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Anonymous Donors

AnonDo_20190213-213125_1

Dear Kim,

I am the ED of a medium sized organization (budget just over $3 million). We raise $1 million from government (we hope that continues), $1 million from fees and rentals, varying amounts from foundations and about $600,000 from individuals. I recently solicited and got a gift of $50,000 but the person made me swear I would never tell another soul where the money came from. I did, but later wondered if that was the right thing to do. What are the protocols for anonymous donors? Can you have a donor that only one person in the organization knows about? If not, should I go back to this person and explain that I made a mistake?

~Secrets and Regrets

Dear Secrets,

I am going to quote in full the answer to a similar question posed to Donald W. Kramer, who is the chair of the Nonprofit Law Group at the Philadelphia law firm of Montgomery, McCracken, Walker & Rhoads, LLP. 

This was the question: Should the president and board members of a 501(c)(3) private nonprofit corporation know the name of an anonymous donor?

And this was the answer: “When you say 501(c)(3) organization, I assume you mean a public charity and not a private foundation.  With a private foundation, there is no such thing as an anonymous donor because all donors have to be disclosed on the annual Form 990-PF tax return, which is a public document.

With a public charity, a large donor has to be disclosed to the IRS on Schedule B to the annual Form 990 tax information return. But that is not a completely public document so that the name on the form might be known only by the preparer and the officer who signs the return. Directors, of course, have a legal right to inspect the books and records of the corporation so they have a legal right to know the identity. They may decide to rely on the president, the board chair, or an executive committee to determine whether to accept such a gift without personally knowing its source, but they have a right to know.  (If there are voting members of the corporation, they may also have a legal right to inspect the books to find out.)

You have to assume that the anonymity, no matter how few know the identity, won’t be totally maintained. Because of the potential for adverse public reaction if it becomes known that an organization is being funded by a creep, as a director or trustee, I would want to know the donor’s identity if it is a significant gift. Even if I don’t object to the gift, I would want to be prepared if people start asking questions.

If the donor really wants to keep it anonymous, he or she should give it — or “launder” it if I want to be pejorative — through an attorney or other intermediary, such as an anonymous donor advised fund at another charity.  In that case, the organization has to decide whether it will accept what many would consider a “tainted” gift.  Keeping a gift anonymous as to the general public is one thing.  Keeping it anonymous as to those responsible for the organization is another thing entirely.”

I think you have to go back to the donor and explain that the chair of the board has to know her or his identity or this donor has to give through another organization. You can reassure this donor that their identity will not be public at all, and that staff and most board members will now know who she is. In addition to the reasons that Don offers, I offer another one, which is called the “Hit by a bus test.” If you were hit by a bus and suffered memory loss, would this donor’s identity disappear with you? Any reporting to that person and any way to ask for a second gift would be impossible.

Good luck and good for you for realizing you may have made a mistake.  

~Kim Klein

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