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Why Do We Need a Gift Acceptance Policy?

GAP

Dear Kim,

A colleague is working with you on a capital campaign and she says you have insisted that the organization create a “Gift Acceptance Policy.” I brought this to our board of directors and they said it should just be “We accept all gifts.” We all laughed. I don’t mean to be disrespectful but what is the point of having such a policy? What kind of gifts would you not accept? That doesn’t even make sense.

~Sense and Nonsense

Dear Nonsense,

Aside from the fact that the IRS is now asking for a gift acceptance policy if you file a Schedule M (if you accept over $25,000 worth of in-kind gifts), and they are considered best practice, I think there are a number of reasons to have one. I will answer with two true stories and then you can decide whether you need a gift acceptance policy or not.

A social service agency has to raise about $250,000 from individuals every year to close the gap between their government funding and their true expenses. They are offered a house by a donor. They have no Gift Acceptance Policy and so they eagerly accept, thinking they will sell it and start an endowment with the proceeds. However, the house doesn’t sell. It sits very near a freeway and not too far from an EPA superfund site. Their administrator is assigned to maintain the house (mow the lawn, check on it from to time). The agency has to pay property tax as the house is not used for a charitable purpose. After awhile, they decide to rent it, and it turns out the house has serious mold issues, some rat infestation, and a few other problems. Getting it in condition to rent or sell will cost thousands of dollars. They decide to leave it empty until they figure out what to do. Two years later an enterprising reporter finds out from a neighbor that this blighted house is owned by the agency. The donor expresses outrage that his gift has been treated so shabbily and claims that the house was in perfect condition when he gave it to them. Dealing with the house and now the fallout from the publicity is costing the agency a lot of staff time (which is also money).

A second true story that illustrates why Gift Acceptance Policies are helpful to have in place: An advocacy organization is offered $25,000 worth of stock in a multi-national corporation known for, among other things, the production of pesticides and genetically modified seeds. Their Gift Acceptance Policy states that they cannot accept a gift that is not in keeping with their mission and so the executive director turns down the stock. The prospective donor is appalled and blasts the organization on social media for being snobby, self-righteous and elitist. The subsequent social media conversation creates backlash from those who agree with the donor, but also brings in new donations from people happy that the organization has stuck to its principles. Ultimately the cost of the publicity is outweighed by donations that are given in support of this principled stand.

A Gift Acceptance Policy (GAP) can be fairly simple: “The Board of People for Everything Good reserves the right to turn down any gift that is not in keeping with its mission or that it feels it cannot properly steward.” Or the policies can be very elaborate.   

You don’t need to create a GAP from scratch—there are dozens of examples online. For me the policy is less important than the conversation that creating a policy forces an organization to have. The examples above show the importance of having these conversations. The first organization really had no concept of due diligence and probably very little experience with real estate. The process of adopting a GAP would have educated them on the questions that need to be asked about real estate gifts. The second organization could stand firm in turning down $25,000 —which would not be easy for any of us.

So, Nonsense, I do insist that clients have a gift acceptance policy because otherwise the last laugh may not be yours.

~Kim Klein

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