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WMF Fundraising Tax Receipts Process
Context and Background:
Historically, the Wikimedia Foundation has not consistently issued tax receipts for donations. It appears that the decision to issue a receipt has generally been prompted by a donor’s request. If receipts were issued, it was generally done in the form of a physical copy being mailed to the recipient; however, it was not tracked sufficiently by the office – i.e. with a receipt number, amount, address, etc. These receipts were not always issued in a timely manner (even when requested), and several follow-ups have frequently been required on the part of the donor.
The physical mailing of tax receipts also appears to be a cumbersome process, and is not clearly associated with the issuance of donation “thank you letters.”
For tax deductibility in the U.S., the IRS requires the donor to maintain a record of the donation, and for there to be a receipt for amounts in excess of $250 (For reference, see: http://www.irs.gov/pub/irs-pdf/p526.pdf)
. If this does not occur, donors may be disallowed from deducting their contributions to the Foundation, which may impact their willingness to donate in the future.
As a 501©(3) organization, it’s important that the WMF maintains clear records of all of its tax receipts and donations. It’s important from an IRS record-keeping standpoint, but also from an internal controls perspective. Providing a receipt for a contribution is a matter of important record, as it tracks important details with respect to donations, and also provides a reference for future follow-up questions from the donor community.
If WMF is slow and inaccurate in processing such requests for donors, it may discourage future contributions.
* WMF needs to create a tracking system for its tax receipts. This should work in lockstep with donation “thank-you” letters, and should be an automatic process. If the Foundation is investigating the implementation of a new online donation tool, it should also consider donation software that allows for electronic copies of thank-you letters and donation receipts to be automatically issued via e-mail to a donor.
The receipt needs to contain a receipt number, the donation amount, the date the donation was made, and the name of the charity, accompanying tax identification number, as well as a written acknowledgement from the organization of the receipt of the funds (and whether anything was provided to the donor, in exchange for the contribution). The IRS will acknowledge an e-mail receipt as an acceptable record of donation.
* The Foundation needs to maintain a listing of all of its issued receipts. If the process is automated (using software as described above), the information should be maintained in a database. The information that needs to be recorded should contain: Tax Receipt Number, Donor Name, Amount of Donation, and Donation Date.
* In the interim period (before an automated process is established), the Foundation should track all of the receipts manually, for record-keeping purposes. This can be done on a spreadsheet, with all of the required categories of information being captures.
* The Foundation also needs to establish better processes for major donation solicitation: for example, it needs to institute a process for confirming donation commitments once they occur.
Current state and next steps:
In October 2007, the Foundation began issuing standardized thank-you letters / tax receipts for all donations above $100.00, and for all donations for which the donor requested a receipt. This is a manual process: with the Office Manager customizing, printing and mailing a letter (WMF Fundraising TEMPLATE Donation Tax Receipt Letter.odt) for each donation. Currently, records of these receipts are are not consistently maintained. Also, a major donor commitment letter (WMF Fundraising TEMPLATE Donation Commitment Follow-up Letter.odt) was developed in September 2007, and since that time has routinely been sent out to confirm all donation commitments in excess of $10,000.
Next steps: beginning in February, under the guidance of the new CFOO, the Head of Development and the Office Manager should develop and implement a tax receipts process consistent with the recommendations above. Also, the new Head of Development should develop a library of standard donation documents, which should include revising and refining the donation commitment follow-up letter as required.