Giving Circles Can Increase Nonprofit Donations

Nonprofit Fundraising Strategy to Bolster New Philanthropic Gifts

Sep 9, 2009 Molly Schar

Nonprofit organizations can tap into the power of collective giving by forming giving circles for donor peer groups to engage with nonprofits and focus philanthropy.

It's not too late to launch a giving circle program for this year. Giving circles offer donors an opportunity to work more closely with the nonprofits they support to direct their funds to areas of special interest. By facilitating this gift designation, nonprofits build stronger relationships with individual donors and create a new stream of donations.

What is a Nonprofit Giving Circle?

Simply put, a giving circle is a group of individuals with each person or couple making a contribution to the group’s “fund,” and the group deciding together how to direct the “fund” to a charitable organization or organizations. Commonly, giving circles are formed by the donors themselves without an affiliation with a nonprofit. In these cases, the circle might decide to make grants on a quarterly basis and support a different cause each time.

“A cross between book clubs and investment clubs, giving circles offer a philanthropy-focused social environment for members and often help them learn about issues in specific areas of concern,” write Paul Brest and Hal Harvey in Money Well Spent: A Strategic Plan for Smart Philanthropy (2008).

As giving circles have become more prominent, nonprofit organizations have started to embrace the model for strategic fundraising. In some cases, the more democratic and participatory giving circles are replacing the outdated named giving society model, which often operated on the principle of recognition.

“Giving circles are not donor circles. Giving circles are about something other than giving a certain amount of money to one particular charity and they do involve members deciding together where to give resources away,” writes Angela M. Eikenberry in Giving Circles: Philanthropy, Voluntary Association and Democracy (2009). So, then, how does a nonprofit adopt the giving circle model to benefit its organization?

Why Should a Nonprofit Consider Hosting a Giving Circle?

The giving circle model can require significant resources to coordinate. But giving circles have a number of advantages, according to the Forum of Regional Associations of Grantmakers in its Giving Circles Knowledge Center. These advantages include:

Further engaging existing donors
Bringing new donors to the organization
Engaging donors in a new and different way
Establishing a new channel to provide more in-depth information to donors
Providing a vehicle for donors to learn more about the impact of philanthropy

How Does a Nonprofit Host a Giving Circle?

Once a nonprofit decides to implement a giving circle program, the organization should consider the range of services it will provide. At minimum, the nonprofit will hold the giving circle “fund” as its fiscal agent.

In the case of foundations, this generally involves setting the giving circle up as a donor-advised fund with the circle recommending to the host foundation who should receive grants from the fund and for how much. For charitable organizations, this might take the form of a designated fund within the organization, such as the “Community Art Fund.” In both cases, the money is donated to the organization and the organization is responsible for tax deduction documentation (as appropriate). Donors can then be organized to support specific areas. (One idea is to come up with three “needs” and then offer donors the choice to vote on which one they are most interested in.)

The host organization also carries out a range of specific tasks for the giving circle, according to the Forum of Regional Associations of Grantmakers, which may include:

Financial, managing accounts and financial reporting
Administration and support, developing policies, databases and communications
Coordination of special events for giving circle members
Philanthropic education
Reporting and evaluation on how funds are used
Educational programs about issues and projects
Fundraising support, identifying new member prospects and creating marketing materials
Public relations

Nonprofits can charge a small fee to cover administrative costs and can also charge per event. Pay attention to legal requirements around what is permissible in terms of services in exchange for charitable donations.

By hosting a giving circle, nonprofits can create a new partnership with donors. There is no one set model, so nonprofits should talk with donors to gauge interest, engage leaders to create momentum and find a mechanism for designation that suits both sides.

Learn more about nonprofit fundraising.

The copyright of the article Giving Circles Can Increase Nonprofit Donations in Non-Profit Management is owned by Molly Schar. Permission to republish Giving Circles Can Increase Nonprofit Donations in print or online must be granted by the author in writing.

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