Adopting, implementing, and monitoring sound governance policies to accomplish an organization's mission continue to be at the forefront of issues of concern to the nonprofit community. Even implementing the most basic policies encourages operational and managerial efficiency.
By now, most organizations have completed the inaugural filing cycle of the new Form 990 and are familiar with the "Governance, Management and Disclosure" section, which addresses the existence—or lack thereof—of policies, including conflicts of interest, whistleblower, document retention and destruction, joint ventures, review of the 990, and executive compensation.
Organizations required to file Schedule M for non-cash contributions have also been confronted with the question concerning the Gift Acceptance Policy ("GAP").
Please note that it is critical to implement GAPs regardless of whether your organization receives non-cash or non-standard contributions.
The Internal Revenue Service defines a non-standard contribution as the contribution of an item that is not reasonably expected to be used to satisfy or further the organization's exempt purpose and for which (a) there is no ready market to liquidate the donation to convert it to cash and (b) the value of the item is difficult to ascertain or speculative.
The value of implementing a written GAP lies in its practical application to provide guidelines and standards for evaluating whether or not to accept any type of gift.
Although it may seem counterintuitive, some potential gifts would serve an organization better if they were refused! For example, a potential gift might include hidden costs, burdening and draining the accepting organization of resources that could be used either to develop other resources or support the mission. A properly thought-out GAP helps the recipient organization avoid such situations by identifying both acceptable and unacceptable gifts.
A cautionary example of failure to implement an effective GAP involves an organization that accepted the donation of a yacht. The recipient organization did not perform any due diligence prior to acceptance and, ultimately, the resources (time, energy, expense) expended to execute the asset sale far exceeded the net proceeds received at the end of a long and circuitous process.
The written policy should incorporate the following aspects:
- Mission of the organization—keep the organization's goals in mind
- Purpose of the policy—state the purpose clearly
- Use of legal counsel by either the donor or the organization—identify circumstances when an attorney should be consulted
- Donor conflicts of interest—identify circumstances when the donor should seek professional advice prior to making a gift
- Restricted gifts—identify types of acceptable restrictions
- Gift acceptance committee—identify individuals with appropriate expertise and experience to evaluate gifts and decide whether or not to accept them
- Type and form of gift—identify each type of gift and acceptable forms for each kind
- Reporting requirements—enumerate what must be done, such as providing written acknowledgement of gifts and filing specific IRS forms for certain types of gifts
- Monitoring—review policy regularly
The adoption of a GAP should be a coordinated effort between the planned giving or development officers, executive personnel, and designated board members in conjunction with professional advisors.
A well-executed GAP (1) provides for flexibility, both in evaluating potential gifts and within the GAP itself, providing for future amendments to "grow" with the organization's planned giving office, and (2) meets the current need for providing discipline and education as well as preserving donor relationships.
Even if your organization is small and has only limited resources, you need a GAP, and resources are available to minimize the cost of implementing a GAP. Board Source (www.boardsource.org) offers a plethora of resources including The Nonprofit Policy Sampler, which includes hundreds of sample policies that can be individually purchased and downloaded electronically for a very modest cost.
The adoption of a GAP will contribute immeasurable value to an organization and have a long-lasting impact on the governance of not-for-profit organizations.
Sarah G. Avery, CPA, Friedman LLP
© 2010, Friedman LLP
Sarah Avery is a senior manager at Friedman LLP with more than 20 years of industry experience. Friedman LLP provides accounting, tax, and business consulting services to public and private companies.