March 7, 2024
Born on this day in 1998, Amanda Gorman was just 22 years-old when she became the youngest
U.S. inaugural poet at the 2021 swearing-in of President Joe Biden. She has said that she drew inspiration for her poem, “The Hill We Climb,” from Abraham Lincoln, the Rev. Martin Luther King Jr., and poet Maya Angelou, who became the first woman to read a poem at a presidential inauguration in 1993.
Ahead of her reading, Oprah Winfrey gave Gorman a ring shaped like a birdcage in reference to Angelou’s, “I Know Why the Caged Bird Sings.” It was a thoughtful and generous gesture.
Nonprofits receive thoughtful and generous gifts, too.
Indeed, they rely on the generosity of the public to support their work. But did you know it’s sometimes wiser to “just say no” to a gift?
Not every gift comes from an “Angel Network”!
Knowing which donations to accept, and sometimes even better, which gifts to decline, is critically important for every nonprofit. That’s because some gifts, offered with the best intentions, can jeopardize a nonprofit’s reputation, create financial headaches, and even compromise its mission.
A well-drafted Gift Acceptance Policy (sometimes referred to as a “GAP”) can help a nonprofit avoid potential pitfalls, as well as establish procedures for accepting, tracking, and managing donations.
The IRS and GAPs
While the IRS doesn’t require a nonprofit to have a Gift Acceptance Policy, its Form 990 does ask that it be filed if available. (You’ll recall that IRS Form 990 is the “tax return” nonprofits must file every year). By expressly referencing the Gift Acceptance Policy on its Form 990, it’s clear the IRS considers adopting and following a GAP “best practice” for nonprofits — and a strong signal your nonprofit should adopt one if it hasn’t already.
Gone are the days when a nonprofit’s responsibilities were no more complicated than depositing checks or acknowledging a donor in a newsletter. Today, accepting and managing gifts is a more complicated undertaking that comes with heightened donor expectations, increased fiduciary obligations for Officers and Directors, and greater reporting requirements. Overall, a Gift Acceptance Policy provides necessary safeguards for both nonprofits and donors.
What IS a Gift Acceptance Policy, Anyway?
Broadly, a Gift Acceptance Policy describes the kinds of gifts a nonprofit will and will not accept and how they will be administered. Adopting a robust written policy regarding gift acceptance is an important part of nonprofit best practices that serve to instill fiduciary discipline, provide legal protection, and contribute to an organization’s long-term viability by ensuring that the nonprofit will not accept gifts that it does not have the time or resources to manage.
The process of developing and adopting a Gift Acceptance Policy also enables staff and boards to understand the complexities and challenges associated with certain kinds of gifts, focuses attention on donor stewardship, presents new opportunities for fundraising, and introduces clarity, control, and consistency into the nonprofit development program.
A case-by-case approach to accepting gifts—or having no policy whatsoever—can lead to poor decision-making by boards who might be tempted by a dazzling but wholly impracticable gift or blinded by their own tastes and personal opinions. Haphazard or arbitrary decisions can also confuse and frustrate potential donors, who are left wondering why their proffered gift was rejected.
Crafting and Adopting a Gift Acceptance Policy
A Gift Acceptance Policy is created through collaboration among a nonprofit’s Officers, Directors, staff, and legal counsel. Because each nonprofit is unique, it needs its own individual policy specific to its needs and mission and not one borrowed from another organization.
In addition to outlining its position on gifts, a Gift Acceptance Policy provides a roadmap for the Board of Directors and other fiduciary decision-makers. A clear and well-designed GAP also gives donors and prospective donors information they need for tax and other reporting purposes.
Approval by Board
Once drafted, the Gift Acceptance Policy must be approved and adopted by the nonprofit’s Board of Directors. Hopefully, a consensus of Directors can be reached on all issues addressed by the GAP.
Regular Reference and Review
The GAP should not be considered written in stone or simply left on a shelf to gather dust. The Gift Acceptance Policy should be readily consulted in any case of a non-cash or unusual gift.
More broadly, the GAP should be reviewed every year, at the least, to take into consideration any changes in the nonprofit’s circumstances, accommodate unexpected types of gifts, or reflect developments in tax law or technology.
Critical Elements of a Gift Acceptance Policy
A well-drafted Gift Acceptance Policy follows best practices in transparency, financial control, legal responsibility, and donor support. It should include the following elements:
- The nonprofit’s mission statement;
- The purpose of the Gift Acceptance Policy;
- The use of legal counsel in matters relating to the acceptance of gifts;
- The policy on restricted gifts;
- The types of gifts the nonprofit will and will not accept;
- Reporting requirements and responsibilities;
- Gift Acceptance Committee (or another group, such as an Executive Committee, that is prepared to be consulted on gifts); and
- Adherence to ethical standards and accountability.
Types of Gifts
Donors have a number of options when it comes to charitable giving. For nonprofits, though, not all gifts are created equal. Some gifts may be more costly or complex to manage than a nonprofit can handle, or the nature of a gift might fall outside its mission and goals.
A Gift Acceptance Policy needs to take into consideration all of the issues related to each of these types of gifts and provide clear and objective reasons the nonprofit can point to for accepting—or refusing—a gift.
Refusing Gifts
Refusing a gift is difficult for both a nonprofit and a donor. A Gift Acceptance Policy can help in this regard because it serves to manage the expectations of donors and guide the nonprofit’s decision-making. The reasons for turning down a gift are many and not always obvious.
There is still a mindset among many nonprofits that any donation is better than no donation. For new—or less sophisticated—nonprofits, turning down any gift can seem counterintuitive or even rude. That’s why a Gift Acceptance Policy that clearly sets out an organization’s position on gifts is in the best interest of every nonprofit, no matter its size or its mission. A strong GAP helps nonprofits “just say no” by delineating important strategic and financial reasons for accepting some gifts while rejecting others.
Donors Rights
If nothing else convinces a nonprofit that it must either adopt or revise its Gift Acceptance Policy, the specter of alienating existing donors or discouraging potential ones can often be the spur it needs. Building strong relationships with donors and enhancing donor retention are fundamental to any fundraising strategy and start with a formal Gift Acceptance Policy.
At minimum, a well-thought-out Gift Acceptance Policy assures donors they will receive timely and meaningful recognition. Further, the GAP can emphasis that donor intent will always be followed. After all, donors have a right to expect that their gift will be used as promised and consistent with their intentions.
Whether it is determining the criteria for naming rights for new building or deciding how to acknowledge a ten dollars ($10) check, a Gift Acceptance Policy helps to enhance and preserve donor relationships—especially when gifts are rejected. For example, if a nonprofit has a formal, written policy of rejecting, say, anonymous gifts, this makes it easier to explain to the donor why his or her anonymous donation cannot be accepted even though it might be generous—and tempting.
Conclusion
A Gift Acceptance Policy is critical for promoting charitable giving as well as limiting risk to nonprofits. They also help donors by providing clarity and enhancing transparency when deciding to make a gift. A GAP should be as integral to a nonprofit as professionally prepared employee and endowment policy handbooks, governing documents like articles and bylaws, and practices like board training.
Importantly, a Gift Acceptance Policy can make it easier for a nonprofit to say, “thanks, but no thanks” to a gift. And, who knows, it could mean the opportunity to say “yes” to an even better one.
Email Me!
If your organization is interested in adopting (or revisiting!) a Gift Acceptance Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Gift Acceptance Policy) specific to the unique mission of your nonprofit.
My email is:
gordon@gordonfischerlawfirm.com
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[Nonprofits Need Gift Acceptance Policies]
