Nonprofits rely heavily on the generosity of donors to fund their missions, but should every donation be accepted without question? As a nonprofit treasurer, it’s essential to recognize that not all gifts are created equal. While it’s tempting to accept every contribution, there are times when saying “no” is the wisest decision for your organization’s long-term sustainability.
This is where having a Gift Acceptance Policy becomes crucial. For nonprofit treasurers, a clear and comprehensive policy provides guidelines for evaluating and accepting donations in a way that supports the organization’s strategic goals, minimizes risk, and ensures that gifts enhance rather than hinder your operations.
What Is a Gift Acceptance Policy and Why Should You Have One?
A Gift Acceptance Policy is a formal document that helps a nonprofit organization decide which gifts it will accept and which it will decline. It sets clear expectations for donors and staff, ensuring that both parties understand the types of donations that align with the organization’s values and operational capacity.
Having a policy like this is essential for managing your nonprofit’s resources wisely and protecting it from unforeseen legal and financial liabilities. A well-crafted policy serves several key purposes:
- Align with Your Mission
Some gifts might not be a good fit with your nonprofit’s goals or values. A policy ensures that donations are in line with your mission, avoiding potential conflicts down the road. - Prevent Unexpected Legal or Financial Burdens
Certain gifts, such as real estate, boats, or motor vehicles, can create unexpected legal responsibilities (e.g., property taxes, disposal of hazardous waste). A policy helps ensure your organization isn’t caught off guard by these complications. - Reduce Administrative Hassle
Some gifts are just too complicated to handle, such as outdated equipment or items that can’t be easily resold or used. A policy can guide staff in declining these donations without having to explain why in every case. - Improve Donor Relationships
While turning down a gift might feel uncomfortable, a Gift Acceptance Policy allows you to do so politely and professionally. Instead of a staff member being put in the awkward position of explaining why a gift isn’t accepted, they can simply point to the policy, which sets clear guidelines for everyone involved.
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The Importance of Managing Donor Expectations
A solid Gift Acceptance Policy helps manage the expectations of donors from the outset. It also acts as a guide for your board members and staff, providing consistency in handling gifts. Here’s how:
- Clarify Acceptable Gifts
You might receive donations that are unusual, like a racehorse (yes, this really happens!). Your policy should specify which types of gifts are acceptable and why. This clarity helps everyone involved, from staff to potential donors, avoid misunderstandings. - Understand “Non-Standard” Contributions
The IRS defines a “Non-Standard Contribution” as anything that isn’t expected to serve the nonprofit’s mission directly and is difficult to sell or evaluate. Many nonprofit gift policies focus on these kinds of gifts—like outdated technology or items without a clear value. It’s far easier to decline an offer of old computers by saying, “Sorry, our policy doesn’t allow us to accept that type of donation,” than it is to explain all the specifics about why it isn’t viable. - Maintain Consistency
A Gift Acceptance Policy ensures no ambiguity about what can and can’t be accepted. With guidelines in place, you can handle donations efficiently, without putting any staff member in an uncomfortable position.
The Benefits of a Written Policy
Even if your nonprofit typically only receives cash or checks, you can never predict when an unusual or complex gift might come your way. That’s why it’s crucial to have a written policy in place. Here are a few reasons why:
- Speeds Up Decision Making
If your nonprofit is ever presented with a gift that requires consideration (like real estate or valuable personal property), having a policy can expedite the decision-making process. This avoids delays and confusion that can arise when donations are handled ad-hoc. - Provides Clear Guidelines for Staff
A policy helps staff members who may be on the frontlines of gift reception. If a donor offers a non-standard gift, the staff can refer to the policy to explain why the gift can’t be accepted, without feeling uncomfortable or caught off guard. - Helps with IRS Compliance
The IRS requires that nonprofits disclose whether they have a Gift Acceptance Policy on their Form 990. This policy can also help you track and report non-cash donations properly, which is a part of the IRS’s Schedule M for in-kind contributions.
What Should Your Policy Cover?
Your Gift Acceptance Policy should address a variety of considerations. Here are some areas to think about when drafting one:
- What Gifts Are Accepted?
This should include specific categories like securities, real estate, and in-kind donations (e.g., equipment, services). You might also specify exceptions, such as not accepting outdated technology or real estate with legal issues. - What Gifts Are Not Accepted?
List the types of gifts that your nonprofit won’t accept—whether because they don’t align with your mission, are legally problematic, or are just too difficult to manage. - Legal and Financial Considerations
Some gifts, such as real estate or large in-kind contributions, may require legal review or appraisal. Make sure your policy outlines procedures for these types of gifts, including any necessary steps like consulting legal counsel. - Guidelines for Restricted Gifts
If you accept restricted gifts (donations given with specific instructions on how they should be used), your policy should include a process for ensuring these restrictions are clear and manageable. - Transparency and Accountability
Your policy should promote transparency, both within your organization and with potential donors. For maximum financial transparency, consider posting the policy on your website. - Review and Updates
Just like any organizational policy, your Gift Acceptance Policy should be reviewed periodically to ensure it’s up-to-date and relevant. You may want to assign a board committee to oversee this process.
How to Navigate Conflicts of Interest and Ensure Fairness
There’s always the potential for conflict of interest when accepting donations, especially when it comes to gifts that could have a tax benefit for the donor. To avoid any awkward situations, your policy should make it clear that the nonprofit will not provide tax or financial advice to donors. Encourage donors to consult with their own advisors before making large gifts, especially planned gifts or gifts of real property.
Final Thoughts: A Well-Crafted Policy Protects Your Nonprofit
A Gift Acceptance Policy isn’t just about declining unwanted donations—it’s about protecting your nonprofit’s time, resources, and mission. It ensures that gifts are accepted in a way that maximizes value while minimizing risk. A clear policy creates transparency for donors, staff, and board members, and it helps prevent any uncomfortable situations that could arise from unexpected gifts.
By establishing a clear framework for handling donations, your nonprofit will be better equipped to manage its resources, stay true to its mission, and cultivate healthy relationships with donors who understand and respect your guidelines.
After all, not every gift is a good fit—but with the right policy in place, you’ll know exactly which gifts to welcome with open arms.