Refunding a Donation

Trying to come up with a definitive answer on the policy of how a nonprofit should react to a donor asking for a refund is more than a little difficult. This question is multi faceted and most situations will contain different variables that effect how the nonprofit should move forward.

Obviously if you were having a fundraiser and canceled it, giving people who may have purchased a ticket a refund is really a no brainier. Likewise if you decided, due to the weather for instance, you needed to have the fundraising event at a later time you can always choose to honor the previously printed ticket.

However, if donor X gives money to your nonprofit and then gets mad at your organization or a specific person within the organization and then demands a refund, What do you do? 

Decidedly the course of action should be based on several factors. First what is the true "factual" justification for a refund. Likewise what is the "emotional" motivation behind this request.

The reason given may or may not be logical but as a nonprofit you also have to be concerned about the public relations aspect of this request as well.

Please know that I am not suggesting that you cave in quickly because you are worried about getting bad press. The actions you take with one person set a standard of how others will expect to be treated. Also, nonprofits should not easily cower when confronted with the outward threats that liken to that of blackmail. Stand firm in your decision regardless.

If you are the executive director make sure you ask your board for guidance and direction first and don't be pushed into making a fast decision.   

One way to help prevent this problem from occurring is to in advance establish a written refund policy that is displayed somewhere on the printed material you have concerning your fundraising event. 

Lastly, make sure that if you decide that your policy is to allow a refund that it must be done so within a specific time limit period as well as you might want to consider that this request be made in writing.

DISCLAIMER: This information is not intended to provide legal or accounting advice, or to address specific situations. Please consult with your legal or tax advisor to supplement and verify what you learn here.