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The difference between donations and sponsorships

03/03/09

Permalink 01:43:45 pm, by ninette Email , 232 words   English (UK)
Categories: Articles

The difference between donations and sponsorships

The words donation and sponsorship are often used in the same context to describe funds that have been received as gifts. Donations and sponsorships are, however, two completely different concepts in the world of fundraising.

Donations

Donations are made by an individual/company/foundation/trust, etc for specific development projects at tertiary institutions or NGOs. When approaching companies for donations, these funds are usually obtained from the Corporate Social Investment (CSI) departments. Company shareholders decide on a certain percentage of company profit to be allocated to corporate social investment annually.

If there are no conditions to the donations, they are bona fida donations and donors are entitled to tax rebate certificates according to Section 18A of the Income Tax Act.

Sponsorships

Sponsorships are obtained from companies' marketing departments and are regarded as marketing budget expenditure — therefore sponsorships are not bona fida gifts and are not eligible for tax rebate certificates.  

Sponsors regard their contribution as a commercial transaction and expect return on investment by means of marketing opportunities, e.g. the company's logo on course material, folders, sport bags and clothes; banners at the venue of for example a conference, course, event, etc.

Key selling points for an event or project are: audience size and geographical scope; the prestige of the offering to the audience; opportunity for client entertainment; sole sponsorship; brand exposure opportunitues and value of the exposure.

3 comments

Comment from: Joalet Steenkamp [Visitor]
Where does tax incentives i.e. the income tax act no 58 of 1962 fit in? How can it be used as incentive to obtain industry funding of university R&D projects?
03/04/09 @ 10:32
The best article. Thank's!
17/04/09 @ 04:48
Comment from: ninette [Member] Email
The Income Tax Act that you are referring allows the University to issue tax rebate certificates in accordance to section 18 (A) of the act. A donor can then claim a certain percentage back on their SARS forms. Donors can to a certain degree minimize their payable tax by claiming back with a tax rebate certificate. As an individual your SARS documents will also have a section for charitable giving. Let say for instance you contribute towards the Alma mater fund (the old Project 202000). You will receive a tax rebate certificate, which are issues from the Department of Institutional Advancement. You can then add this certificate with your other supporting documents for your SARS submission.

Another method is to entice a donor by offering points towards their B-BEEE scorecard. Each company can claim points through their procurement processes if they purchase from a B-BEEE provider. A company can focus on a minimum of five criteria. There are nine, ranging from social responsibility, skills development to enterprise development. The University is on a level 4. This means that 110% of any donation made to the University can count towards the donors B-BEEE scorecard. Naturally this will only work for CSI, not Foundations.

I think the essence is that Fundraising is a serious business. Donors are investors and we should be able to offer instead of ask. If you need any further advise on raising funds, contact the Department of Institutional Advancement or consult our blog.
21/04/09 @ 15:26

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