By building an incentive into the fundraising process, potential donors are encouraged to give or even increase their giving to charities. Two of the relational giving patterns often used by charities are "challenge gifts" and "matching gifts." These tools have the potential for great benefit, but also for great misunderstanding, both to charities and to donors. The purpose of this document is to explain ECFA’s understanding of the concepts.

Our interpretation of the terminology may be helpful:

• Challenge gifts.  A challenge gift represents a noncontingent gift (not dependent on the gifts of other donors) to a charity with an accompanying "challenge" for other donors also to support the same charity.
• Matching gifts.  A matching gift represents gift that is contingent (dependent on the gifts of other donors) either incrementally or wholly on:
  • Gifts raised for one or more specific projects (restricted giving) or for unrestricted purposes, and/or
  • Gifts raised during a specific period of time.

Challenge gifts. The challenge incentive is often used in television and radio fundraising campaigns. Here are some examples:

Example #1:  "Bill Brown just called in and pledged $1,000 for the Sharathon. Bill challenges his friends and other listeners to join him in supporting this radio ministry that is producing changed lives by calling in your pledge in the next hour. This is biblically portrayed through the Macedonia Church, which urgently encouraged others to give (2 Corinthians 8:3-5)."

Example #2:  "A listener has committed a 'Dollar a Day' gift. It’s an example that many can follow. We are challenging 30 other people to join them in the next hour.  When you do, we’ll have added over $10,000 to our total."

Example #3:  "If you can give a gift of $500, now is a great time to call! A listener has committed a gift of $500 and we are challenging five other listeners to join him. We’re looking for five people to give $500 in the next hour.  We’ll have added another $2,500 to the total if we accomplish this."

You will notice the examples above do not use multiplier terminology; e.g., "if you give $100, we will get $200." Instead, the examples use terminology making it clear the initial donor has committed to a noncontingency gift and if other donors pledge or give, the overall total is simply larger. Though it seems to be a technicality, it is a fundamental difference in the fundrising message.

Matching gifts.  When a donor has made a commitment to be used as a matching gift (one contingent on results), it should be based on a written or verbal dialogue concerning the terms of the matching gift.

Example #1:  "I have in my hand a matching-gift commitment for up to $3,000 from one of our listeners. It is not in our Sharathon total yet. This listener wants her matching gift to encourage others to join her in support of this station. For the next 30 minutes, she will match dollar for dollar up to her $3,000 offer. If you give in the next 30 minutes, your gift will effectively be doubled."

Example #2:  "Our ministry has a matching gift pledge from one of our loyal donors, who has committed to match gifts received by December 31 up to $50,000 for the building fund. This is a wonderful opportunity for you to double your gift to our ministry. Please send your check today with the enclosed response form."

Here are some of the integrity checkpoints for matching gifts:

• Soliciting the initial matching gift.  After a donor has committed to make a gift, should the charity ask that the nature of the gift be changed from a nonmatching gift to a matching gift? No. The matching gift should be solicited before the donor has committed to give the funds. Example: A ministry's development representative asks a donor for a $75,000 gift. The donor agrees. Then, the gift solicitor asks the donor if the charity may use the $75,000 as a matching gift. Integrity requires the development person to ask for a matching gift prior to the gift commitment.
   
• The "at risk" element.  The fundamental basis of any matching gift is the conditional generosity of the potential matching-gift donor. If the matching gift is not at risk—the charity has already met the terms of the matching gift with internal funds or through some other means—there is no basis for a matching-gift communication with other donors.

Example #1:  The donor writes a check to a charity for $50,000 and says: "If you can raise any matching gifts in relation to my gift, fine, but the $50,000 is yours." While this gift could be used as a challenge gift, it is not a matching gift. The $50,000 is not at risk and no matching-gift solicitation in connection with this gift is appropriate.

Example #2:  A government grant of $250,000 may be matched by a charity using $250,000 of unrestricted net assets. If the charity sends a solicitation letter in reference to the matching gifts, the solicitation should clearly communicate that the terms of the matching gift have already been met; i.e., the charity has already received all that it is eligible to receive from the matching-gift donor. The charity could ask for gifts to replace the unrestricted funds that were used to match the government grant but there is no multiplier impact because of a response to the general donor solicitation.

• When the terms of a matching gift are not satisfied.  For the sake of integrity, funds from the initial matching-gift donor should not be accepted if the terms of the matching gift are not met.

Example: A donor offers to give up to $100,000 for a certain project if the charity raises $100,000 within 90 days. The charity raises $90,000. The donor should only match $90,000 since these were the terms of the matching gift. If the donor wishes to make a later gift unrelated to the matching gift, it would be acceptable.

• Tracking and remitting matching gifts.  Matching gifts require careful tracking in the donor management and accounting records. The terms of the matching-gift agreement with the initial donor should be precisely followed.  Generally, matching-gift donors should not provide their gift to the charity until the charity has documented the total (not the detail by donor—this is private information) of the funds given related to the matching-gift appeal.
• When to receive a matching gift.  It is generally wise to receive the funds to fulfill a match gift pledge after the funds have been raised to fulfill the requirements of the conditional match. If the matching gift is received by the charity before raising the additional funds, the donor’s charitable deduction could be delayed until the charity fulfills the conditions of the gift.

Using challenge and matching gifts as a part of your fundraising program can be very effective. As in all fundraising communications, truthfulness is a hallmark (ECFA Standard 7.1) as are appeals that do not create unrealistic donor expectations (ECFA Standard 7.2).