Be Prepared: Tips for donors’ due diligence

As you and your team build momentum implementing your 2024 fundraising plan, keep in mind that many individual donors look at the same criteria used by foundations to determine whether to support a charitable organization. You may not even be aware that a prospective donor is conducting due diligence. Especially when a donor is considering making a large gift or setting up a bequest, gaining the donor’s confidence is key.

The team at Whidbey Community Foundation is always happy to serve as a sounding board as you strive to continuously improve your organization’s governance and operational documentation. 

Here are three items you might consider reviewing as you do a little spring cleaning.

Governing Documents

Make sure your articles of incorporation are up-to-date and reflective of your current mission. Donors who are considering a large gift will want to see that your legal documents are in ship shape, especially with respect to the language required to achieve Section 501(c)(3) status. If you’re in doubt, consult the IRS’s suggested language. You’ll also want to review your bylaws. Bylaws can become outdated, in some cases due to technology. For example, you’ll want your bylaws to include permission to use up-to-date mechanisms to gain board approval, such as through an online poll in lieu of an in-person meeting. 

Tax Returns

You’re no doubt on top of the need to file the annual Form 990 tax return. Make it a point, though, to check for consistency between your Form 990 and the Form 1023 you filed (likely years ago) to secure the IRS Determination Letter granting charitable status. Make sure your organization’s charitable purpose is still stated correctly. Consistency across key documents is important to a lot of large donors. Indeed, many donors review the Form 990 carefully before they decide to make a gift. Make sure yours is accurate and compelling. 

Gift Acceptance Policy

Make sure you’ve recently reviewed your policies for how your organization handles the acceptance of certain gifts, especially if they fall in the category of “Non-Standard Contributions” as defined by the IRS. Gifts of hard-to-value assets should not be undertaken lightly. We encourage you to reach out to the community foundation to assist in establishing a gift acceptance policy that will protect your organization and empower your fundraisers to engage in successful conversations with donors. To that end, the community foundation offers nonprofit organizations the opportunity to establish endowments and reserve funds to benefit from the community foundation’s governance and oversight, especially related to accepting complex gifts, as well as relying on the community foundation for all of the policies and administration associated with an endowment or reserve.  

We look forward to working with you!

Whidbey Community Foundation is a resource and sounding board as you serve our community. This is provided for informational purposes only. It is not intended as legal, accounting, or financial planning advice.