Many nonprofits receive contributions of both cash and non-cash gifts and are often hesitant to refuse any donations offered. However, there are certain non-cash gifts that can cause issues and at times even cost the nonprofit money.
To prevent these situations, nonprofits should have a gift acceptance policy to standardize this process and ensure that only gifts that benefit the organization will be accepted.
Nonprofits should address the following considerations in developing a formal gift acceptance policy:
What types of assets will the entity consider accepting?
Consider listing the types of gifts that will be accepted, such as cash, publicly traded securities, closely-held business interests, real property, etc.
What is the process for determining whether a gift will be accepted?
Consider and/or determine who on the organization’s staff will be responsible for reviewing proposed gifts and when it may be necessary to engage additional expertise such as outside legal counsel or appraisers. Determine if the entity should establish a gift acceptance committee if it has a large volume of gifts.
What information is needed prior to final acceptance of a gift?
Consider documenting what due diligence is required for each type of donated property prior to acceptance. Establish guidelines for when qualified appraisals, environmental analyses, etc. are required for specific property types.
What are the timelines for the liquidation of illiquid gifts?
Establish a definition of a holding period for an illiquid gift. Establish policies to assess if there will be costs incurred during the holding period, as well as policies to address the expectations of donors if the illiquid asset cannot be liquidated in the original projected holding period.
What gifts will the entity not accept?
Clearly identity any donated assets an entity is not willing to accept.
How will the organization handle donor tax questions?
Consider clearly documenting a policy that encourages donors to obtain tax guidance from their own professional advisers. Nonprofits should avoid giving tax advice to donors.
Will the entity encounter additional work or costs related to an unusual gift or unusual gift restriction?
Establish a policy to assess whether additional time or funds will be incurred prior to the acceptance of a donation. Consider whether these unusual items enhance programs of the entity. Consider whether the entity needs to establish a minimum gift amount or whether these types of gifts should be included in the list of items that will not be accepted.
What is the gift acknowledgment process?
Establish a clear policy for the issuance of gift acknowledgment letters. Ensure these are drafted and reviewed by appropriate tax personnel to ensure all IRS guidelines have been met from both the organization’s and donor’s perspectives.
Having a clearly defined gift acceptance policy can help protect an organization against risks and unexpected costs and provide guidelines for board members or management to determine when it is appropriate to decline a donation. The main focus of a gift acceptance policy is to ensure donated gifts assist the organization in achieving its mission and do not detract from this focus.
By Tammy Ricciardella, CPA