Pledge fulfillment is important for nonprofit sustainability and fundraising, but when pledges aren’t fulfilled it can result in a number of problems. If the unfulfilled pledge amount is in the thousands, or higher, this can result in a major setback. In fact, several unfulfilled pledge disputes between a donor and a nonprofit have even resulted in legal issues and court cases.
In a survey conducted by the Association of Fundraising Professionals (AFP), 62% of nonprofit respondents said that they had 2% or more in uncollected pledge payments and 10% or more in unfulfilled pledges. An additional 91% said that they had to extend the period for a donor to fulfill a pledge.
The rate of pledge fulfillment can vary by organization, but all nonprofits still must account for the possibility a pledge will go unfulfilled. By examining common reasons pledges aren’t fulfilled and developing practices that can help reduce that unaccounted for amount, nonprofits can better prepare.
Why do people pledge donations?
Pledge fulfillments may allow donors━especially major ones━to give a large amount of money in smaller increments over time. Unlike recurring donations, pledge fulfillments will have a set schedule at which the total amount will be received, establishing a schedule for incremental payments. They also often may have a binding contract that establishes the pledge agreement and may or may not outline specifically how the donated funds are to be used.
Why do some pledges go unfulfilled?
The reasons why some pledges fall through can be different for each donor and nonprofit. Some of the most common reasons can even be beyond your control, such as unexpected financial hardship or death. However, there are some causes that organizations can and should regulate to protect those promised donations. There are also steps that nonprofits should take to increase the likelihood that pledges will be fulfilled.
Document Pledge Agreements
For smaller gifts, documenting all of the terms regarding a pledge fulfillment may not be crucial, but when it comes to large gifts, it is. Setting out the exact terms and conditions for pledges should be one of the first steps that organizations take once a donor expresses an interest in pledging. Nonprofits and donors need to document the terms of a pledge right from the beginning to prevent any issues popping up later on. Once each party agrees to terms, many organizations will create a binding contract that serve to mediate any potential conflicts.
Establish A Timeline
Part of the documentation process should include a detailed timeline for payments, as well as an outline of the actions that will be taken for each unfulfilled pledge circumstance. Also, terms for any deferrals of pledges should be outlined and documented.
Donors may be unable to meet a scheduled pledge payment for reasons beyond their control, but still want to honor their promise as best they can. This is why many organizations may work with them to restructure their arrangement, so both parties can come to an agreement that keeps donors supportive and involved, while also accounting for the lost funds the nonprofits may face. Nonprofits can provide pledge deferrals to help donors remain supportive by changing the donation schedule, reducing the amount or substituting a cash payment for an agreed upon asset.
One of the most important ways to ensure pledge fulfillment is to communicate regularly with donors. The frequency of communication should be just enough to remind them and provide them with updates, but not often enough to become spammy or pushy. Donors want to know how their contributions are helping your organization, too, so it is important to show them the impact of their efforts and to thank them in meaningful and personal ways.
Even with a documented pledge agreement and excellent donor communications, some events are simply out of a nonprofit’s ability to control. This is why calculating your pledge fulfillment rate year over year is an essential performance measurement. Nonprofit organizations must plan ahead and prepare for the possibility that a percentage of pledges will not be fulfilled, and follow best practices to try to decrease that number.