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Wednesday, May 15, 2019

The Do's and Don'ts of Matching Gifts and Challenge Grants


Is your organization considering a matching gift campaign? Charity Navigator worked with industry experts to discuss best practices for soliciting and structuring a matching gift campaign to ensure that you and your Donor are on the same page.

Generally speaking, there are two kinds of matching gifts.  The one we naturally think of is when every donation received within specific parameters (time; amount threshold; and other conditions like a particular response vehicle or channel, amount of donation, recurring gift enrollment, etc.) is matched by a Donor, and individual, family, or group that has pledged to make a significant financial contribution. The match could be 1:1, 2:1, and so forth, but the premise is that every donation made by a Supporter is doubled or more.

These campaigns will have a goal, say $10,000, and if $10,000 is contributed by Supporters or everyday donors, the Donor will match whatever amount has been agreed upon.  $10,000 becomes $20,000 ... $50,000 would become $100,000. In an ideal situation, the Donor does not make their contribution until the campaign is complete and the organization can show what amount was raised, which is then matched.  The Donor, of course, has the choice to give more, so long as they meet the original commitment to match what was raised at a minimum.

Sometimes the Donor prefers not to wait until the campaign is over; for example, Donors for year-end campaigns want to make their contribution before the end of the tax year and not wait until January to find out how much was raised.  In these instances, the pledge letter with the Donor should not only document the agreement to match qualifying donations but also confirm that the organization will refund the Donor any difference between the amount of her matching gift and the amount raised.  Here again, the Donor may choose not to accept a refund, but the understanding between the Donor and the organization is that the obligation is only to match what the organization can raise and not contribute more than that.

While this is the most common and preferred way to solicit and structure a matching gift campaign, there is another option, though much less advisable, as it can lead to confusion between an organization and its Donor. If your organization is considering using funds you’ve recently received to match new donations there are two approaches for ensuring your matching campaign is legitimate.  Both require explicit permission and agreement by the Donor. 

The first is to draft an agreement with the Donor that says the organization will position the gift as a match and refund the difference if they do not raise the full amount. 

The second is, with the Donor's permission, to create a matching challenge. In a challenge, the organization announces that it has already received a donation of, say, $250,000, and the Donor has challenged the organization to match it, thereby doubling the power of their gift. This is often a less effective fundraising strategy because Supporters recognize that the organization has already received the large gift and their own smaller donation feels less impactful. However, it's still a compelling ask, particularly if the organization is trying to reach a set goal for a specific project, e.g., "We need to raise $500,000 to do build a new community center. A Donor helped us get halfway there with a gift of $250,000. Can you help double that gift to ensure that we can create a new space for the neighborhood to enjoy?" 

In each case, having had an agreement in place with the Donor prior to receiving the gift and launching the campaign would be preferable. Some Donors have reported finding the latter approaches to matching gift campaigns off-putting because their gift has already been made and the funds now fully belong to the organization. While the agreement after the fact may be legal, it can also be felt as a misrepresentation of intent. 

Be prepared to have an open and honest conversation with your Donor about how you would like to structure the campaign and be prepared to listen to their feedback. A matching gift commitment of any amount is a generous opportunity and the Donor’s wishes should be respected and reflected in your campaign.  We strongly suggest having these discussions before rather than after the fact. 

And remember, the critical factor in a matching gift or matching challenge is the legal agreement that confirms that the Donor is only committing to the agreed upon amount, typically the amount raised. You may consider having legal counsel and/or a nonprofit accountant review your agreement to ensure this is clear and the gift will be booked appropriately before sharing it with your Donor for final approval.

Has your organization run a matching gift campaign? What did you learn? Share your thoughts, tips, or ideas below!

As a 501 (c) (3) organization itself, Charity Navigator depends on public support to help donors make informed choices. Please consider investing in the future of Charity Navigator by making a donation today.  Donate now >>

5 comments:

Unknown said...

yes

Ademeso lekan said...

I really love this article

Unknown said...

I receive requests from many charities that have a matching fund offer. If I contribute to one or more of the matching fund charities using Charity Navigator (and do not use the charity's enclosed form) will my contribution still be matched by the Donor if sent by the deadline?

Erica Seelig said...

Strangely when charities I support in my very modest way email me and other supporters that they are having a matching fund raising time/event, I feel suspicious of the charity actually having a matching donor and actually just pretending they do so donors will be more encouraged to give.
How does one know there is actually a matching donor?

Unknown said...

What kind of responses are these? Poor communication. Impossible to follow. What comment goes with what question and why doesn’t CN respond to the question directly. A waste of my time. I use CN a lot but now I’m not so confident of this organization because of the way it has handled my inquiry.