Donations are any items or services that individuals and businesses provide to nonprofit organizations in lieu of payment. Regardless of the form in which a donation is presented to a nonprofit organization, the law and accounting standards regarding donations must be followed to maintain legal compliance. Donations may be cash, in-kind items, or appreciated investments like stocks and mutual funds. All of these forms are subject to different laws, tax implications, and accounting best practices. Offering a wide variety of ways for your supporters to donate can help you cultivate more donor and member interest, as well as ensure that your accounting for all types of donations is accurate.
There are many reasons why people decide to give their money or property to charity, whether it be a cause close to their heart, the memory of someone, or simply as a way to teach their children the value of giving. It’s important that you encourage your donors to do their research before donating so that they are confident in their choice. For instance, if a charity reaches out to you and claims to be tax-exempt, make sure you check that they are in fact registered with the IRS by searching their name in their database or using the IRS’s Tax Exempt Organization Search tool. It is also important to be wary of telemarketers that are not representatives of your organization. They can be dishonest and use names that sound like yours or other charities to trick you into donating.
Donors can also choose to remain anonymous in their giving. This is often the case with public figures and philanthropists who do not wish to have their names linked to their generosity. For other donors, it may be a matter of privacy or religious beliefs. It’s essential to communicate clearly with your donors about what their donation will be used for and why they may want to stay anonymous.
Another popular way to donate is through the purchase of products and services that benefit your organization. For example, an animal shelter may accept in-kind donations from its supporters such as old puppy crates or heavy discounts at local veterinary clinics for vaccinations and examinations of rescue animals.
In-kind donations are a great way to support your organization and can bring in valuable new sources of revenue. However, it’s essential that you carefully review all in-kind donations to ensure they comply with your policies and do not pose a health or safety risk to your animals or volunteers. For instance, if a supporter donates opened dog food, that could represent a waste for the shelter and a potential food safety violation for your donors.
In-kind and cash donations are the most common types of donations, but there is a wide array of other options to explore as well. Each type of donation comes with different laws and regulations that need to be considered, as well as different benefits for your donors.