A gift acceptance policy helps a nonprofit set out which charitable gifts it will accept, which require additional review, and which may create unacceptable legal, financial, administrative, or reputational considerations.
While accepting donations is central to nonprofit fundraising, not every gift is necessarily a good fit for an organization. A gift of real estate, closely held stock, cryptocurrency, or other unusual property may carry significant obligations. Similarly, a restricted gift may limit a nonprofit’s ability to use charitable funds effectively in the future.
A well-drafted nonprofit gift acceptance policy provides a framework for evaluating these issues before the organization accepts a gift.
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What Should a Gift Acceptance Policy Include?
Every organization will have different needs, but a comprehensive gift acceptance policy will generally address the following:
1. Types of Gifts the Nonprofit Will Accept
A gift acceptance policy usually identifies gifts that can generally be accepted without special approval, such as cash, checks, and publicly traded securities. It also often identifies gifts that require additional review, including:
The organization should consider not only the value of an asset, but also the costs and risks associated with accepting, holding, and disposing of it.
2. Restricted Gifts and Donor Conditions
Donor restrictions can create significant long-term obligations for a nonprofit. A gift acceptance policy often establishes when restricted gifts will be accepted and when restrictions are too narrow, impractical, or inconsistent with the organization’s mission.
For significant restricted gifts, the nonprofit generally also may use a written gift agreement that clearly describes the purpose of the gift and the organization’s obligations.
3. Gift Review and Approval
The policy should establish who has authority to accept or decline gifts.
Routine contributions may be handled by staff, while unusual or high-value gifts may require review by senior management, a finance committee, the board, and/or legal counsel. Establishing these procedures in advance helps prevent individual fundraisers from inadvertently committing the organization to inappropriate obligations.
4. Legal, Tax, and Financial Considerations
Certain charitable gifts require additional due diligence. Depending on the gift, the nonprofit may need to consider valuation, title, environmental issues, transfer restrictions, tax consequences, insurance, maintenance costs, or unrelated business income.
The gift acceptance policy typically will identify when professional advice or an independent appraisal is appropriate. It should also make clear that donors are responsible for obtaining their own tax and legal advice regarding the deductibility and tax treatment of their gifts.
5. Reputational and Governance Risks
A gift can create risks beyond its financial value. The nonprofit may want to review gifts that could affect its reputation, independence, mission, or relationships with stakeholders.
The policy should also address potential conflicts of interest and related-party gifts, particularly when a donor has a relationship with a director, officer, employee, or other insider.
6. Donor Recognition and Naming Rights
Naming rights and other donor recognition can create continuing obligations. A gift acceptance policy should address when naming arrangements require additional approval and should encourage written agreements that address their duration and circumstances under which recognition may be modified or removed.
When Should a Nonprofit Decline a Gift?
A nonprofit should have a process for declining gifts that:
Having clear criteria makes it easier for staff and board members to explain why the organization cannot accept a particular contribution.
In What Manner is a Gift Acceptance Policy a Governance Tool?
A gift acceptance policy is more than a fundraising procedure. It is an important nonprofit governance and risk-management tool.
The goal is not to prevent an organization from accepting generous or unusual gifts. Rather, it is to ensure that the nonprofit understands what it is agreeing to when it accepts a charitable contribution.
The most effective policies are practical and tailored to the organization’s mission, resources, and risk tolerance. They should also be reviewed periodically as the nonprofit’s programs, finances, fundraising practices, and regulatory environment change.
Ultimately, the right question is not simply, “How much is this gift worth?” It is also, “What obligations and risks come with accepting it?” A thoughtful gift acceptance policy helps nonprofits answer both questions before saying yes.