November 30, 2016

Why You Need A Gift Acceptance Policy

A gift acceptance policy outlines the kinds of gifts a nonprofit will accept, and under what circumstances. For a nonprofit just starting out, this may seem like more of a hassle than it’s actually worth.

But there are two reasons why having a gift acceptance policy is important:

  1. it helps the organizations figure out in advance how to take in and process certain gifts should they come about (and determine if the organization has the ability and capacity to accept particular types of gifts), and
  2. it also to determine what kinds of gifts the organization cannot or will not accept, as they may run counter to its mission or values

In addition, the IRS recommends the adoption of a gift acceptance policy as a “best practice”. In case a nonprofit does accept noncash contributions, the IRS will require a Schedule M as part of the organization’s annual return.

The “cannot accept” part can be accomplished in an open discussion with your board of directors, or a fundraising and financial advisory committee.

First, review and discuss all potential scenarios how a donor might make a gift to the organization:

  • cash
  • checks
  • credit cards
  • gifts of publicly traded stock
  • gifts of closely held stock
  • gifts of property
  • gifts of real estate
  • retirement plans
  • life insurance policies
  • time shares
  • annuities
  • copyrights
  • royalties
  • mining rights
  • and more

The board and staff should consult with a legal adviser to determine what would need to be in place to accept each type of gift. Cash, checks, and credit cards are likely going to be easy. Gifts of publicly traded stock may require setting up a brokerage account first. However, if there isn’t an expectation of regular gifts of stock, is the organization prepared to pay ongoing fees just in case?

It gets infinitely more complex with gifts of real estate, or personal property. In some case, like with closely held stock or time shares, the organization may opt to not even accept them in the first place. All different giving vehicles should be discussed, and then adopted or rejected via board resolution.

Another aspect of the gift acceptance policy is that it is meant to help the organization navigate potential ethical, moral, or administrative issues before a gift is even considered. Ethical questions can be stickier. In those cases, having a written gift acceptance policy readily available can have tremendous benefits. For example:

Let’s say your nonprofit is an urban homeless shelter with a strong focus on helping homeless families with children. A donor approaches you with the promise of a seven figure gift, but the stipulation is that the homeless shelter opens a new facility dedicated exclusively to the care of abandoned animals. While generous and thoughtful, the gift clearly falls outside the scope of the mission of the homeless shelter.

After a long conversation, the donor decides to make the gift in support of the mission of your shelter. But there is a catch: the donor will only make the gift if the board agrees that only white families receive services. You reject this restriction outright and state that your organization would only accept the donor’s gift if there are no restrictions on who is eligible for services. The donor agrees and informs you that the gift will be made in the form of shares of stock.

Two days later, you receive a call from the donor’s broker. During the conversation, the broker informs you that the shares of stock are from a company that has recently made headlines for making huge profits off of child labor, with children as young as nine working excessively long hours. Knowing that, do you still accept the gift?

If you do, how would the community and local media respond?

Using a gift acceptance policy to settle those ethical issues in advance of any potential gift is essential. It gives fundraisers guidelines to share with potential donors, and it can protect the organization from consequences that could be devastating to its reputation and its legal and financial standing. These are not the discussions a board needs to have the moment a seven-figure gift is looming. These considerations need to be made in advance, and from a non-emotional and level-headed perspective.

Everything should be put in writing and adopted by the board as official policy. The board should routinely review (every three to five year) all policies, and if necessary make the appropriate changes.

About Marc Huber

Marc Huber is a fundraising professional with over seventeen years of experience, including strategic messaging, board development, annual giving, capital campaigns, and volunteer consultation and training. He's also the author of The Fundraising Co-Pilot.

Related Posts:

Share this post:
Tools and Consulting for Small and Mid-Sized Nonprofits and Fundraising Professionals