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Should Not-For-Profits Accept All Gifts?

March 11, 2021
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Most not-for-profit organizations rely on gifts or donations to fund their program activities. One may consider it an easy decision to accept whatever it can get - after all, a gift is a gift. However, should an organization really accept everything that comes in its doors? It may be a surprise to some, but the most judicious answer is perhaps, “No.”

Not all organizations have the ability to manage or maintain gifts that are not liquid or readily convertible to cash. Some gifts may even lead to obligations that a not-for-profit would rather not have. A gift of a real property may raise property tax issues and a not-for-profit may simply not be equipped to dispose of certain types of gifts in order to convert these to cash. Some gifts result in more expenses to the organization than the projected benefits, and this is when a gift acceptance policy can be helpful.

Having a formal gift acceptance policy may also avoid the awkwardness of having to say, “No, thank you,” to your donor. It provides guidance to staff and volunteers, with a consistent way of handling nonstandard gifts. Although the need for an organization to have a gift acceptance policy generally relates to noncash or nonstandard contributions, the mission of an organization may also be a factor in limiting gifts from certain donors; an example would be a gift from an entity that conducts activities that are inconsistent with the organization’s values. The organization’s policy should provide guidelines to assist the organization in evaluating the reputational risks, costs, and benefits associated with a gift, prior to acceptance.

Organizations that reported more than $25,000 of noncash contribution on its Internal Revenue Service (IRS) Form 990 are required to complete Schedule M, and asked whether the not-for-profit has a “gift acceptance policy” that requires a review of any nonstandard contribution. Moreover, the IRS has explicitly stated that adoption of the policies and practices about which the Form 990 asks is not mandatory; the IRS has indicated that it attaches significance to the manner in which all tax-exempt not-for-profit organizations govern themselves. Some prospective funders and other readers of the Form 990 also give weight on how well an organization is administered through documented procedures, thus a formalized policy is a relevant consideration.

Drafting A Gift Acceptance Policy

Some of the things to consider in drafting an organization’s gift acceptance policy are: the selection of the appropriate system to house donor information; definition of a gift to the organization; the identification of the different types of gifts that are acceptable; establishment of a systematic review process; recognition guidelines; donor acknowledgement; and, record keeping.

An organization’s gift acceptance policy can be simple or complex, depending on the types of gifts it decides to receive. As in all other policy making, the process should be collaborative – involving the development staff, management, and the board’s committee responsible for oversight. Ultimately, one of the greatest values of the policy is the protection of the organization, through education and proper discipline, in gift acceptance and administration.