Are Charity Matching Donations Legit?
Dec 10, 2021
It has become common practice for charities to conduct matching gift campaigns. Donors are promised that their donations will be matched dollar for dollar up to a certain amount if they make a donation within a specific timeframe. Typically the pitch goes something like this:
"A generous board member has agreed to match all donations received by the end of this week up to $10,000!"
"Any donation you make in the next hour will be doubled!"
Charities use such campaigns to encourage people to donate more, and to do it quickly, often without adequate time to understand if a particular charity will use their donations efficiently and effectively. It is important for donors to understand which types of matching gift campaigns will really result in a charity receiving more total donations, and which are little more than marketing spin. CharityWatch is here to help.
Marketing Spin to Encourage More Donations
In some cases charities are already in possession of the money that they will use to "match" your donation. A charity will sometimes make an arrangement with a board member or other loyal donor to put their donation in a purpose-restricted fund. Based on the agreement, this donor's restricted contribution can only be used to "match" donations from other donors. Each time a new donor makes a contribution in response to this matching gift campaign, the restriction on that portion of the purpose-restricted donation is released, and the charity is free to use those funds for its general operations. To put it in simpler terms, the charity is just moving money it already has in its possession from one account to another.
In some cases the purpose restriction on the donation is legally binding. Meaning, if the charity fails to raise enough new donations in an amount that equals the total of the purpose-restricted donation, the donor has a right to ask the charity to refund the unmatched portion. Alternatively, the loyal donor could choose to simply release the restriction on the remainder of their donation in lieu of a refund so that the charity can use it to fund general operations. If the donor is a board member of the charity or some other loyal supporter, the chances that they will ask the charity for a refund are quite low.
In other cases the agreement between the charity and the donor is informal. What this means is that the charity has chosen to put a certain amount of money in one of its accounts, and then promises to use this money to "match" the new donations it receives by moving funds from one of its accounts into another as part of a "matching" campaign. At no time is the money legally restricted. The charity can choose to spend it for any charitable purpose whether or not it meets its fundraising goals. The decision to use certain funds it already has in its possession as part of a matching gift campaign is an internal decision made by the charity, not a legal restriction imposed by a donor.
In both cases a charity is using marketing spin to try to convince donors that it will only receive the matching donations if new donations are raised during the "matching" campaign. In reality, the charity already has the matching funds, and in most cases is in no danger of needing to refund them to the donor if it fails to meet its fundraising goals.
Is Misleading Marketing About Matching Donation Campaigns a Sign That a Charity Is "Bad?"
A charity's decision to use one of these common matching donation campaign marketing tactics is not necessarily a sign that a particular charity is good or bad in terms of how efficiently it will use your donations. For example, Union of Concerned Scientists has never received a rating lower than "B" on CharityWatch's "A+" to "F" rating scale (which reflects the efficiency with which it raises and spends public dollars) since we started rating the charity in fiscal 2003. As of the date this article was published, the charity received an "A" rating and met our benchmarks for Top-Rated status based on its fiscal year ended September 30, 2020. Read "Matchless Matching Campaign" from CharityWatch's article archive for an historical example of how this charity used marketing spin in a past matching campaign to encourage donors to donate by a deadline with a promise that their donations would be "matched."
The downside to these types of marketing campaigns is that they can encourage uninformed giving due to the time pressure that is put on donors to give before a certain cutoff period in order for their donations to be "matched." If a donor is already familiar with a particular charity and has done their research to understand how efficiently and effectively it will use their contributions, then donating in response to such a campaign is not so problematic. Whereas, if a donor makes an impulsive decision and donates to a matching campaign without adequate time to research it beforehand, such uniformed giving comes with negative, real life consequences. Donations may be directed towards inefficient and ineffective charities at the expense of those that could have accomplished much more with them.
Company / Employer Matching Gifts
Many companies, particularly large corporations, promote cultures of giving back (and gain some public goodwill in the process) by allowing their own employees to have a say in what charities they support when making their philanthropic decisions. Such companies will maintain what are known as matching gift programs in which the company will match donations to the charities to which their employees contribute donations. An employee will typically need to complete some paperwork or use software designed to process matching gifts in order for their donation to be matched.
Companies often maintain a budget for their annual philanthropic giving. Meaning, they typically have a dollar figure in mind of what they plan to contribute to charity annually. For example, say a large corporation has set aside $100,000 a year for its matching gift program, but only receives requests from employees to match $75,000 worth of their charitable donations. The company might choose to distribute the remaining $25,000 budgeted balance to charities of its own choosing. In this case, the total amount donated to charities by the company would not change whether or not its employees contributed as part of a matching gift program. But its employees did have a direct say in which charities would receive whatever amount it budgeted for philanthropic giving that year.
