Legend tells us that on this date (March 21), Pocahontas was born. The exact year is unknown but is estimated to be around 1595 or 1596. She is believed to have been born in the vicinity of the present-day Gloucester County Courthouse in Virginia.
Pocahontas: Living Symbol of Love and Peace
For 400+ years, the true story of this remarkable woman was shrouded in mystery, clouded by myths, and told mainly from the point of view of the English colonists.
The book states directly that the life of Pocahontas is first and foremost a great love story.
“The love that was the moving force within Pocahontas’s life was the spiritual bond and filial affection between Pocahontas and her father, [the] Chief, and the love they [both] had for the Powhatan people.”
Pocahontas’s father was the paramount chief of the Powhatan nation. Pocahontas, for many reasons well-explained in the book, was the very favorite child of the Chief. Even the English colonists were able to figure this out!
Pocahontas, held in such high regard, accompanied her elders when delivery of food and implements were made to the settlers. Her father wanted to put a young girl in a prominent position such that the English would know the Native Americans came in peace, only to help.
Unfortunately, the love and peace that Pocahontas shared was not enough to halt the perhaps inevitable conflict between the colonists and her Powhatan nation. I don’t need to inform readers about the disastrous results for Native Americans. Sometimes conflicts roar out of control.
Nonprofits and Conflict
Obviously nonprofits have far, far less at stake than conflicts occurring in colonial America. Nonetheless, conflicts still happen. To successfully continue their important work, nonprofits must manage conflicts in a positive, professional, and strategically smart manner.
The general term “conflicts” includes the more specific “conflict of interest.” Moving from the 1600s to modern day, our increasingly complex and interconnected world means more conflicts of interest and more potential conflicts of interest.
A conflict of interest is present when an individual or entity has competing interests that could influence actions or decisions. Often this results in compromised judgment or lack of objectivity.
Conflicts of interest can lead to ethical dilemmas, biased decisions, or outright breaches of trust. While they can’t always be completely avoided, there are proper handling procedures that can significantly mitigate risks.
Common Examples of Conflicts of Interest
A common example of a conflict of interest, frequently given, is that of an Officer or Director who has a financial stake in a company that the nonprofit is considering for a contract. A similar issue would exist if an Officer or Director had a spouse with a financial stake in a company that the nonprofit is considering for a contract.
Other examples:
An employee works part-time at a nonprofit resale shop and works full-time as a realtor, which includes staging homes. If the employee were to buy furniture from the resale shop at a discount to use for staging in the realtor business, that is a clear conflict of interest.
A conflict of interest can also occur when an Officer for a nonprofit outright violates trust. Imagine, for example, the Treasurer of a nonprofit who owns an antique shop. The nonprofit owns antique desks and antique lamps. If the Treasurer sells the desks and lamps, and makes a commission on the sale, that is most definitely a conflict of interest.
Conflicts of interest can occur in the political realm, too. If a nonprofit organization contributed money to a public official in exchange for the public official agreeing to pass legislation that would benefit the nonprofit, that would also be a major conflict of interest.
What IS a Conflict of Interest Policy, Anyway?
A Conflict of Interest Policy provides a formal set of guidelines and procedures to identify, disclose, manage, and mitigate conflicts of interest. In sum, the Policy should accomplish two major goals:
Require Officers and Directors to disclose any existing or potential conflicts of interest.
Set forth specific procedures for handling conflicts of interest.
The Policy should define what is considered a conflict of interest and strongly encourage individuals and entities to disclose potential conflicts. The Policy should also contain procedures for the nonprofit’s governing Board to evaluate the significance of the conflict.
Once conflicts are defined, disclosed, and evaluated, the Policy should provide mitigation strategies. Often, these will be safeguards to prevent bias and encourage recusal from decision- making. For example, mitigation might mean asking a Director with a conflict of interest to leave the meeting during discussion of the issue and also to refrain from voting on said issue.
