Soft Credits--How? Why?

Amy Ranker:

Hello all! I am new to data entry in general and Raiser's Edge in particular. I am responsible for gift entry and as we change over to RE, a question has come up as to why we have soft credits in our system and why they are needed. The way I have been using it is that we apply the gift to the donor and soft credit to what company/organization they are giving through. When I asked our consultant, she said that we should be doing it the other way around (soft crediting the individual donor) and that that was best practice. But why is that so? If we are doing it the second way, then when I pull gift reports, the donation shows up under United Way, for example, and not the person who actually gave the donation. So what are you doing?

• Fundraising - not gift entry, not receipting, not accounting
• Don’t let accounting dictate how RE is used
• Always think about the output – how best to report information to the fundraisers

• The IRS says nothing about what record a gift should be entered into in a fundraising database
• You do not need to enter the gift in a record based on the name of the check
• You do need to follow proper tax receipting and acknowledgment laws and rules, but do not need to follow a mindless “name on check” fallacy

• Don’t “just soft credit them”
• Consider the OUTPUT with soft credits, not just the input
• There are trade-offs – easy on the entry end or easy on the output end
• Do not use soft credits for
  • Money raised
  • To simply link someone to a gift
• Hard credit should go to the fundraising entity – who we asked, who gets the acknowledgment, who gets recognized, who gets further mailing, who will be asked again
• Create a gift attribute named “Name on Check” with a text data type
  • Enter this attribute on any gift where the name on the check is sufficiently different from the donor’s name to warrant calling this out in the letter
  • Include this attribute in the fields to export for the acknowledgment letters.
  • Modify the acknowledgment letter to include this field and use the Microsoft Word “If … Then…Else … function to display the name on the check in the letter only if the attribute is not blank.
• There should be a very limited use of soft credits
• Use “other” as a gift type rather than soft credit     
  • Consider using gift subtype every time with Other to explain the specific uses of Other and to allow filtering of queries, reports, exports, and so forth more easily

• From non-profit community foundations
• From for-profit corporations
• Who is the gift legally from?  Who gets the tax receipt credit?
• BUT
  • Who made the decision?
  • Who do you want to thank?
  • Who are you going to recognize?
  • Who are you going to mail to accordingly?
  • Who are you going to ask for the next gift?
  • In whose record does your fundraising team want to see the money?
• Hard credit the individual or couple who “advised” the gift
• Use the “Name on Check” gift attribute
• Soft credit the foundations, not the corporations
  • Always with an eye toward your SC grid and output needs
• Ensure your acknowledgment letter is worded properly
  • Have a DAF Letter code?
  • Use conditional statements in your letters?
  • Put the Name on Check attribute in your letter
• Create an organization relationship …
  • To the DAF itself?
  • A linked relationship to the foundation
  • Anything to the corporation?

• It is common for the company or a third party to send us the employee contribution
• So it arrives on a company check, oftentimes with both the employee’s money and the company’s match rolled into one
  • BUT whose money is it?
• The employee’s money should go into the employee’s record as a hard credit
• Use the Name on Check attribute
• The company can’t provide a tax receipt to the employee, so less concern about the acknowledgement letter addressing tax issues
• If you don’t know the employee’s name, use
  • The Anonymous constituent
  • An org constituent named “The Employees of ABC Corporation”
• Use the Matching Gift functionality, don’t use soft credits for matching gifts
• If both parts arrive in the same check
  • Enter the one check as 2 cash gifts in the batch
  • Create the Matching Gift Pledge off the employee’s portion
  • After the batch is committed, apply the company’s portion to the MG Pledge
  • Most organizations don’t post matching gift pledges, so a Cash gift and a MG Pay-Cash are posted the same way
  • Depending on your post and reconcile with accounting, this may require some manual explanation

• Who gets the hard credit, is there a soft credit, are there organization relationships?
• Find out more information about the situation …
• If it’s the “glorified checking account” type, enter it into the person’s or couple’s record with the “Name on Check” attribute (don’t forget to do the letter right)
• If it’s the Gates Foundation, enter the gift into a record of that name and consider soft or Other credit based on your other uses of soft credit
• If it’s somewhere in between … that’s where judgment comes in – understand donor needs, and understand Raiser’s Edge
• Consider
  • Are there foundation staff?  A different contact person?
  • Multiple people in the family beyond one couple, such as siblings or children?
  • Is there a different mailing address?
  • How is the recognition to be done?

• People collect the money form their sponsors for us, and send in one check
• Gifts at the death of someone given to the surviving spouse
• Third Party events where we get the proceeds
• Who are the donors really?  Who do we want to thank?  Wo do we want to recognize?
• What does the IRS allow us to do?
• Pick up the phone, ask questions, get into complicated situations
• Break out the money into separate donor records if you can, and the data entry load is reasonable and worthwhile
• Otherwise enter the money into your “Anonymous” constituent record or another specific record to the purpose.
• Be careful with organizations – sometimes it IS there contribution
• Perhaps ask the host not to consolidate the checks

• A revocable living trust is set up by individuals and couples so their assets do not go through probate at death.
• It is a separate legal entity, but there is no separate tax entity (no separate tax id number)
• There are no staff
• There is no different address
• Giving decisions are not affected
• Fundraising is not affected
• Enter the checks into the Person/Couple’s constituent record
• Use the Name on Check attribute if concerned
• Don’t be afraid to ask your donors if you’re not sure – there are many kinds of “trusts”

• The IRS DOES NOT require the gift be entered based on the name on the check
• Understand and consider output considerations when entering gifts
• Document policies and procedures specific to your organization

• Soft credits will be changed so you can run reports differently based on types of soft credits.  For example, spouses with their own record you can tell the report to only report the hard credit (primary spouse).  However, with foundations, you can have the report only pull the soft credit (the family).  Right now, a report will treat all the soft credits the same way.