Gift acceptance: To accept or not to accept? That is the question.

Gifting vehicles to not-for-profit (NFP) organizations have grown more complex in recent years, causing various challenges from an accounting, tax and philanthropy standpoint. Crafting a comprehensive, yet easy-to-follow gift acceptance policy is paramount in guiding fundraising professionals and donors through an area of increasing sophistication. Failure to create and adhere to strong gift acceptance policies can lead to costly consequences from both a financial and a donor relations perspective.

In this article, Baker Tilly Principal Kevin O’Connell along with Rachel Decker, founder and president of Detroit Philanthropy LLC, highlight key issues that can be addressed through a robust gift acceptance policy.

Valuation

In the past, accounting teams have often struggled to value gifts of closely held stock and nonfinancial assets, such as real estate or intangible assets. The emergence of cryptocurrency as a rapidly appreciating asset has created an environment ripe for donors to gift these assets to not-for-profits. However, when there is not an active market for valuing an asset, the organization’s accounting team takes on the burden of having to determine the value of the asset on the date of donation, which could mean having to hire a valuation specialist. In addition, the organization may need further assistance at the end of each reporting period in which the asset has not been sold.

Liquidation

The issues with accepting noncash gifts without an active market (e.g., real estate, closely held stock, intangible assets) do not end with obtaining a valuation on the date of donation. When there is no active market for an asset, it can create difficulties in liquidating the asset. Organizations may spend months or years preparing a nonmarketable asset for sale and finding the right buyer, which can lead to unanticipated costs and cause liquidity problems. Furthermore, it could strain the organization’s resources as it can take additional time and effort for team members who are not specialists in selling nonmarketable assets.

Administration

When it comes to administrative burdens, the issues are not limited to nonmarketable securities. Organizations should clearly define what types of restricted or conditional gifts they will accept. An organization that does not regularly receive gifts with restrictions or conditions should be prepared to spend time tracking these requirements. Moreover, certain donor-gifting vehicles, including split-interest agreements or endowments, could cause an undue administrative burden for organizations that do not regularly receive such gifts.