Where Do Fundraising Monies Go in a 501C3 Organization?
Nonprofit organizations, also known as 501(c)(3) organizations based on their filing status with the Internal Revenue Service, receive charitable donations as their main source of income. When considering a donation, it is reasonable to wonder what will become of those funds. Where the money goes depends mostly on the donor's intentions.
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Designated Donations
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A donor may contribute funds and indicate they are "designated," which simply means they may be used only for the purpose chosen by the donor. For example, some donors prefer paying for new projects or for capital expenses such as major equipment purchases or building renovations.
General Support
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When a donor contributes without specific guidelines for his funds, an organization may apply donations wherever they see fit. For example, they may pay for salaries or administrative costs. They also might invest money if their financial situation makes that an appropriate option.
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Operating Expenses
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One common form of designated donations are those that go toward operating expenses. Operating expenses include items like administrative costs, overhead, rent, salaries and the general costs of doing business.
Program or Project Support
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Frequently, donations are designated for particular programs or projects. Donors also tend to feel their impact is greater when they invest in new programs or projects rather than ongoing activities.
Capital Investments
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Especially for donors making substantial contributions, capital expenses are a frequent form of designated gifts. Capital expenses include building, renovations, major equipment purchases or upgrades. In particular, individuals, organizations or companies who would like their names displayed prominently may make donations for capital expenses where "naming opportunities" are available.
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