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What Does Restricted Giving Mean and What Is Its Real Impact?

Close Up Of A Person's Hand Donating Money On Smartphone

In the last few years, there has been a lot of talk about “restricted giving,” particularly after large-scale tragedies like the events of September 11th, the Tsunami in Indonesia and the ongoing Israel-Gaza humanitarian crisis. As a donor, you may wonder what it means to make a restricted gift to a nonprofit organization.

What Are Restricted Donations?

Unrestricted gifts are donations to a nonprofit organization that do not have any limitations placed on where or how the money is spent while a restricted gift specifies how the donation should be spent and requires the nonprofit to use it in the manner the donor has outlined

The Benefits of Unrestricted Donations

There are some benefits to giving restricted donations, and as a donor, it is your right to choose to make a restricted gift. However, sometimes such donations can actually harm the organization or not be as helpful as they could be. 

  • An unrestricted gift can help pay for monthly expenses that are vital to an organization’s existence: administrative costs, rent, salaries, fundraising, etc. The Visiting Nurse Association of Mercer County is one such nonprofit that relies on unrestricted gifts for its Annual Fund to continue to provide services.
  • Additionally, a gift without restraints may actually cover more programs and contribute to the overall success and health of an institution. 

The Targeted Priorities of Restricted Donations

One of the most significant factors in unrestricted giving is that the organization has the choice to use your funds in an area that will have the greatest impact at that particular time of the year. 

On the contrary, a restricted gift allows you to make a specific choice for the organization, often leading to a more active role in that particular charity. Many donors also find relief in knowing precisely where their money is being spent. In some instances, it may be clear to a donor that an organization is overlooking a specific part of a program that may be of particular importance to the donor. In this situation, restricted gifts not only allow the donor to allocate their money appropriately but also psychologically weld the giver to the cause they’re supporting. They can feel more attached and responsible. This type of symbiotic giving is healthy both for the donor and the organization. 

A Recommendation in Closing

We recommend that if a donor is making a larger donation, say a contribution of over $5,000, they should earmark a portion of that donation to a specific program, thus making it restricted. The remainder of the money could be unrestricted and used at the discretion of the organization. Five, six and seven-figure contributions should be managed carefully, and professional advice should be sought by the donor about how the donation would be best utilized by the organization.

As a leading PR agency in the nonprofit space, The TASC Group continues to monitor industry-wide PR trends to best serve our clients. To learn more about ways that The TASC Group can work with you, please visit our website and review some of our case studies.

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