Drafting a Gift Acceptance Policy for Your Nonprofit Organization

by Greg DePersio

4 min read

Nonprofit organizations rely on gifts and donations to carry out their missions, but that doesn’t mean your nonprofit should accept every gift it’s offered. Some donors offer gifts but attach strings to them that run counter to your organization’s values. Other gifts, such as real estate, pose logistical challenges and may be more difficult and expensive to maintain than the value of the gift. There are also times when well-meaning donors offer gifts even though doing so compromises their own financial position. Some donors may have ulterior motives, such as questionable tax write-offs. Drafting a gift acceptance policy helps your nonprofit handle these situations and others that may arise when accepting gifts and donations. This policy spells out how to handle gifts with strings attached, the specific types of gifts you do and don’t accept, what financial position of the donor is required, and how to handle gifts offered with ulterior motives.

Gifts With Strings Attached

Donors often want to ensure their money or gifts are stewarded properly, and there’s nothing wrong with that. If you were making a big donation because you believed in a cause, you’d understandably want to know your gift was actually put toward the cause and not mired in red tape. For this reason, donors often attach strings when they give to charity. “Please accept this $50,000 gift,” they’ll say, “but only if you promise to do exactly as I say with it.”Sometimes the strings donors put on gifts are completely reasonable. Other times, they’re less reasonable, or they run against your nonprofit’s values. To offer an extreme example, a racist individual or organization might offer a donation but instruct that you favour certain people or groups in how you spend it. Your gift acceptance policy should outline a process for getting on the same page with each donor about how the gift will be used.

Types of Gifts Accepted

Occasionally a donor offers a gift with the best of intentions, but the gift ends up being more trouble than it’s worth. Suppose your nonprofit is gifted a ramshackle office building in an out-of-the-way location. You don’t have much of a need for it, and the taxes and upkeep would represent an expense you didn’t previously have. You could sell it, but it probably isn’t worth enough to justify the time and money you’d have to spend to fix it up and put it on the market. This is the kind of gift where it’s probably better to say, “Thanks, but no thanks.” Without a clearly defined gift acceptance policy, you’re left trying to decide on the fly whether accepting a gift actually benefits your nonprofit. It can also offend donors when you decline their gifts despite having nothing stated in your organization’s literature about not accepting certain donations. Stating clearly in your policy that you cannot, for example, accept gifts involving real estate or automobiles, leaves no room for doubt on either side.

Donor’s Financial Position

Regardless of its specific mission, one universal responsibility of any nonprofit is to be a good steward of its community. This means doing right by everyone you come into contact with, including donors. Some people are so selfless they’ll sacrifice their own well-being for a cause they believe in. Even if you plan to do good with the money or gift, it treads a thin ethical line to accept a donation when you know the person giving it is making a big sacrifice that puts their own financial security at risk. For this reason, you may want to consider a policy that says your nonprofit only accepts gifts above a certain value if the donor’s net worth exceeds a certain level. Another way to frame such a policy is to not accept gifts that represent more than a stated percentage of the donor’s net worth or liquid assets.

Gifts With Ulterior Motives

It’s a longstanding practice to use charitable donations to reduce tax liability. In many cases, a donation to charity that is at least partially motivated by tax benefits poses no ethical challenges, and the gift is a win-win for the charity and the donor. However, there are other occasions when a donor uses a charity or nonprofit as nothing more than a mechanism to exploit loopholes in the tax code and get out of paying what they should. Cases have arisen where individuals and businesses have used complicated gifting schemes to take huge write-offs for charitable donations even though the charity itself ended up with little to nothing of value. Your gift acceptance policy should stress transparency in all donations to your nonprofit. This helps to avoid situations in which donors have ulterior motives and are more concerned with helping themselves than helping your mission. Your nonprofit needs gifts to thrive, but it should also exercise discretion in how it accepts them. A thoughtful gift acceptance policy helps your nonprofit determine when it is and isn’t appropriate to accept a gift.

References & Resources

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