Non-Profit
Gift Acceptance Policies for Nonprofits
Nonprofit organizations are often the recipients of “gifts” from donors. While many gifts (or, non-cash contributions) are beneficial to nonprofits, others can be more of a hassle than a benefit. (Read: no one needs a computer from 1993). Creating a “gift acceptance policy” can help nonprofits manage the expectations of donors while providing guidance for board and staff members about which gifts are acceptable and the procedures that need to be followed.
Organizations that are required to complete Schedule M of the Form 990 (including those that receive more than $25,000 in non-cash contributions) will be asked if they have a gift acceptance policy. Even organizations that are not required to complete Schedule M should consider adopting the policy and/or reviewing their existing policy annually.
A well-considered gift acceptance policy addresses the following issues:
- What types of gifts will the organization consider for acceptance? Many different types of gifts exist, but donors also have different vehicles to accomplish the gift to the organization. The organization should determine its capacity for receiving different types of gifts.
- What types of gifts will the organization not consider for acceptance? The organization may not be able to easily convert noncash gifts to usable resources. For example, an organization receives a gift of land that may take years to sell. Prior to its sale, the organization must pay property taxes, which could cost the organization more than the value of the land.
- What types of gift entities is the organization willing to participate in (i.e., split interest trust or other trust arrangements)?
- What types of restrictions on gifts will the organization accept? Gifts with restrictions frequently create problems for an organization. If it cannot easily honor the donor’s restrictions, the organization should decline the gift.
- When will the organization accept gifts? Is there a deadline for making certain types of gifts? Due to timing and due diligence issues, the organization cannot always accept gifts when offered. For example, the organization should not accept real estate near year-end due to the time it takes for the organization to perform due diligence, especially regarding title and environmental issues. Additionally, the organization should clarify how end-of-the-year donations will be processed and recorded.
- Who reviews and authorizes the acceptance of noncash gifts, gifts with restrictions, or gifts using alternate funding vehicles? The board should appoint someone from senior management to this task. The board should give this person clear instructions about gift acceptance.
- What forms (if any) of virtual currency are accepted? What channel(s) will be used to accept virtual currency (e.g., third-party vendors)?
- Who has the authority to provide acknowledgments to donors and who is required to monitor any IRS filing requirements for subsequent transactions (e.g., sales of the property)? The finance department is ordinarily responsible for this task.
- Is there any positive or negative publicity surrounding the donor that could have potential ramifications to the organization?
Developing a Gift Acceptance Policy
Developing the gift acceptance policy requires input from several roles within the organization, including development, finance, administration, legal, and top management. This reduces the risk that one department will circumvent the policy to appease a donor.
Gift acceptance policies may be as simple or as complex as an organization requires. It is better to start with a simple policy and then add specific provisions to address organizational concerns.
After the policy is drafted, it’s a good idea to have it reviewed by legal counsel before it’s reviewed and accepted by the board of directors. Once accepted, it should be reviewed six months later and annually thereafter.
Contact D+L for Guidance
For nearly 50 years, Dugan + Lopatka has partnered with nonprofit organizations to navigate every step of the financial journey. At D+L, our CPAs and consultants are always on the cutting edge of changes in the nonprofit sector. We understand the challenges you face—the special accounting, auditing and reporting requirements of your organization—and we use our deep expertise to deliver exceptional service tailored to your needs.