6 Tips to Manage Restricted Gifts Without Driving Yourself Crazy


Do you remember the days when much of the money you raised was general operating support? I do, and they sure are happy memories! Today, donors often steer their philanthropic dollars toward specific programs within a chosen organization.

There are lots of reasons for this trend, including the perceptions that program gifts yield greater impact, that they force the nonprofit to be more accountable, and that they are not “wasted” on less-than-compelling budget items like overhead or an organization’s staff salaries. The New York Times dubbed this phenomenon the “tyranny of donors” in this thought-provoking 2008 article.

To clarify, a gift that a donor makes to your organization in support of a program or specific activity, is called a “restricted gift.” A gift that isn’t tied to a specific program is called “unrestricted,” or more commonly, “general operating support.”

One upside of restricted gifts is that they’re great for stewardship – you’ll always have a topic for conversation with your donor, program activities to which you can invite them, and specific impacts to share. No sweat, right? Wrong. Stewardship may be a breeze, but behind the scenes, restricted gifts take a lot of time and energy to manage and spend correctly. Here are 6 tips to help you and your organization get it right:

1. Make Friends With Finance

Your finance colleagues are one key to keeping restricted gifts on course. Development and finance departments need systems and open communication to guarantee that everyone has the info they need. It’s likely your finance team also handles your organization’s financial audits, an activity that shines a spotlight on restricted and unrestricted gifts. Auditors look closely to make sure restricted gifts are being spent correctly and according to the donor’s intent. Help your finance team by keeping good paper trails of documentation. Here are more reasons you should build a good relationship with your finance team.

2. Respect Donor Intent

Draw upon your own well of personal integrity when dealing with donor intent. You are the spokesperson and the steward of your donor’s gift once it comes through your organization’s doors. Finance folks who don’t have a strong nonprofit background may not realize how important this is, not only in terms of carrying out a donor’s wishes, but also to create a smooth audit process and to avoid any issues with the IRS. Respect your donor’s designation of their gift and educate those around you on its importance. If questions come up or you’re unsure about a restriction, pick up the phone and clarify intent with the donor herself.

3. Package Your Programs

Be strategic when you present and negotiate a donor’s gift. When discussing program costs, fold in a percentage for administrative expenses. Agree to focus a contribution on athletic equipment for students at your school, but not on just baseballs and football helmets (what a pain to track a gift like that!). Every organization will have a different threshold at which it becomes unrealistic to manage super-restrictive donations. Know your organization’s limits. 

4. Know Your Impact

Program-specific gifts demand program-specific stewardship. When raising money for a new program, work with program staff to ensure that there’s a mechanism – however simple – for measuring program effectiveness from the get-go. You’ll want to share data and anecdotes as updates for your donor. It’s hard to pull this info together after the fact, if your program’s been running for a year and you’ve really collected nothing.

5. Embrace Change

Nonprofit programs rarely run exactly as planned. Bumps in the road and happy surprises will pop up along the way. Get comfortable communicating some of these twists and turns to your donors to keep them informed. Don’t try to hide setbacks. Instead, ask for advice and present possible solutions to show your organization’s creativity and proactivity.

6. Learn to Say No

You hear in the news every once in a while a story about a nonprofit organization that refused a multi-million dollar gift because the donor’s restrictions didn’t match organizational priorities. No matter how tight your finances are, it’s never worth accepting a gift to fund a program that doesn’t match your mission. Trust your instincts – if the gift feels like a poor fit for your organization, it probably is. 

What strategies do you use to raise and manage restricted gifts?

If you'd like proven fundraising tips and ideas delivered every week to your inbox, sign up here. You’ll also receive a free gift, my step-by-step guide, Conquer Your Fear of Asking for Money