Gift acceptance policies are important because sometimes, a gift can cause a charity more trouble than it is worth. Set out well-reasoned criteria for looking a gift horse in the mouth.
A gift may result in significant administrative or financial burdens (for example, real property and other in-kind gifts can be challenging to manage), damage reputations, and even endanger registered charity status because of improper donation receipting, illegality, or other issues. The public expects more from charities, so there is that added public perception pressure.
At the same time, a charity will not want to pass on a donation opportunity that may be perfectly acceptable with a little more investigation and less snap judgment. Rash decision-making is poor stewardship.
Written gift acceptance policies protect staff and volunteers by providing a reference point so that people are less likely to substitute their own (possibly flawed) judgment when deciding whether or not to accept a gift. It is helpful to give prospective donors written guidance through websites, brochures, solicitation materials, publicly available policies, and other means. That way, donors will not be disappointed or take it personally when a donation is refused because they were forewarned, or the person refusing the gift can point to a policy document.
A charity may want to decline a donation for several reasons. All reasons relate to reputational, legal, financial or other disadvantages for the charity and its directors, officers, and other personnel. For example, a prospective donation may be:
- Subject to unacceptable conditions, such as those violating human rights legislation.
- From an ethically questionable source. Many charities refuse gifts from persons or organizations that have connections to crime; have questionable environmental or human rights practices; are involved in gun sales or manufacturing; are in alcohol, gaming, or tobacco industries; or have a controversial or polarizing political or other stance.
- Solely for reputation-laundering purposes. Reputation laundering occurs when a donor seeking to improve or cleanse their public image without any real commitment to change and solely to combat their negative public image offers a sizeable and much-publicized donation.
- Administratively burdensome, for instance, a building requiring ongoing maintenance and upkeep.
- Illegal. It may be obvious that a charity should not accept counterfeits or goods made from endangered species. It may be less apparent that a donation may violate anti-money laundering, anti-terrorism, anti-bribery, and anti-corruption laws, but charities should refuse these types of donations.
- Tarnished. For instance, a charity may be better off declining artwork and other gifts with the tarnish of cultural disputes. See, for example, The Benin Bronzes and the road to restitution and Fate of looted Benin Bronzes intensifies debate over restitution.
Among other things, gift acceptance policies should set out who has the authority to accept or reject a gift, their approval limits, and the decision criteria they should use.
Meeting your duty of care
Protect your charity’s reputation and preferred tax-exempt status by being careful about the gifts you accept. Guidance is in a new policy in the upcoming release for the Not-for-Profit database in PolicyPro, SPP NP 4.08 – Gift Acceptance, including two recent examples of not-for-profits that faced financial, legal, and reputational challenges because of the gifts they accepted. Also see another new and related policy, SPP NP 4.09 – Sponsorships.
Policies and procedures are essential, but the work required to create and maintain them can seem daunting. The Finance and Accounting, Operations and Marketing, Not-for-Profit, and Information Technology databases in PolicyPro, co-marketed by First Reference and Chartered Professional Accountants Canada (CPA Canada), contain sample policies, procedures, checklists and other tools, plus authoritative commentary to save you time and effort in establishing and updating your internal controls and policies. Not a subscriber? Request free 30–day trials of Finance and Accounting, Not-for-Profit, Operations and Marketing, and Information Technology databases in PolicyPro here.
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