Insight

A policy can help nonprofits look “gift horses” in the mouth

When you receive a personal gift from a friend or family member — even if it’s not something you particularly want — you accept the gift and thank the person. The same isn’t always true of gifts given to your not-for-profit. Gifts should be examined, and, possibly, refused.
Why? There are many reasons, from space limitations to unsuitability to your mission. It’s never easy to say “no” to a generous donor. But a gift acceptance policy can make the decision and process easier.
Nothing personal
A gift acceptance policy provides an objective way to decline a gift but still maintain a good relationship with the contributor. Your nonprofit’s staffers can explain to donors that a previously set policy prohibits you from accepting certain gifts — in other words, “it’s nothing personal.”
For example, if a donor offers tangible personal property such as an art collection, it may need insurance, special display cases or offsite storage. This could require your organization to incur substantial out-of-pocket costs. You can simply explain to the donor that your policy doesn’t allow you to accept gifts that cost money to maintain.
Getting it down
Before drafting your policy, think about the types of gifts you want to accept and which ones you should refuse. In general, gifts that conflict with your organization’s mission fall in the latter category. And gifts with certain donor restrictions (such as how they can be used) may simply be unmanageable given your mission’s scope or staffing resources.
Most organizations welcome publicly traded securities because they’re easy to convert to cash. But closely held stock can be hard to value and sell. Split interest gifts, where the donor transfers an asset to your organization but draws income from the asset or receives a remainder interest at some point in the future, can also be difficult to manage. These gifts usually require financial expertise and involve obligations to the donor or the donor’s family.
Your policy should not only describe the kinds of gifts that are acceptable, but also how they’ll be valued, managed and, if necessary, disposed of. Be sure to indicate which types of gifts need to be reviewed by your attorney — for example, real estate, because it could have property liens and other encumbrances.
Times change
Ask your attorney and financial advisor to review your policy before giving it to your board for approval. Then review it annually. Over time, your capacity to accept certain gifts may change and require revisions to your policy.
© 2019

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