Has your nonprofit ever been asked to reimburse a donation? Refund requests for donations are relatively uncommon, but donors sometimes request that charities refund the money that they gave to charity. If a donor wants to have the money returned, the charity should provide a written return policy explaining why it must do so. When a donor gives you a check for a gift that you have not used, the charity must return it. But if a donor requests that money be returned, what do you do? Find the answer to that question and more throughout this article:

• Why would a donor ask for a refund? There are many reasons why donors often ask to have their money returned. Some people do not understand how the charity is really making an impact; others believe that the charity is misusing the funds it receives. Sometimes people do not like certain nonprofit charities because they do not agree with them, or there may be a behavior they dislike. Donors complain when charities refuse to return funds because they think you are not doing what they asked them to do.
• Should nonprofits refund donors? There is no law requiring nonprofits to refund donors money if their donations are returned to them. There are some laws in some states that require charitable organizations to return gifts from donors — but those laws are often very unclear. Donors who complain about charities not returning their donations often believe it is impossible for a charity to return a donation after it is accepted.
• Under what circumstances is a refund mandatory? When a donor gives money to a nonprofit that violates the terms of its donation agreement, the charity is legally obligated to return the money. If a donor has given money to a charity and it is not used, that charity must promptly refund the money. An example of this is If a donor agrees that a gift will be used for Hurricane Relief, but the money is spent elsewhere, the charity must refund the money.
• Have a refund policy in place. To mitigate any lack of clarity around donation refunds, have a written policy in place. As an organization, determine the policy that is the best for your context. This could be anything from requiring reimbursement if asked or that all donations are nonrefundable. Ultimately, if your organization follows best practices for finances, this should not become an issue for your organization. If a gift recipient reaches an agreement with a charitable organization that requires it to return the money, that organization must refund the money he or she donated. If a donor donates money to a charity, the money will not be returned. But if the donor requests a refund, the charity must explain why.
• Don’t hesitate to ask for help. If a donor asks that a donation be returned, you may need to consult with professional advisors and maybe get advice from the state agency that oversees nonprofits. If a donor asks to have the money returned, it may be best to let the donor know that you will consult legal counsel before proceeding but that they can view your current policies. This will be particularly valuable, especially in instances of large donations being asked to be returned.

Clarity around donations is so important. To help manage donations and donor information, check out MyDonors for more information. MyDonors is part of MyCommunity, which exists to build relationships and tools that equip organizations so that they can maximize their impact. Our suite of tools is designed to help organizations of all sizes focus on their mission without worrying about the logistics. We understand the importance of building strong relationships, so we provide the necessary tools to maximize impact and make a difference like our easy-to-use platforms MyDonors and MyVolunteers. Likewise, MyNonprofitCoach equips nonprofits with the training they need to be successful. Schedule a demo for any of our solutions here.

* * * * *

Source: https://www.cshco.com/articles/when-nonprofits-should-return-donations/