Wealth Insights

Creating a gift acceptance policy for a nonprofit

Being prepared to handle non-cash donations can help your organization maintain crucial relationships and unlock new opportunities.

Is your nonprofit organization equipped to handle every well-intentioned gift a donor may offer? A seemingly generous, non-cash gift can end up demanding more time, effort and expense than your organization can handle. For example, outdated computers or old cars and boats can become more hassle than they’re worth. This is where a well-crafted gift acceptance policy for your nonprofit can act as a compass, guiding you in making the right decision based on your mission and resources.

Why create a gift acceptance policy?

Think of a gift acceptance policy as your organization’s framework for carefully handling non-cash donations while providing transparency and accountability to donors and stakeholders. It clearly outlines the types of gifts you can accept and the process for doing so, while also ensuring each contribution aligns with your core mission and the nonprofit’s ability to manage it effectively.

Another important thing to note: Studies show that nonprofit organizations that accept marketable securities can grow their contributions six times faster compared with those accepting only cash.¹ Marketable securities are readily traded on public exchanges and have no restrictions. Examples of marketable securities accepted under a gift acceptance policy include stocks, bonds, mutual funds, and other common investment securities. Non-cash gifts, such as stocks, property, or funds from IRAs, can present challenges to nonprofits that haven’t thought through the intake process as part of a gift acceptance policy.

Then there are planned gifts, received as part of a donor’s estate planning. The actual funding could take years to realize, and the complexity can easily ramp up. However, if you’re able to work with a donor on the process of accepting a planned gift, you open the door to new possibilities. Many donors are interested in making the most of their charitable dollars through tax-efficient gifts.

Finally, consider the fact that the IRS wants to make sure organizations are properly managing non-cash donations. IRS Form 990 explicitly asks whether your organization has a gift acceptance policy, and if your nonprofit receives more than $25,000 in non-cash gifts, you’re required to complete that section of the form.² Having a well-defined policy simplifies this reporting and signals to the authorities that your organization has thoughtful procedures in place.

Preserving ties and strengthening governance

Imagine a donor offers your nonprofit a vehicle with significant mileage, or a plot of land in a distant location. Without a clear process to guide you, accepting such a gift could lead to unexpected costs for appraisal, storage, insurance, or even environmental remediation. A thoughtful gift acceptance policy empowers you to navigate these situations gracefully, allowing you to politely decline gifts that don’t mesh well with your mission or operational capacity without jeopardizing donor relationships.

Impartial decision making is key. That’s why establishing a gift acceptance committee is a best practice. This committee, made up of board members and key staff, would then objectively review proposed non-cash donations. “By evaluating whether the item will truly have a positive impact on the organization, this committee frees up frontline staff to focus on building positive donor relationships,” says Jennifer Foster, Philanthropic Solutions Advisor at Regions.

Key questions your gift acceptance policy should answer

A comprehensive policy provides clarity and direction for your organization and donors. It should address questions such as:

• What types of gifts will the organization accept? (Example: cash, stocks, real estate, IRA accounts, bequests, grants from donor-advised funds, life insurance, in-kind donations)
• Under what circumstances will different types of gifts be accepted? (Example: minimum valuation for real estate, transferability of securities)
• How will gifts be formally recognized and acknowledged?
• How will major or complex gifts be handled? (Example: All securities donated are likely to be sold immediately)

Essential elements of a gift acceptance policy

The structure of your policy is also important. Consider including these key sections:

• Introduction and definitions. Clearly define what your nonprofit considers a “gift” for the purpose of the policy, establishing context for the document.
• Gift review process. Detail the roles and responsibilities of any gift review committees or designated staff members involved in evaluating specific types of gifts, outlining the steps of the review process.
• Gift agreements. Specify the requirements and expectations for implementing formal gift agreements, particularly for significant donations exceeding a certain value, ensuring mutual understanding of terms and restrictions.
• Acceptable gifts and evaluation. Clearly list the types of gifts your organization will generally accept. Outline your stance on accepting personal property (such as art or real estate), including your intention for its use (such as direct use or conversion to cash) and the responsibility for associated expenses (such as insurance or storage needed to protect the contributions until they are sold). Reference your gift acceptance committee’s review process for these donations. Finally, detail the process for evaluating non-cash gifts, including whether appraisals are required and how donor receipts will be handled in line with IRS regulations.
• Restricted gifts. If your organization accepts restricted gifts, outline the requirement for a formal gift agreement that clearly states the gift, the donor’s specific intentions, and contingency plans should the original purpose become unachievable. Emphasize the importance of language that allows for flexibility if the initially intended program ceases to exist.
• Donor recognition. Describe how donors will be acknowledged and recognized for their contributions, potentially listing specific recognition levels and associated benefits.
• Gifts to be declined. Clearly state the types of gifts your organization won’t accept, including those that:
  • Don’t align with your mission and values.
  • Would jeopardize your tax-exempt status.
  • Are too difficult or expensive to administer effectively.
  • Are for purposes that do not further your strategic goals.
  • Could potentially damage the reputation of your organization.
  • Have restrictions so specific that the funds can’t be reasonably used if the designated program becomes inactive.
• Liquidation of gifts. Specify the typical timeframes for liquidating gifts of securities or noncash donations, ensuring efficient management of these assets.
• Gift counting and reporting. Outline your standard procedures for counting and reporting gifts accurately.

Examples of gift acceptance policies

Below are some national organizations that share examples of gift acceptance policies:

Chronicle of Philanthropy Gift Acceptance Policy

Nonprofit Risk Management Center Gift Acceptance Policy

Council of Nonprofits – Gift Acceptance Policies

Empowering your nonprofit

A well-crafted gift acceptance policy is a strategic tool that empowers your nonprofit to cultivate meaningful philanthropy while protecting your mission and resources. “By establishing clear guidelines and a thoughtful review process, you can confidently navigate the complexities that sometimes accompany non-cash gifts,” says Camille Epps, Philanthropic Solutions Advisor at Regions. “A policy can help ensure that every accepted contribution strengthens your ability to advance your cause.”

If you’d like additional guidance, reach out to us or explore our nonprofits, endowments, and foundations capabilities.

Sources:
¹James, Russell. “Cash Is Not King in Fundraising: Results from 1 Million Nonprofit Tax Returns.”
²National Council of Nonprofits. “Gift Acceptance Policies.”