Contributions matter: A primer on best practices (Part 4)
This is the final piece in a multi-part series on charitable contributions. In part 1, we covered the technical requirements for tax-deductible contributions. In part 2, we highlighted best practices for not-for-profits (NFPs) to assist donors with meeting the substantiation requirements for their tax deductions. In part 3, we reviewed the compliance requirements and recommended best practices for soliciting contributions. To wrap up the series, this article addresses donor privacy and gift acceptance policies.
There are two types of donor privacy policies: explicit and opt-out. An explicit policy informs donors that their personal information won’t be disseminated without permission and gives them the choice to advise whether or not their personal information can be used. An opt-out policy informs supporters that the organization can use their information unless they specifically decline.
Personally identifiable or other information collected, the means by which it is captured, and how it is used
The reasons, if applicable, personally identifiable or other information is shared with third parties
How donors can opt-out or access their data to review or modify it
Links to third-party websites included on the organization’s website
Established security measures to protect personally identifiable or other information
The date of the current version of the policy and a statement that it can be changed in the future with or without advance notice
Gift acceptance policy
Prospective donors may offer contributions of many different types of assets. The main purpose of a gift acceptance policy is to provide a means of evaluating potential gifts to protect the organization from exposure to possible risks. A carefully crafted and well-thought-out policy strengthens donor relations and helps avoid potential burdens on the organization relating to a proposed gift, such as costly upkeep or maintenance of personal property or real estate. The nature and mission of an organization may likewise justify limitations on the receipt of unrestricted gifts of cash or sponsorships from certain proposed donors (for example, a controversial enterprise or one that promotes activities that are inconsistent with the organization’s mission). NFPs should consider posting their gift acceptance policies on their websites.
As a best practice, a gift acceptance policy should cover the following elements:
The types of cash and non-cash gifts that are acceptable, including virtual currency
The types of donor-imposed restrictions on gifts that are acceptable
The means by which the organization will administer gifts received
The levels of gift approval by authorized personnel in the organization
The means by which the organization will vet the prospective donor and the donor’s ownership of the gift
How donors will be recognized
The importance of establishing a gift acceptance policy is reinforced by a question on Schedule M of IRS Form 990 regarding whether the NFP has a gift acceptance policy that requires review of any nonstandard gifts.
Gift agreements are another dimension of gift acceptance, but they are beyond this article’s scope.
Author: Robert H. Yunich, CPA, is based in New York City. Over the past 30 years, he has had extensive involvement with a variety of not-for-profits, as a volunteer, donor, and board member.