Posted March 1st, 2014

Having Gift Acceptance Policies in Place Now Can Prevent Headaches in the Future

By: Aviva Boedecker

> One of your major donors wants to make a gift of real estate. It’s December 14, and the transfer must be completed before the end of the year.

> A member of your Legacy Society wants to donate a dozen paintings by her late husband.

> A board member wants to give your organization stock in her privately held company.

> A member of your planned giving advisory committee wants you to promote gifts of new life insurance policies.

In situations such as these, which gifts can your organization or institution accept? Who should make the decision? And thinking more broadly, what kinds of charitable gifts do you want to encourage?

If you have the right policies in place, all of these situations can be handled without embarrassing delays or complications.

Making policies useful

The purpose of gift acceptance policies is to inform staff, board members and donors about what a charitable entity will and will not accept, what reviews may be required and who has the authority to make a final decision. Such policies can be public documents if desired and may be provided to donors if necessary.

Imagine how easy well thought out gift acceptance policies will make declining an inappropriate gift: “Thank you for your generous offer of livestock to City Public Library. We appreciate your thinking of us, but unfortunately, as you can see from the enclosed policies, we are not able to accept gifts of this type at this time.”

To be useful, policies should be readily available, reviewed with staff and appropriate volunteers from time to time and kept handy—not buried in the back of a file and forgotten. The Board Chair needs to know that the charity will not automatically accept all gifts of real estate before assuring his friend that it would be happy to accept the property he was unable to sell!

Gift acceptance policies

Outright gifts

Most gifts of cash and publicly traded securities would not require special approval, but gift acceptance policies should state that authority to accept such gifts is delegated by the Board to the CEO. (The procedures may in turn delegate such authority to the CFO or another staff member). However, the policies might also specify that if a gift is over a certain amount or is restricted in any way, even a gift of cash or publicly traded securities requires special approval.

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The policies should define which other types of assets (such as real estate, various insurance interests, non-publicly traded securities, tangible personal property and other illiquid assets) the organization may accept and should outline the reviews, inspections and approvals each type of gift requires, such as an environmental review or approval by a gift acceptance committee.

Life income gifts

Gift acceptance policies should state whether the charitable entity will administer or serve as trustee for life income gifts. Will it offer gift annuities, and if so, is there a minimum age for the annuitant? Is there a minimum or maximum dollar amount?

Note that it is unnecessary to describe and define every gift vehicle. For example, the term “charitable remainder trust” has a specific, legal meaning which does not vary from organization to organization. Including a definition of the various types of trusts in the policies just makes the document longer—and less likely to be read.

A note about procedures

Nonprofits also need to have clear procedures about how gifts are handled, but procedures are not the same as policies. Procedures are internal documents that define which staff members are responsible for what and how certain tasks should be done, such as who is responsible for documenting, depositing or liquidating gifts that have been accepted, and how the acknowledgment process is handled.

Drafting the policies

Thoughtful and clear gift acceptance policies can make everyone’s life easier and can help avoid awkward situations.

Such policies should not be an exercise in creative writing. In fact, it can be a daunting project to begin drafting or even to review existing policies. Before you start, research best practices and policies that similar organizations have adopted. Many organizations post their policies on their websites, and sample policies may be found on the Partnership for Philanthropic Planning’s website:pppnet.org/resource/model_docs.html.

It is important to keep in mind, though, that the same policies are not appropriate for all organizations. The size of the charitable entity, its resources, the nature of its mission and other pertinent factors can influence the content of gift acceptance policies. Your research will help you identify issues that need to be addressed, determine which matters the board must decide and serve as a checklist to ensure you are not omitting important considerations.

Nonprofits can save time and check that policies are complete and appropriate by bringing in professional assistance. The Sharpe Group’s consultants have helped many organizations develop clear, appropriate and practical gift acceptance polices. Contact us at info@sharpenet.com or 901-680-5300 for more information.

The publisher of Give & Take is not engaged in rendering legal or tax advisory service. For advice and assistance in specific cases, the services of your own counsel should be obtained. Articles in Give & Take may generally be reprinted for distribution to board members and staff of nonprofit institutions and other non-donor groups. Proper credit must be given. Call for details.

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