It’s hard to imagine a world without nonprofit organizations to help those in need, which is why, when they’re able, so many individuals and businesses donate cash, goods, and services to those organizations with a shared passion. As a nonprofit, you rely on the generosity of your donors to fulfill your mission. But what happens when something you receive actually proves to be a burden? A gift acceptance policy is a great way to gracefully manage your donors’ expectations and decline gifts that may prove to be more than your organization can handle.
They say not to look a gift horse in the mouth but, for nonprofits, successful gift acceptance and management requires a delicate balance of mission, capital, and capacity. If accommodating a gift ultimately depletes other resources or presents risks, you need to be able to bend that rule before your gift horse turns into a Trojan horse.
While accepting cash gifts is always a great way to help you keep doing what you do, accepting in-kind gifts, or non-cash goods and services, isn’t always as straightforward.
Your organization can benefit significantly from in-kind contributions, as long as they fit your mission, current needs, and future goals. For example, if you provide food for the hungry or build homes for those in need, the food and building supply contributions you receive from donors can be an incredible source of support. Volunteer services, such as office help or legal or tax advice, is another way organizations benefit from in-kind donations.
When donors give, it goes without saying they share a passion for what your organization does and have the best of intentions. However, sometimes, what donors have to offer doesn’t translate into the benefit the donor intended for your organization. A gift acceptance policy lets your donors know what gifts are appropriate and helpful to your organization and what gifts are inappropriate.
For example, not all organizations are equipped to properly license, pay property taxes for, or dispose of gifts such as real estate, automobiles, boats, computers, hazardous materials, or other types of property. These contributions are an excellent example of why your nonprofit should have a gift acceptance policy in place to protect you from the challenges involved in receiving unneeded items and those that are difficult to liquidate.
A gift acceptance policy is also a great avenue to explain the mechanics to your donors and reasons why you accept or reject certain gifts.
Not only can you use the policy to disclose why specific gifts are not acceptable and how you handle the receipt of such gifts, but you can also provide donors transparent access to your standards and procedures, such as whether a donation may be made anonymously. You can disclose whether you have any amount, value, or timing thresholds related to gift acceptance and express your right to deny certain types of gifts. It’s best practice to post your policy in an easily accessible area on your website.
Let’s say your organization namely seeks cash donations, preferring to steer clear of donations made through stocks, bonds, or mutual funds. In cases like this, you have a chance to demonstrate your request is no way to take the easy route, allow for misappropriation of funds, or to spend donated funds in less charitable ways – you have the chance to say, “Here are the reasons why higher liquidity and fewer restrictions can actually increase the net financial impact and ultimate social benefit from your donation.”
A gift acceptance policy can also provide your organization with an outlet to disclose your organization’s review process pertaining to certain types of gifts. For example, if you receive real estate donations, your nonprofit may use the policy to disclose what donors can expect in terms of the review process and the legal advisory your organization generally seeks in these circumstances.
Even if you have a gift acceptance policy in place, now is an opportune time to revisit and update your policy to address newer donation methods, such as cryptocurrency.
According to The Block, in 2019, 12% of the US’s top charities were accepting cryptocurrency. Donating cryptocurrencies, such as Bitcoin or Ethereum, has only become increasingly popular, especially among younger generations. Your gift acceptance policy should also address the receipt of cryptocurrency donations. If you accept cryptocurrency, your organization will need to determine whether to retain these donations as investments or sell them immediately.
Bitcoin value can fluctuate much the way stock does. For the past several years, the value of bitcoin has rapidly increased, which can make holding onto it as an investment seem like an enticing option. While there isn’t a one-size-fits-all answer, in general, it’s less risky to liquidate non-cash contributions quickly, so the proceeds can be used in accordance with your investment policy and/or donor restrictions without adding unnecessary hurdles or wasting time and resources addressing valuation issues.
While there are risks involved in any investment, the lack of regulation, un-backed status with the US Federal Government, and more than a few grey areas in guidance can make the risks associated with cryptocurrency investments of greater concern. And keep in mind, when your organization’s financial reporting time rolls around, estimating the fair market value of your virtual property investment can present unique challenges as well.
While it’s hard to turn down any donation, it is sometimes in your organization’s best interest to avoid donations not in support of the delicate balance between your mission, capital, and capacity. ARB’s Nonprofit Advisory Services Team is here to help nonprofit organizations maintain that equilibrium.
I want to help your organization optimize your gifts and donations. If you’re ready to create, revamp, or talk about your gift acceptance and management policy, contact me today!
Take a look at ARB’s other recent insights for nonprofits and visit our COVID-19 Tax & Financial Resource Center for information on related matters.
by Alyssa K. Hemingway, CPA, CGMA
Alyssa Hemingway joined ARB in 2016 and is a Senior Manager. She provides accounting and auditing, and advisory services primarily for nonprofit organizations. Alyssa specializes in compliance audits in accordance with Uniform Guidance and MAAP. Her career concentration has been in non-profit organizations, including education, conservation, healthcare, community, and welfare services. She advises our clients on internal control systems, accounting standards, gift acceptance, and organizational matters.