12 Key Elements of an Effective Gift Acceptance Policy

By: Jon Schultz and Kimberly Haynes

Private schools and colleges often rely extensively on donations to fund routine operations and growth of the organization. While donors’ generous impulses always inspire gratitude, some gifts can be hard to manage or provide little (or no) net value to the school. An effective gift acceptance policy helps your educational institution avoid that problem —and much more. 

Having a formal gift acceptance policy encourages operational and managerial efficiency, consistency and better decision-making. It is considered a good practice for those reasons — and because it promotes seeking legal advice to prevent potential problems before they emerge. IRS Form 990 and Schedule M (Non-Cash Contributions) both ask whether the filer has a gift acceptance policy. 

A well-crafted gift acceptance policy guides board members as they seek and receive contributions, and it depersonalizes gift acceptance for staff members on the frontline. It manages donors’ expectations, prevents donors from making mistakes and preserves donor relationships when gifts are rejected. It also limits the types of acceptable gifts and donors, helping you avoid relationships with controversial enterprises and those that promote activities incompatible with the school’s mission. 

Whether you’re revising an existing policy or starting from scratch, including these essentials can help you get the most benefit from your school’s gift acceptance policy.

12 Critical Elements to Include in Your School’s Gift Acceptance Policy

1. Mission and Purpose: You don’t have to spell out the institution’s mission and purpose in your gift acceptance policy, but its primary goals should remain top of mind. 
2. Purpose of Policies and Guidelines: In most instances, the purpose is to govern internal processes and decisions around gift acceptance and provide guidance to donors and their professional advisors in completing gifts. Your policy should clarify the situations in which the rules apply (and any exceptions) as well as the affected parties. 
3. Use of Legal Counsel: The policy should clearly state that the institution will seek the advice of legal counsel when appropriate. This wording provides a platform for the use of counsel while leaving the final decision to the gift acceptance committee.
4. Donor Conflict of Interest: The policy should state that the school urges donors to seek independent professional counsel before making a gift. It should also address potential board and staff conflict of interest issues. You may wish to incorporate:
   • The National Committee on Planned Giving (NCPG)’s Model Standards of Practice for the Charitable Gift Planner
   • The National Society of Fund-Raising Executives (NSFRE)’s Donor Bill of Rights
5. Restrictions on Gifts: The policy should fully explain any limits to restrictions on gifts, whether that’s prohibiting restrictions entirely, using endowment pools for specific purposes, or accepting all gifts that fit the institution’s mission and purpose. The policy should state that the school will decline gifts counter to or beyond the scope of its mission and purpose. You may want to include language about specific endowments, chairs, or other naming opportunities.
6. The Gift Acceptance Committee: This committee should be small enough to make timely decisions and respond quickly to unusual gift offers. Your policy should specify the size and composition of the gift acceptance committee as well as how and when members are added.
7. Types of Gifts: State clearly the types of gifts that are appropriate for your institution and the types of gifts that are not appropriate. The most common gift forms include: 
   • Cash
   • Tangible personal property
   • Marketable securities: These donations demand careful treatment for accurate accounting and financial reporting by the institution as well as the donor. Your policy should specify how to track and account for these gifts based on:
     • Timing of the gift
     • Timing of the transfer
     • Timing of the sale
   • Closely held securities: Your policy should explain how to determine value and marketability before acceptance of the gift. It must also specify how to examine and resolve any restrictions on the gifts of closely held securities and clarify when legal counsel is required before accepting the gift.
   • Real estate: Real estate gifts can carry a high degree of risk. Your policy should address the two biggest concerns with these gifts: potential environmental liability and practical issues related to the disposition of the property.
   • Life Insurance
   • Charitable Gift Annuities
8. Appraisals: The policy should clearly define who is responsible for appraisals required for the donor’s tax return (the donor) and any exceptions. Policies should also list situations in which the organization will obtain an independent appraisal.
9. Legal Fees and Professional Fees: The policy should clearly state that legal fees for the completion of the gift are the responsibility of the donor. 
10. Valuation of Gifts on the Nonprofit Books: Be sure that the language in your policy includes implications of ASU 2020-07 as it relates to accounting for gifts to the school.
11. Filing of IRS Forms on Sale: Specify who is responsible for this obligation and how and when any required information must be provided.
12. Acknowledgment of Gifts: The policy should explain gifts are acknowledged and what options donors have, if any, for notifying other parties. All gift acknowledgments should specify the amount of any tax-deductible gift or tax-deductible portion of a gift. 

Besides these elements, your gift acceptance policy should reflect the institution’s unique attributes and needs, offering an appropriate balance of flexibility and discipline. Be sure to include detailed provisions that lay out enforcement measures, accountability and opportunities for periodic reevaluation. Post the policy on your institution’s website where donors can easily review it as they consider their gifting strategy. 

Most importantly, remember that a gift acceptance policy is only helpful to the extent that it is clear and consistently applied. Train staff and board members on the policy so they can comply and guide donors appropriately. For questions or help formulating a customized gift acceptance policy, reach out to the experienced education advisors at Mauldin & Jenkins.