Tips for Developing an In-Kind Gifts Acceptance Policy for Your Nonprofit

Given the new reporting and disclosure requirements issued recently in ASU 2020-07, Not-for-Profit Reporting of Gifts-in-Kind, now is a good time to develop or update your nonprofit’s gift acceptance policy.

As you likely know, Schedule M (Form 990) asks if the nonprofit has a gift acceptance policy, and those answering “yes” are required to attach it to their tax return. Under the newly revised standard, nonprofits must provide more information in their tax reporting presentation and disclosure of contributed nonfinancial assets that they receive from donors. These gifts-in-kind may include tangible goods and property, intangible goods such as patents and copyrights, land, buildings, vehicles, equipment, and professional and administrative services.

Benefits of a Gift Acceptance Policy

A gift acceptance policy instills discipline and controls to a nonprofit’s development program. It also can protect the organization from inadvertently taking on risks and liabilities not immediately visible, such as a house infested with pests or property with environmental hazards. Many nonprofits have experienced horror stories of accepting donated goods or property that turned out to be a white elephant.

The advantages of adopting a formal gift acceptance policy are many:

• It fosters sound fiscal management and greater accountability, both internally with staff and externally with donors.
• It helps protect your organization’s charitable status for tax reporting purposes.
• It enables your organization to avoid potential financial or public relations disasters linked to the gift.
• It educates staff, the board, and committee members on major gift fundraising parameters.
• It minimizes misunderstandings between donors and your organization and helps to channel acceptable gifts-in-kind to your organization.

Getting Started

Your board and senior development staff will lead the effort of creating a gift acceptance policy. It should address questions such as:

• What categories of gifts will be accepted and how will gifts be valued?
• What types of gifts will not be accepted? For example, your organization may decide not to accept gifts of real estate due to the potential for hidden costs and liabilities.
• Are there certain types of gifts that will not be accepted because they run counter to the nonprofit’s mission and values? For example, an environmental nonprofit would not accept oil industry securities from a donor.
• Should the nonprofit decline gifts that bring a legal or financial obligation? For example, the donation of a specialty vehicle or boat may bring costly licensing or disposable waste issues with it.
• What types of gifts may require consultation with legal or financial counsel? For example, a donor may wish to donate vacation property which would entail legal or other research to confirm the property’s title, value, and marketability.
• What guidelines will help the board determine whether to keep the gift and use it in the nonprofit’s programs or fundraising activities, or sell it to obtain cash to fund operations?
• How will gifts-in-kind be recognized for accounting and tax purposes and tracked?
• What kind of acknowledgment will be issued to the donor?
• If a gift acceptance policy is already in place, what changes should be made to update it for current times and conditions?

Many nonprofit professional organizations and consultants offer free sample templates for gift acceptance policies. Once your board and leadership team define the policy for your organization, you can communicate it both internally to staff and externally to potential donors. This will enable your nonprofit to have fewer misunderstandings with donors and highlight those gifts-in-kind that can afford the greatest impact for your organization.

If you have any questions about this please contact your ALL advisor or call us at 617-738-5200.