Donor acknowledgement is the way nonprofit organizations recognize the individuals and entities that make contributions to support the organization's work. In some instances, it can be a simple thank-you letter. In others, it can be a formal recognition procedure, such as engraving a donor's name on a contributor's plaque or wall. The donor acknowledgement process is part of the way a nonprofit cultivates an ongoing relationship with a supporter.
Saying "thank-you" when a gift is given is never required, but it is always good form. Nonprofits rely on gifts to make up the bulk of their operating budgets. It is in their best interest to observe every formality, and to make sure to express appreciation for gifts. Donor acknowledgement is typically a function of an organzation's development department. Development staff manage the entire relationship with donors and prospective donors.
One of the first things that a development officer does when a donation is received is to send out a donor acknowledgement letter. There may be other forms of appreciation extended to the donor, but the basic letter ensures that the donor is formally thanked at least once. The thank-you letter is an official step in the donor cultivation process that is considered a best practice in the fund raising industry.
In some cases, the donor acknowledgement letter serves a secondary purpose to satisfy tax requirements. For example, the nonprofit tax code in the US requires organizations to provide donors with a receipt for their gifts that indicates whether the gift is tax-deductible. The receipt must also contain language that states nothing of value was received in exchange for the donation. Instead of sending a separate receipt, many organizations use the donor acknowledgement letter as the receipt, combining the two functions.
There are additional ways of recognizing donors, once the thank-you letter has been sent. Some organizations host a special donor acknowledgement event for major donors once a year. Other organizations publish a list of donors in an annual report or as an advertisement in prominent publications. In some instances, nonprofits design special acknowledgement programs that include adding the names of donors to a donor wall or to a special donor plaque that is displayed for a year or more.
The key to proper acknowledgement is in understanding the role it plays in donor cultivation. Nonprofits try to develop long-term relationships with donors. This makes sense because donors are their primary source of income. Development offers are tasked with moving donors along in the giving process, ensuring that they give regularly and increase the size of their gifts over time. Donor acknowledgement is an important way of making donors feel appreciated and keeping them engaged.