellent post: Are You Fundraising in the Right “World”? It Makes All the Difference! )
That puts you in a tough place. You need “general” money, but donors are considerably less likely to respond to “general” appeals. Making matters even worse, large institutional funders (foundations, government, etc.) often give tightly defined restricted funds. It’s important funding that you really need, but it makes your need for unrestricted funds even more urgent.
That leaves your individual donors holding the bag for the boring unrestricted funds.
The main thing most organizations should do is have a policy (in writing) that most funds raised are unrestricted. (It’s likely not possible to raise 100% unrestricted funds because of the way institutional donors work. That’s a whole other issue!)
A few years ago, I asked an accountant who specializes in nonprofit issues what is the right thing to do as far as accountants are concerned. Here’s the good news: He told me it’s possible to raise unrestricted funds while talking about specific needs and projects. There are three specific things you need to do:
1. Somewhere in every fundraising campaign, you should include a statement like this:
Your gift will not only help with this wonderful project, but it will also help in many other ways. We work with all kinds of children all over the world, and your kindness makes it possible for us to help each one.
This is just a suggestion of how it might be. The purpose is to specifically say, “Your donation will not only help with this project but others too.” Think of it as a “friendly” way of describing your policy about raising unrestricted funds.
You have a range of options here. Some organizations go as far as saying something like, “All gifts are symbolic and help fund the entire work of the organization.” Personally, I find that a little bit, well, disingenuous.
2. “And other help…”
On the action line of the reply device or landing page make sure the description of the call to action includes a phrase like:
- … and other help.
- … and other projects.
- … and other places.
You probably should include that elsewhere when you make a specific call to action. You are saying explicitly that some of the money raised will do other good things.
3. A line of copy somewhere that’s something like this:
In the case that funds exceed the projects described here, we will use the money where it is most needed.
It is your unrestricted funds policy, sometimes word for word, sometimes a simplified statement of it. This needn’t be super prominent. In direct mail, it is typically on the back of the reply device.
Done! Your excellent, compelling, specific fundraising can now raise unrestricted funds.
Here’s some more good news: In my experience, these things do not detract from your fundraising effectiveness.
I want to give you some additional ideas that you can consider doing to improve your restricted/unrestricted situation. You can do these things instead of – or in addition to – the three steps above.
Negative option restriction
A check box on the reply device that says something like, “Use my gift where it’s needed most.” This allows the donor to look beyond the topic of the appeal at hand and purposely un-restrict their gift. If a donor does not check this box, the funds are restricted to the topic at hand. If they do check it, the money is unrestricted. A high percentage of donors usually choose this option.
Positive option restriction
Make it clear with the way you state the offer that you’re raising unrestricted funds. But include a check box that says something like, “Please use my gift exclusively for this project.” If they don’t check it, the money is unrestricted. They have to check the box to restrict their donation. Most donors, most of the time, do not check this option.
Promote the advantages of unrestricted giving to some donors
Unrestricted gifts may be boring, but they’re important. In fact, if you really want to boost the impact of your giving, you should consider funding fundraising. This has a return on investment of around 10 to 1!
You can specifically make this case to some donors. The challenge is it’s a complex, left-brain offer. Almost certainly too complex to communicate effectively through direct mail, email, or other low-attention channels. But you may have a group of donors — most likely major donors – that you can have personal conversations with. Many organizations find an elite group of donors who love this offer.
“Permission unrestricting” after the fact
Like our Fundraisingology Lab member, I told you about at the beginning, it might be too late to do any of the above things. Something went wrong, and now you have restricted funds on your hands that you really need to un-restrict.
Here’s a way to do that: Go back to donors who responded to the original offer and ask them for permission to redirect their gifts to another fund – or better yet, unrestricted. Let them know you have too much money for that project, but you have other urgent needs they could fund if they’re willing. Tell them that if they do or say nothing to you about it, the money will be redirected. To keep the money as it is (restricted), they need to tell you that’s what they want.
Very few donors choose to keep the money restricted. In fact, some donors make an additional gift!
That’s why I’m willing to give you an even wilder version of this: Give them the additional choice of having their donation refunded if that’s what they want. A few large organizations have done something like this after major disaster where they raised more than needed for the disaster at hand.
Scary? Yes. But I’ve never heard of a donor wanting their money back in situations like this. It must happen at some point, but it’s vanishingly rare. They are far more likely to make an additional donation.
It’s a donor-honoring strategy, and that almost always works out well.
I’d love to hear any other strategies you’ve done or seen to deal with the unrestricted funds challenge. Tell us about it in the comment section below.
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