Why Does a Nonprofit Need a Conflict of Interest Policy?
Nonprofits have a commitment to serving the public good, relying on community trust and support. This makes the implementation of a Conflict of Interest Policy imperative for several reasons:
Mitigating Bias
Clear guidelines for handling conflicts of interest reduces the risk of biased decision-making that may compromise the nonprofit’s work or even its very mission.
Protecting Stakeholders’ Interests
Such a policy helps Directors, Officers, agents, advisors, consultants, contractors, donors, employees, and volunteers, and other all stakeholders, have confidence that all decisions are made in the best interest of the nonprofits.
Legal and Regulatory Compliance
Transactions can be detrimental to a nonprofit if they breach laws or regulations. A policy can help a nonprofit navigate known conflicts of interest before they bring harm to the organization.
Enhancing Internal Accountability
A Conflict of Interest Policy promotes accountability within the organization, which further ensures stakeholders they can trust the nonprofit to make objective and impartial decisions.
Forbidding Retaliation
the Policy must prohibit retaliation against individuals who report conflicts in good faith, promoting transparency and accountability.
When to Adopt a Conflict of Interest Policy
Conflicts of interest can arise at any time and could even already exist during the formation process. Ideally, a Conflict of Interest Policy, along with other key policies, should be established during initial stages. This ensures proper governance practices are in place from the outset.
If the Conflict of Policy is already in place, it should be periodically reviewed. (I would say at least annually). During review, Officers and Directors need to consider possible revisions to account for internal or external changes.
As nonprofits grow and engage with more stakeholders, the potential for conflicts of interest increases. Therefore, having a clear policy in place as soon as possible helps establish ethical conduct within the organization and prepare for conflicts before and as they arise.
How to Adopt a Conflict of Interest Policy
The general steps you should take when adopting or revising a Conflict of Interest Policy:
Assessment and Review: Evaluate the organization’s structure, operations, and areas where conflicts of interest could arise.
Research and Development: Research existing policies and best practices relevant to the nonprofit sector, while also considering the nonprofit’s unique circumstances. There is lots of information out there about nonprofits, conflicts, and policies and procedures; this is an area where “Doctor Google” can really help.
Drafting or Revision: With the information gathered from the assessment, review, research, and development, consult with a lawyer qualified to draft a Policy. Be sure to explain your nonprofit’s unique features and challenges.
Approval: After legal approval, consider having a committee (perhaps the Executive Committee?) carefully review the Policy. Should any questions or concerns arise, go back to legal counsel. Ultimately, the Conflict of Interest Policy should be given to the full Board of Directors for their thorough review. At a meeting of the full Board, a presentation should be given which considers each of the elements of the Policy and the Policy’s overall importance. Be sure to allow plenty of time for education, discussion,
and debate. The vote should be unanimous.
Implementation: Communicate the adopted or revised policy to staff, donors, and the public. Include guidance on how the policy will be implemented.
Documentation: Maintain records of conflicts disclosed, actions taken to address them, and any related decisions or actions. Be sure that documents are retained (or destroyed) pursuant to the Document Retention and
Monitoring: Establish procedures for ongoing monitoring and evaluation of the policy.
Who Should Have a Conflict of Interest Policy?
Every organization should have a Conflict of Interest Policy.
Conflicts of interest can surface at any time, within any organization. A proper policy is essential for promoting transparency, integrity, and ethical conduct in decision-making processes. All organizations, from small local nonprofits to multinational organizations, should establish and adhere to a Conflict of Interest Policy to safeguard against conflicts that could compromise their mission.
Email Me!
If your organization is interested in drafting (or revisiting!) its Conflict of Interest Policy, don’t hesitate to reach out today to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, specific to the unique mission of your nonprofit, the ten (10) policies expressly referenced by the IRS on Form 990.
Questions about the ten (10) policies referenced on IRS Form 990? Email me now!
