To a not-for-profit organization, the notification of a gift can lead to a celebration. However, without the proper gift acceptance policy, gifts can lead to headaches and hassles for the organization.
A not-for-profit organization may wonder whether a gift acceptance policy is necessary, especially if typical donations are straightforward in check or cash. However, unusual gifts may be received at any time and a written policy will expedite the acceptance or rejection of the gift.
A written gift acceptance policy serves as guidance to board members and the organization’s development team as they solicit gifts from donors. It also provides those staff and board members a way to clearly accept or reject a gift without it feeling like a personal rejection to the donor.
The policy should describe the gifts that an organization will freely accept, the gifts that will be immediately rejected, and which gifts require additional analysis prior to a decision being made. Each gift should be evaluated against the gift acceptance policy and the organization should consider the three questions below.
- Does the gift align with the organization’s mission, strategies, and goals? If the gift runs counter to the not-for-profit’s values, it’s critical that the organization reject the gift. There are also possible future implications. For example, a gift that comes with a request for naming rights may not raise any red flags in the moment. However, a building with the donor’s name could become negative publicity if the donor runs into issues in the future for criminal or unethical behavior.
An organization can add a section to the gift acceptance policy that includes the revocation of naming rights if a donor’s future actions could damage the reputation of the organization. As environmental, social, and governance (ESG) investing is becoming more important to organizations, it’s also imperative to be aware of where donations are coming from and whether the donor’s mission agrees with the not-for-profit’s mission.
- Do the benefits outweigh the cost of accepting the gift? Donations with specific or too many restrictions may impact the organization’s ability to further its mission. If the gift requires a certain activity to be carried out that is expensive, especially if the costs are higher than the original gift, the not-for-profit may want to consider rejecting the gift. For example, while donors mean well, an outdated computer may not be worth anything to an organization or may be difficult to maintain.
- Does this gift lead to possible unintended consequences such as taxes, administrative costs, or environmental liabilities? Donations of real estate may lead to property taxes while gifts of a vehicle will come with costs related to annual registration fees, repairs, and maintenance. Certain real estate may be useful to the organization for future operating uses but other real estate may have significant carrying costs or risks related to environmental or hazardous waste. If the organization plans to sell the property, the value of the property needs to be higher than the costs that it will take to sell including marketing, insurance prior to sale, transfer taxes, attorney fees, etc.
Like many other policies that a not-for-profit organization maintains, a gift acceptance policy should be reviewed on a periodic basis and updated for changes in operations or technology. For example, donations related to floppy disks, pay phones, or pagers may have been eagerly accepted in the past but wouldn’t be nearly as appreciated in today’s world.
Finally, a gift acceptance policy should schedule out the following:
- What? Establish the types (cash, real property, in-kind contributions, etc.) and forms (current, deferred, split-interest, etc.) of acceptable gifts.
- Who? Consider the types of donors (individuals, corporations, foundations) and the team members authorized to make gift acceptance decisions.
- When? Determine the timeframe for making decisions on gift acceptance and the length of time to hold on to or sell certain types of gifts.
- How? Make sure gifts and agreements are reviewed by the executive team and external professionals (attorneys, appraisers, etc.).
If you have any questions or would like to discuss how to establish your gift acceptance policy, please reach out to Katie Galaska, Director, Audit & Accounting, or any member in our Not-for-Profit Industry Group.