March 31, 2005 | Read Time: 3 minutes
Many charities get into trouble with demanding donors because they lack detailed policies that outline how
to manage gifts and donors, fund-raising and legal experts say. By defining expectations and procedures, written policies can promote good relations with donors, help charities avoid the hassle of accepting gifts they cannot use, and head off lawsuits as well as other costly financial or regulatory problems.
Even nonprofit groups that have policies on what gifts to accept often do not cover all the key issues, experts say.
“Many charities have pieces of policies,” says Kathryn Miree, a Birmingham, Ala., lawyer who works with charities on complex gift arrangements. For example, she says, “they might have an extensive policy on real-estate gifts, because they got burned with one, but no policy regarding closely held stock.”
Among the issues charities should grapple with when they design their policies, says Ms. Miree: how and when the charity will acknowledge donors for big contributions.
For instance, many charities state that at least 80 percent of a pledge must be paid before the organization will put a donor’s name on a building. Charities without such policies have bowed to donors’ wishes to apply their names to buildings long before the gifts had been fully paid, and ended up in an embarrassing situation when the donors reneged, says Ms. Miree.
Other issues Ms. Miree advises charities to focus on: defining when a donation would pose a conflict of interest; what types of donation need review by an outside expert acting on behalf of the charity; and what steps must be taken in handling complicated or unusual donations such as closely held stock, time shares in condominiums or vacation homes, or artwork, jewelry, and other noncash items.
Tailoring Guidance
While charities often get a good start by using model policies offered by colleagues, consultants, and professional associations, they also need to think through the special situations that could occur with donors and gifts at their type of organization, says Lynda Moerschbaecher, a lawyer in Carlsbad, Calif. For example, she says medical institutions might want to specify whether they want to accept a large gift from a benefactor who is on a waiting list for a donated organ.
“A lot of problems with donors could be avoided,” Ms. Miree says, “if, at the outset, charities would stop and think, ‘What are the problems we’ve already faced and what other crises could we find ourselves in?’”
It’s not enough just to draft a policy, however, says Ms. Miree. Too many groups don’t do enough to make sure staff members are keeping the policies in mind, she says. She suggests that all staff and board members who solicit donors be asked to sign the charity’s policy on accepting gifts and that the document be placed somewhere that is easy for fund raisers to find whenever they are negotiating with donors. The policies should also be regularly reviewed and revised when necessary, she says.
Some charities adopt rules as needed, rather than formulating as complete a policy as possible from the beginning, but that is a mistake, says Ms. Miree.
“Without guidelines, you are more likely to make bad decisions, especially if you have a big gift staring you in the face,” she says. “Charities always want the gift and the inclination is always to make it work. But the question is, ‘Should it work?’”
To help nonprofit groups create policies on accepting gifts, Ms. Miree has posted a free manual on her Web site at http://www.giftplanners.com.
