The 501 S(c)ene

The latest view on not-for-profit accounting issues

Why Your Not-for-Profit Organization Needs a Gift Acceptance Policy

When I suggest that a not-for-profit organization should consider adopting a gift acceptance policy, my words are often met with some degree of surprise.  Why would a not-for-profit soliciting contributions consider turning any contributions down?  Well, there are lots of reasons – but the most important one it that a gift acceptance policy can protect both the organization and its relationships with donors.

A recent article in the Chronicle of Philanthropy highlighted this issue.  The title alone – “Charities Deal With a Stream of Lawsuits From Disenchanted Donors – speaks volumes!  The article cites multiple instances of donors contributing large sums of cash to various organizations and then disputing various terms of the restrictions or arrangements.  One particular situation involved famous country singer Garth Brooks, which resulted in negative publicity for the not-for-profit (a hospital) in addition to having to repay the entire gift plus damages to the tune of $1 million.

Of course all policies need to be customized and tailored to meet the needs of the individual tax exempt entity, but here are some basics to consider when drafting a gift acceptance policy:

• All accepted gifts should further the charitable purpose of the organization
• A gift acceptance committee might be established to vest authority in those committee members to accept gifts according to all policy terms
• Certain gifts may need to be subject to a full board review
• Instances where legal counsel should be obtained should be outlined
• Policies for various restrictions – such as naming rights – should be addressed
• Gifts of real property, which present issues like carrying costs, insurance, or even environmental issues, should be specifically addressed

Similar to all other policies, once implemented a gift acceptance policy should be reviewed periodically to ensure that it remains relevant to the not-for-profit’s mission.

Sharlynn Garza