Broken Promises--Unpaid Pledges
Pledges are promises made by donors to pay a certain amount over a scheduled period. The IRS tells us to book those pledges in the year they are made. We can’t, of course, spend the money until the pledge is paid. So why do so many nonprofits balk at (a) getting signed pledges and (b) reminding their donors that the pay period is upon them? Worse—why do nonprofits fulfill their part of the bargain before the donors fulfill theirs? On one campus where I worked, a building near the center of campus was named for a donor. It was called the (donor’s name) building and the donor’s name was prominently displayed. However, the donor (and really, that’s the wrong moniker for this person) only played the first of 6 scheduled payments—meaning he had given just about 1/6 of the naming right.
When I, in my role at the campus, contacted the donor to request he live up to his part of the bargain, the reaction (and not just from him!) was that I was the one in the wrong. “How,” I was asked, “could I embarrass the donor”—presumably by asking him to honor his promise.
While we like to think of charitable giving as something warm, fuzzy—do gooding in the best sense of the word—the truth is that much of it is a business deal. This is particularly true when a gift is restricted—I will give you this so that you can do that specific thing—or when there is a negotiated recognition for the donor’s generosity. And it is equally true when there is a pledge
I am not judging here, just looking at the facts.
But when a pledge is made, the onus of paying that pledge does not fall solely on the donor. The organization has a responsibility, also.
The first is to get a signed pledge that spells out the agreed upon payment schedule and any restrictions on the gift. That pledge should also clearly outline how the gift will be recognized—and at what point that recognition will kick in. For example, certainly news about the pledge can, arguably should, go out immediately. But naming rights, for example, would need if not a completed pledge then at least 75% of the payments in hand.
With a signed agreement, all parties know when payments are due. You could then sit back and wait for the donor to remember the payment schedule. You could, but that would not be wise. Rather, you should send out reminders about one month ahead of time. Whether this in the form of an invoice, a friendly letter, some combination of the two, is entirely up to you. But it should be hard copy; something the donor can put on his/her desk as a reminder.
And if the pledge doesn’t come in on schedule, yes, you really should contact the donor with a reminder, and if necessary, another one several weeks later.
Pledges are promises and promises are assurances that someone will do something specific. Nonprofits rely on those promises and so it is our job to ensure that those promises are kept and those pledges paid.
Janet Levine is a consultant who works with nonprofit organizations helping them to increase fundraising capacity. Learn more at http://janetlevineconsulting.com. While there, sign up for her free monthly newsletter.