Five Questions Every Nonprofit Donor Should Ask

Donors wishing to contribute their time and treasure to nonprofits face a vast array of choices. After all, there are more than 1.6 million nonprofit organizations in the United States that would be delighted to accept their resources. The challenge for donors becomes how to make the right match.

In order to make the best choices and enhance their experiences, philanthropists need to do some research, either on their own or with the help of a professional adviser. Nonprofits need to make sure that the answers to donors’ questions are complete and easily accessible. These questions include:

1. What is the nonprofit’s purpose?

Donors seek a clear picture of an organization’s mission and work. The nonprofit must discuss its origins, historical growth and achievements, and goals. It needs to explain how donations will further these goals, as well as describe the ability, experience and dedication of its professional staff.

Donors want to know how many people sit on an entity’s board, who they are and where they come from. Also, they need to know that the nonprofit’s 501(c)(3) status is approved and current. (The IRS recently revoked the tax-exempt status of tens of thousands of nonprofits.)

2. Is the nonprofit’s financial picture transparent?

There must be accurate reporting on how funds are spent. Timely and easy access to annual reports, audited financials and IRS 990 filings help potential donors and their advisers understand the financial health and priorities of the organization.

Too many donors still criticize “overhead” expense such as salaries and rent. While it is important to be aware of these costs, they are less important than the expenses incurred in the delivery of programs or services and are an essential component of doing so. Nonprofits are businesses with a bottom line measured by a social outcome; their employees should be compensated competitively.

 3. What outcomes result from the nonprofit’s work?

Nonprofit organizations need to accurately measure and honestly describe the impact their work is having on their mission-related issues. Too frequently, nonprofits report only on their activities, such as how many people they “touched” with their programs and what they did for them. Instead, they should focus on the outcomes they achieved and the changes that resulted. Donors are asking, “What difference did you make?”

Charting Impact, a collaboration of the Better Business Bureau Wise Giving Alliance, Guidestar and Independent Sector, developed five key questions nonprofits can use to assess their impact by analyzing the following information:

• What does your organization aim to accomplish?
• What strategies will make this happen?
• What are your capabilities for achieving your goals?
• How will you know if you are making progress?
• What have you accomplished so far? What still needs to be done?

 4. Does the nonprofit provide timely updates?

Donors stop giving when they fail to receive regular updates on a charity’s progress as well as its challenges in meeting its goals. Donors want to know what is working, what is not working and how their continuing support can help bridge this gap.

5. Does the nonprofit appreciate its donors?

Donors expect (and deserve) a prompt, personalized “thank you” for every gift, no matter the size. Some donors want public recognition while others prefer anonymity – but they all want to be thanked. And oversolicitation is often the reason some donors refuse additional gifts.

In 1993, a group headed by the Association of Fundraising Professionals published the still-valid Donors’ Bill of Rights. Since then, however, the relationship between donors and nonprofits has evolved from a transactional to a partnership model. In a partnership, donors want (and nonprofits must provide) more information, better communication and more transparency than ever before.

This article originally appeared in the Denver Post, April 14, 2013.  It is reposted here by the author.