Unlike the matching gift campaigns conducted by charities that use semantics to convince you that your donation will be doubled when this may not be the case, the matching gift programs sponsored by employers are more reliable for ensuring that more total donations will go to support the charity of your choice. If you donate $50, your employer will donate $50 to match it.
A few things to keep in mind before taking advantage of such an employer-sponsored program:
(1) Each company will have its own rules and procedures for processing matching gift requests. Be sure to inquire with your company before making your donation to understand if and how your donation will be matched.
(2) A company may have an annual limit for the total amount of donations it will match in a year, or a limit on the dollar amount of each individual donation it agrees to match. For example, an employee who donates $5,000 to their favorite charity may be disappointed to learn that their employer only matches donations up to $500. Check with your employer to understand what limits it has in place.
(3) Many companies have rules about the types of nonprofits that can be included in their matching gift programs. For example, a company may only agree to match donations made to 501(c)(3) public charities. A donation to a 501(c)(4) social welfare organization or a 527 political action committee is far more likely to go against their matching gift policy.
(4) Most companies are not interested in alienating or offending their customer bases or shareholders by matching donations to controversial causes or religious organizations. Try to maintain reasonable expectations about the types of causes your employer may be willing to fund. After all, one of the purposes of corporate philanthropy is to obtain and maintain public goodwill, not scramble to do damage control by catalyzing a public relations nightmare in response to giving decisions that many people may find controversial.
Some examples of companies with matching gift programs can be found here.
There are some matching campaigns for which it is absolutely true that the charity will not receive the proposed matching funds unless you make a donation. In these cases, your decision to make a donation does increase the total donations that will be received by the charity. These types of matching gift campaigns are often found in cases in which a charity is engaging in a capital or capacity building campaign involving relatively large matching gift amounts. For example, a hospital or an art museum that needs to raise $20 million in order to add a new wing to one of its buildings might engage in a capital campaign to cover the costs of these expansions. A wealthy donor may be found who wants to contribute $5 million, but only on the condition that the charity can prove that it has received commitments from other donors for the remaining $15 million balance needed to complete the project. If the charity is unable to raise the remaining $15 million, then such a donor reasons that the project they want to fund will not be able to be completed and will choose to not make the donation.
Capacity building campaigns function similarly. A charity that wants to scale up its capacity so it can expand the scope or reach of its programs might be asked by potential major donors to prove that it has enough diversity of support from other sources to sustain these scaled-up operations in future years. For example, if a charity with a $1 million annual budget wants to scale up its operations to a $5 million annual budget, a major donor or foundation that is willing to donate $2.5 million for capacity building may want to know that the charity's expanded operations won't collapse if in a future year they choose to not continue granting this level of support. In these cases, matching campaigns are used as a way to gauge stakeholder interest in providing ongoing financial support. Such a foundation might propose that they will donate $2.5 million to the charity's capacity building campaign only on the condition that the charity can raise the remaining $2.5 million from other donors.
Public / Private Partnerships
Matching gifts may come from federal, state, and local governments, or from large foundations and corporations as part of a public/private partnership related to funding discretionary projects that will benefit a community or specific geographic area. For example, in 2004 the City of Chicago proposed that the unused Bloomingdale Line train tracks (also known as The 606) be converted into park space. As a result, an alliance among the City of Chicago, the Chicago Park District, The Trust for Public Land, and dozens of other stakeholders was formed to try to effectuate this project. A nonprofit called Friends of the Bloomingdale Trail was also formed to collect donations in support of the project. The Trust for Public Land later issued a challenge grant in which The Alphawood Foundation and an anonymous donor agreed to set aside matching funds to double and triple certain donations contributed in support of the project. Completing the project was estimated to cost about $95 million as of the announcement of this challenge grant campaign.
When very large amounts of money are at stake, corporate, foundation, and government funding is often accompanied by formal agreements that detail the conditions of any donation that will be made. Some of these conditions may require the managers of a public/private partnership project to provide evidence of their ability to raise adequate funds to complete the project before any matching grants will be conveyed.
Some charity matching campaigns are legitimate, while others may be little more than marketing spin. CharityWatch advises donors to not use the promise that your donation will be matched as your primary determining factor for deciding whether or not to make a donation. See our 5 Steps for Informed Giving to understand a better process for making informed giving decisions, and visit our Top-Rated Charities list to identify efficient and effective charities to support that are working in causes important to you.
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