Although it may seem counterintuitive, creating a gift acceptance policy that outlines unwanted donations to your not-for-profit organization is the easiest way to reduce confusion for staff and frustration for donors. It may be tempting, especially for organizations in their early years, to enact a “make-policy-as-needed” approach, but that method can lead to acceptance of gifts that are financially burdensome or costly to your organization’s reputation.
Key Takeaways:
- Special considerations for in-kind donations and tangible personal property
- Important details to include in the policy
- Limits of case-by-case policies
- Real estate challenges
Gift Acceptance Policy for More Streamlined Donations
Rejecting gifts as a not-for-profit might seem strange, but there’s very good reason why some organizations would want to be discerning when it comes to accepting certain donations. While generous, some donations come with costly maintenance or other fees that cut into the gift’s value.
Other gifts possess negative associations or other connotations that you may prefer to keep away from your organization. Setting out policy ahead of time on best practices will help your donors understand what the most acceptable and appreciated gifts will be. Enacting a gift acceptance policy will set out a static and consistent plan of action for frontline staff members.
Dangers of “As-Needed” Policy Decisions
Leaving these decisions to be made in the moment can also be frustrating for donors. Some organizations charge board members with coming to these decisions, but without a policy, board members can only rely on their own opinion rather than something more concrete or purpose driven.
Once the gift acceptance policy is drafted, consider forming a specific gift committee to evaluate incoming donations. Preferably, this committee would be formed by people with experience with your organization and familiarity with your gift policy. Keeping the committee small allows them the ability to quickly respond to unusual or controversial gift offers and come to a timely decision.
There are several important aspects to include within a strong gift acceptance policy. As with every document, whether it’s meant to be internal or external, your organization’s gift policy should display your mission and purpose statements at the top. Declaring your values could possibly help lessen the chances that an inappropriate donation will come your way.
Placing Restrictions on Gifts
There are a number of ways to do this, from broad policies stating that only gifts that fit an organization’s mission and purpose will be accepted to specific listing of unacceptable donations. We’ll go through some of the most common gift types, as well as some more unusual items, and special considerations an organization may want to keep in mind before accepting.
In-Kind Donations and Tangible Personal Property
Although receiving certain donations, like a boat or expensive work of art, may be exciting, these sorts of gifts may cause issues for donors and the organization alike. Not-for-profits are generally held to related use rules, meaning their organization must use the item for the donor to realize the tax deduction. Then there are other drawbacks to accepting certain in-kind donations.
Depending on the item, your organization may need to pay to store it until it can either be used or sold. Take a boat for instance. While it might be exciting news that a boat has been donated, the organization must take responsibility for its storage, storage fees, property taxes and other maintenance costs that ultimately cut into the donation’s value, and that’s IF your organization is able to sell it off in a timely fashion. There’s a very real possibility of losing money on the wrong donation.
Receiving Real Estate Donations as a Not-for-Profit
Another complicated gift is real estate, which comes with several possible liabilities that may end up costing your organization more than it brings in. Since real estate is one of the most commonly owned assets, it’s incredibly likely that it will be offered to your organization at some point, which is why you should have a plan for when that inevitability eventually comes to pass.
The first issue with accepting real estate as a donation is the environmental liability. The Comprehensive Environmental Response, Compensation and Liability Act of 1980 put the responsibility of a cleanup of hazardous materials and restoration of the property on the owner. The cleanup process can easily reach millions of dollars, far exceeding the value of the property.
There are other practical issues that can complicate gifts of real estate, which is why it’s vital for the gift acceptance committee to discuss ahead of time. Having a policy in place will keep your organization informed which increases their ability to make the most educated decisions possible. Questions to ask before accepting a parcel of real estate might include:
- Does the property have a mortgage?
- Is the property the donor’s residence? Do they intend to continue living there?
- Are there carrying costs such as mortgage payments, property taxes and insurance, utilities, HOA fees or property management fees?
- What other restrictions, reservations, easements or other limitations does the property possess?
There are other unusual forms of donations, including donations of livestock, frequent flyer miles, patents and savings bonds. Learning how to handle gift offers of an unusual sort is possible with the help of an experienced advisor. Contact an Anders advisor below to learn more about the Anders Not-for-Profit Group.
