What to consider when making your gift
When you’re making a significant donation to a charitable organization, you may be asked by the charity to define the scope of your gift. Will these funds be restricted to cover specific costs or spent at the discretion of the organization?
Sometimes, donors will restrict their donations because they want to invest in the programmatic activities of the charity and the important outcomes those programs create. While that approach may come from the best of intentions, there are several important factors to consider before deciding whether or not to restrict your next gift.
What are restricted and unrestricted donations?
Restricted donation/gift: Funds tied to a specific use and not available for the general purposes of the charitable organization.
Unrestricted donation/gift: Funds given to a charity for which no restrictions are placed on how they are spent. These gifts are sometimes referred to as, “general support grants.”
Why might a donor restrict a donation?
For some, this choice may stem from a lack of trust in the organization to spend the gifted funds wisely or not wanting to support the organization’s overall operating costs.
While there have been cases of improper allocations of donations, it’s important to remember that the charitable sector is highly regulated by the Canada Revenue Agency (CRA) and any charity is subject to an audit of their files.
It’s also important to conduct your own due diligence of a charity before considering donating to that organization. For example, you may want to look into the outcomes of their programming, as well as the experience of those in senior leadership and on the board of the organization. A key question to reflect on is, “Do I trust this organization to deliver on the outcomes they seek to create?”
If you can answer “yes” to that question, an important part of your decision is to trust that the organization will know how to apply your donation towards their strategic goals. This allows the organization to focus on fulfilling its overall mission and investing in all inputs necessary to achieve success. If your answer is “no,” you should consider doing further research to source charitable organizations you feel you can trust.