Gift Acceptance Policy and Gift Agreements
Most nonprofits have thought through why they accept philanthropic contributions — they are necessary for the delivery of services and growth of the organization. On the other hand, have you ever thought that your organization might have to say “no” to a philanthropic gift? If not, there are a number of reasons why advancement professionals should think it through. Beyond the thinking and discussion stages, consideration should be given to policies and procedures to safeguard these decisions.
Donor relations plays a critical role in gift acceptance and compliance. Some think gift acceptance decision-making falls under the purview of general accounting and reporting. There are shared responsibilities and a specific set of policies and procedures should guide activities before, during and after accepting all types of philanthropic contributions.
Having a set of standard operating procedures and policies specific to philanthropy, ones that align with overall organization accounting and finance, will help ensure a successful giving program and enhance confidence among your donors, board members, and other stakeholders in and outside of the organization. In addition to outlining what can and cannot be accepted, a gift acceptance policy provides transparency and clarifies how each organization will handle the paperwork and next steps associated with philanthropic gifts. Alongside other policies and compliance documents governing an organization’s fundraising activities, the gift acceptance policy clarifies the responsibilities of the organization and helps manage donor expectations. (See the Association of Fundraising Professional’s resource, the Donor Bill of Rights).
The overall number of policies and procedures will vary by the size and complexity of the organization. Gift Acceptance is the basis upon which all other policies associated with fundraising will rest.
What is in a Gift Acceptance Policy?
A written gift acceptance policy can help manage donor expectations, mitigate risk if questions arise about the gift, and serve as guidance for fundraisers, leadership, other internal stakeholders, and board members or other ambassadors for your organization who are asking for or even supporting the process of asking for philanthropic contributions.
A gift acceptance policy establishes the authority for accepting philanthropic giving, drives compliance with taxation and other laws, and safeguards alignment between donor giving and the organization’s mission and may reference a number of other policies and procedures. A gift acceptance policy outlines what gifts may be accepted and the purposes the gifts may and may not be used for. Fully realized, the policy document is accompanied by separate procedural documents that provide additional guidance to internal stakeholders who carry out the work of receiving, acknowledging, recording and investing or spending philanthropic dollars. Procedure documents are an efficient means of providing those doing the fundraising and gift management work instructions on what is and is not allowable while providing the flexibility to manage how the day-to-day work is accomplished.
Key components of a Gift Acceptance Policy:
• Purpose
• Audience and scope
• Review and approval authority
• Definition of gifts the organization will and will not accept
What is a Gift Agreement?
Along with the gift acceptance policy, nonprofit organizations will want written a gift agreement to serve as a contract between the organization and some of its donors. Organizations differ in the criteria that warrant a gift agreement. Those criteria may include gift amount, such as those requiring pledge payments; gift type, especially gifts resulting in naming opportunities, endowed funds, or planned gifts; or type of donor, such as agreements with a corporation or foundation. A gift agreement is a signed contract between your organization and the donor that delineates the donor and organizational responsibilities, including payment terms, recognition details, and investment, spending or award requirements. It outlines how and when funds will be received, where or for what purpose funds will be spent, the organization’s duty to report back to the donor, and establishes legal points of contact for both parties. The Gift Agreement can begin with a template that is used across the organization and may be customized by gift and donor circumstance. Gift agreements are often reviewed by legal counsel both from the organization’s and donor’s perspective.
Key components of Gift Agreement/s:
• Gift details and payment timeline / options, along with revocation or removal clause should the terms not be met
• Donor name and contact information
• Whether or not public recognition will be offered (details of recognition do not belong in this agreement although they may be presented as an addendum)
• Signature lines for the organization and donor
Gifts that may require a Gift Agreement:
Gifts to established named and/or endowed funds
Gifts resulting in a public naming opportunity
Legacy gifts
Any gift that reaches the “major gift” level as determined by your organization
Gifts that may not require a Gift Agreement:
Gifts to already established funds
Gifts that are not endowed
Gifts that that do not establish a new fund
Questions to guide your gift acceptance policy planning:
What types of gifts can a nonprofit organization actually use?
How would an organization use a gift of real estate, a vehicle, fine art, jewelry, stock or bitcoin?
Is there a clear plan of communication for accepting these types of gifts and how will they be converted into usable assets?
Is the organization prepared to accept and manage the various forms of planned gifts?
Are there other gifts a nonprofit organization would reject and why?
To be true to their mission, vision and values, some organizations limit not only what they can accept as a gift but also from whom. For example, nonprofits that work with children may opt not to accept gifts from companies who market food or beverages not appropriate for children.
Are there circumstances that would cause a nonprofit organization to return a gift?
Donor misconduct is often addressed in recognition policies, but is there a circumstance that would cause the organization to want to disassociate from the money as well?
Are there limitations about who can give to what and when?
For example, some organizations choose to have special considerations in place for employee giving.
Should a nonprofit organization borrow policies and procedures from other institutions?
Having policies and procedures in place requires knowledge that is both specific to the organization and accounts for best practice by peer institutions. Policies should not be seen as rudimentary or generic. Gathering and adapting examples from other organizations can result in a lack of specificity and misalignment with the mission and values of the organization. These documents will be used to guide consistent, reliable activities in response to philanthropic giving. Consistency and reliability expedite the work across teams and build donor trust. Predictable, repeatable practices are crucial to donor relations and stewardship excellence.
Your organization may benefit from working with a consultant to develop a comprehensive set of donor relations policies and procedures. A consultant will bring insight and objectivity, knowledge of best practices, and practical skill at operationalizing new tools. Comprehensive assessment, planning and documentation will improve the outcomes in all areas of institutional advancement.
Heurista provides assessment, consultation and improvement of documents that support donor relations work, including gift acceptance policies, gift agreement templates, record keeping procedures, and donor recognition policies, design standards and implementation procedures. Our expertise is gained through work with organizations of every size and type. We welcome questions and would be glad to discuss donor relations challenges and successes with you. Please contact us to schedule a call.