Born on this day in 1998, Amanda Gorman was just 22 years-old when she became the youngest
U.S. inaugural poet at the 2021 swearing-in of President Joe Biden. She has said that she drew inspiration for her poem, “The Hill We Climb,” from Abraham Lincoln, the Rev. Martin Luther King Jr., and poet Maya Angelou, who became the first woman to read a poem at a presidential inauguration in 1993.
Ahead of her reading, Oprah Winfrey gave Gorman a ring shaped like a birdcage in reference to Angelou’s, “I Know Why the Caged Bird Sings.” It was a thoughtful and generous gesture.
Nonprofits receive thoughtful and generous gifts, too.
Indeed, they rely on the generosity of the public to support their work. But did you know it’s sometimes wiser to “just say no” to a gift?
Not every gift comes from an “Angel Network”!
Knowing which donations to accept, and sometimes even better, which gifts to decline, is critically important for every nonprofit. That’s because some gifts, offered with the best intentions, can jeopardize a nonprofit’s reputation, create financial headaches, and even compromise its mission.
A well-drafted Gift Acceptance Policy (sometimes referred to as a “GAP”) can help a nonprofit avoid potential pitfalls, as well as establish procedures for accepting, tracking, and managing donations.
The IRS and GAPs
While the IRS doesn’t require a nonprofit to have a Gift Acceptance Policy, its Form 990 does ask that it be filed if available. (You’ll recall that IRS Form 990 is the “tax return” nonprofits must file every year). By expressly referencing the Gift Acceptance Policy on its Form 990, it’s clear the IRS considers adopting and following a GAP “best practice” for nonprofits — and a strong signal your nonprofit should adopt one if it hasn’t already.
Gone are the days when a nonprofit’s responsibilities were no more complicated than depositing checks or acknowledging a donor in a newsletter. Today, accepting and managing gifts is a more complicated undertaking that comes with heightened donor expectations, increased fiduciary obligations for Officers and Directors, and greater reporting requirements. Overall, a Gift Acceptance Policy provides necessary safeguards for both nonprofits and donors.
What IS a Gift Acceptance Policy, Anyway?
Broadly, a Gift Acceptance Policy describes the kinds of gifts a nonprofit will and will not accept and how they will be administered. Adopting a robust written policy regarding gift acceptance is an important part of nonprofit best practices that serve to instill fiduciary discipline, provide legal protection, and contribute to an organization’s long-term viability by ensuring that the nonprofit will not accept gifts that it does not have the time or resources to manage.
The process of developing and adopting a Gift Acceptance Policy also enables staff and boards to understand the complexities and challenges associated with certain kinds of gifts, focuses attention on donor stewardship, presents new opportunities for fundraising, and introduces clarity, control, and consistency into the nonprofit development program.
A case-by-case approach to accepting gifts—or having no policy whatsoever—can lead to poor decision-making by boards who might be tempted by a dazzling but wholly impracticable gift or blinded by their own tastes and personal opinions. Haphazard or arbitrary decisions can also confuse and frustrate potential donors, who are left wondering why their proffered gift was rejected.
Crafting and Adopting a Gift Acceptance Policy
A Gift Acceptance Policy is created through collaboration among a nonprofit’s Officers, Directors, staff, and legal counsel. Because each nonprofit is unique, it needs its own individual policy specific to its needs and mission and not one borrowed from another organization.
In addition to outlining its position on gifts, a Gift Acceptance Policy provides a roadmap for the Board of Directors and other fiduciary decision-makers. A clear and well-designed GAP also gives donors and prospective donors information they need for tax and other reporting purposes.
Approval by Board
Once drafted, the Gift Acceptance Policy must be approved and adopted by the nonprofit’s Board of Directors. Hopefully, a consensus of Directors can be reached on all issues addressed by the GAP.
Regular Reference and Review
The GAP should not be considered written in stone or simply left on a shelf to gather dust. The Gift Acceptance Policy should be readily consulted in any case of a non-cash or unusual gift.
