Why Gift Acceptance Policies are Important and Must Be Periodically Reviewed and Updated
A gift acceptance policy fills many important roles for a nonprofit organization, including acting as a set of guidelines for fundraising efforts, a tool for risk management, and a protector of the organization’s good governance practices, mission, ethics, reputation, and culture. These characteristics are naturally sensitive to unexpected change and evolving economic conditions, so regularly reviewing and updating your organization’s gift acceptance policy is essential.
A gift acceptance policy generally addresses what types of gifts an organization accepts and does not accept and provides operational guidelines for management and staff for seeking approval of certain proposed gifts, documenting pledges, and providing acknowledgments and other timely communications to donors.
Gift acceptance policies are not to be confused with gift policies restricting Board members, senior management, and other organizational representatives from accepting personal gifts in the course of their work for the organization, a subject that is typically addressed in an organization’s Code of Ethics, Conflict of Interest, and/or other similar policies.
Gift acceptance policies are unique in that they must balance two equally important but potentially conflicting priorities: (1) guiding the acquisition of future funding; and (2) enterprise risk management (ERM). Favoring one role at the expense of the other can lead to negative consequences down the road.
If ERM is unnecessarily over-stringent, valuable donations could be turned away (declined). However, if every new source of funding is accepted without review and careful consideration of potential consequences, an organization’s good reputation and brand can be quickly harmed and become difficult or even impossible to repair and restore in the future. For these reasons, adding a gift acceptance policy, or taking a closer look at your current gift acceptance policy, is imperative.
Gift acceptance policies are one the best examples of a “living” document. By structure and purpose, they are not designed to be all-encompassing. Gift acceptance policies are designed and developed to manage expectations and related outcomes and risks. Even during stable times, expectations evolve and change. The future will always be different from the present especially now where we live in a world with rapidly accelerating change driven by technological advances, changing economic conditions, and polarization of feelings.
Nonprofit organizations are experimenting with new fundraising tactics and implementing never tried before strategies for securing donations, grants, and sponsorships in a market that appears to be more competitive and unstable. This is driving organizations to explore various new strategies and non-traditional sources of funding that may not be addressed in their current gift acceptance policies (such as new planned giving vehicles and creative approaches for structured gifts).
Thus, it is crucial to be fully versed in the details of your gift acceptance policy. To be nimble and avoid back-tracking on discussions between donors and your development team, you must first know what your current gift acceptance policy allows and does not allow. Most organizations will need to take a closer and more regular look at their gift acceptance policies even if they have been recently updated in the last year or two.
For organizations that do not have a gift acceptance policy, now is a good time to adopt one. A well-crafted gift acceptance policy will help protect your organization and its reputation as you explore and acquire new funding sources that could expose the organization to future challenges and potential new risks.
Planning Tip – Gift acceptance policies should provide for the establishment of a “gift acceptance committee” to review large and/or unusual gifts, grants, and sponsorships. This should be an inward-facing committee made up mostly but not entirely of senior management and staff. The role of the gift acceptance committee is to transparently address and explore options related to large and unusual gifts prior to acceptance and notifying the Board, and to make recommendations whether to accept or decline the new source of funding. The organization needs to be proactive and alert the gift acceptance committee to changing program and economic conditions and provide access to additional education and professional consultation resources that might be needed by the gift acceptance committee in the future. The gift acceptance committee is also an excellent resource for proposing changes to the current gift acceptance policy to better meet changing organizational needs and improve related enterprise risk management (ERM).
Finally, a general word of caution. Because of the fast pace of change that appears to be here to stay, there is added pressure on nonprofits to make quick funding decisions related to potential new sources of donations, grants, and sponsorships that could set the organization on a risky path that will be hard to change in the future. During these challenging times, a closer review of your gift acceptance policy is essential to protect your organization’s reputation and foster future continuity and sustainability
You might also be interested in:
