Not-for-Profit Gifts: Thanks or No Thanks?

Not-for-profit organizations are always thankful for the generosity of their donors. Sometimes, however, they must consider whether a proposed gift should be accepted. A gift of $100,000 in cash is easy to immediately direct toward the not-for-profit’s mission. On the other hand, a donation of real estate worth $100,000 may come with additional expenses and effort to sell the property before the proceeds are available to support the organization’s mission. Having a formal gift acceptance policy can help define when an organization should, or should not, accept a proposed gift.

A well-written policy can guide donors and development staff as to what types of donations can or should be accepted, and what review procedures are necessary for certain gifts. When developing a policy, consider the following:

Clearly define the types of assets the organization will consider accepting. List the types of gifts accepted such as cash, publicly traded securities, closely-held business interests, real property, etc.

Define the process for determining whether a gift will be accepted, including which positions have the authority to accept them. Consider when the organization’s staff will review proposed gifts, and when it may be prudent to engage additional expertise, including outside counsel. For certain gifts, it may be useful to have a gift acceptance committee available to review a proposed donation.

Identify what is required prior to final acceptance. Depending on the type of property, requiring specific due-diligence items prior to acceptance can minimize risk (e.g., qualified appraisals, environmental analyses, etc.).

For illiquid gifts, establish clear timelines for expected liquidation of the proposed donation. Define the expected holding period for an illiquid gift, and decide whether an additional cash gift from the donor is necessary to cover anticipated carrying costs of the asset. Clearly define what is expected of the donor (such as an additional cash gift) if the liquidation of the asset does not occur within the original projected holding period.

If there are certain types of assets the organization is not willing to accept, clearly identify them in the policy. For example, items such as tangible personal property (vehicles, jewelry, antiques, etc.) may be more difficult to liquidate, and therefore may not be worth accepting.

Non-cash gifts may involve more complex tax issues. Instead of providing advice about the tax benefits of gifts, encourage donors to seek guidance from their own professional advisers to assist them in their decision-making process.

Because of the additional work that can accompany an unusual gift or unusual gift restriction, consider whether a minimum gift amount is prudent. When significant time and funds must be spent prior to a donation being accepted, a minimum donation amount may be warranted to cover upfront costs.

A thoughtful gift acceptance policy can help protect an organization against unknown risks and guide board members and staff when it is appropriate to say no. By crafting a policy that clearly defines what should and should not be accepted, the organization can focus its efforts on those gifts that will generate the greatest impact in helping the not-for-profit achieve its mission.

For information on gift acknowledgement letters—another recommended best practice, click here. Gift acceptance is just one of the many topics covered in the AICPA Not-for-Profit Section’s comprehensive Resource Library.

Alyssa Federico, CPA, Vice President- Finance, Foundation for the Carolinas. Alyssa’s primary responsibilities include serving as the foundation’s financial point of contact for client relationships and other accounting-related issues. She manages the daily activities of the finance team, oversees the internal controls of the Foundation and ensures adequate controls exist. She is a member of the AICPA’s Not-for-Profit Advisory Council.

Donation jar courtesy of Shutterstock

Not-for-Profit Gifts: Thanks or No Thanks?

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