Proactive Steps to Stay Out of the Headlines

[Editor's note: While it's huge, the Susan G. Komen for the Cure/Planned Parenthood situation isn't the only recent headline-grabbing development in the world of nonprofits. Here, our blogger talks about steps you can take to avoid some of the situations other nonprofits have found themselves dealing with lately.]

In the past week, one nonprofit was ordered by the court to return a $500,000 donation and pay another $500,000 in punitive damages, while another nonprofit is being sued for the return of a donation designated for a program that has since been scrapped.

These cases need to be a wake-up call to all of us in fundraising. While we can't prevent all "bad things" from happening to our good organizations, we can take proactive steps to make them less likely.

Document everything
The most important thing, of course, is to be sure any agreement you have with a donor or a major gift is spelled out in writing. Major donors make an investment for which they expect a certain "return." Spelling out the terms of that return in writing can prevent future misunderstandings — or decisions by the nonprofit that destroy the possibility of fulfilling the agreement.

Sometimes these understandings are only verbal and may be stored only in the memory of a staff person. This is a particularly dangerous situation, as that person may leave or be hit by the proverbial bus, and the "institutional memory" is gone.

Having a policy that requires a written memorandum of understanding with the donor for any gift over a certain threshold can prevent this from becoming an issue.

This doesn't mean you turn a gift from the heart into a document full of legalese. Your documentation should reflect your gratitude for the donor and reference the good things you anticipate happening as a result of the donation. In addition, spell out reporting you will provide, a timetable if it isn't a project that is already underway and key milestones for the project.