More broadly, the GAP should be reviewed every year, at the least, to take into consideration any changes in the nonprofit’s circumstances, accommodate unexpected types of gifts, or reflect developments in tax law or technology.
Critical Elements of a Gift Acceptance Policy
A well-drafted Gift Acceptance Policy follows best practices in transparency, financial control, legal responsibility, and donor support. It should include the following elements:
The nonprofit’s mission statement;
The purpose of the Gift Acceptance Policy;
The use of legal counsel in matters relating to the acceptance of gifts;
The policy on restricted gifts;
The types of gifts the nonprofit will and will not accept;
Reporting requirements and responsibilities;
Gift Acceptance Committee (or another group, such as an Executive Committee, that is prepared to be consulted on gifts); and
Adherence to ethical standards and accountability.
Types of Gifts
Donors have a number of options when it comes to charitable giving. For nonprofits, though, not all gifts are created equal. Some gifts may be more costly or complex to manage than a nonprofit can handle, or the nature of a gift might fall outside its mission and goals.
A Gift Acceptance Policy needs to take into consideration all of the issues related to each of these types of gifts and provide clear and objective reasons the nonprofit can point to for accepting—or refusing—a gift.
Refusing Gifts
Refusing a gift is difficult for both a nonprofit and a donor. A Gift Acceptance Policy can help in this regard because it serves to manage the expectations of donors and guide the nonprofit’s decision-making. The reasons for turning down a gift are many and not always obvious.
There is still a mindset among many nonprofits that any donation is better than no donation. For new—or less sophisticated—nonprofits, turning down any gift can seem counterintuitive or even rude. That’s why a Gift Acceptance Policy that clearly sets out an organization’s position on gifts is in the best interest of every nonprofit, no matter its size or its mission. A strong GAP helps nonprofits “just say no” by delineating important strategic and financial reasons for accepting some gifts while rejecting others.
Donors Rights
If nothing else convinces a nonprofit that it must either adopt or revise its Gift Acceptance Policy, the specter of alienating existing donors or discouraging potential ones can often be the spur it needs. Building strong relationships with donors and enhancing donor retention are fundamental to any fundraising strategy and start with a formal Gift Acceptance Policy.
At minimum, a well-thought-out Gift Acceptance Policy assures donors they will receive timely and meaningful recognition. Further, the GAP can emphasis that donor intent will always be followed. After all, donors have a right to expect that their gift will be used as promised and consistent with their intentions.
Whether it is determining the criteria for naming rights for new building or deciding how to acknowledge a ten dollars ($10) check, a Gift Acceptance Policy helps to enhance and preserve donor relationships—especially when gifts are rejected. For example, if a nonprofit has a formal, written policy of rejecting, say, anonymous gifts, this makes it easier to explain to the donor why his or her anonymous donation cannot be accepted even though it might be generous—and tempting.
Conclusion
A Gift Acceptance Policy is critical for promoting charitable giving as well as limiting risk to nonprofits. They also help donors by providing clarity and enhancing transparency when deciding to make a gift. A GAP should be as integral to a nonprofit as professionally prepared employee and endowment policy handbooks, governing documents like articles and bylaws, and practices like board training.
Importantly, a Gift Acceptance Policy can make it easier for a nonprofit to say, “thanks, but no thanks” to a gift. And, who knows, it could mean the opportunity to say “yes” to an even better one.
Email Me!
If your organization is interested in adopting (or revisiting!) a Gift Acceptance Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Gift Acceptance Policy) specific to the unique mission of your nonprofit.
Iowa native George Nissen built his first “tumbling device” in 1934 out of angle iron, canvas, and rubber springs. He perfected the contraption, renamed it the “trampoline,” after the Spanish word for springboard. On March 6, 1945, Nissen received a patent for the springy piece of equipment.
Nissen’s trampoline was used to train aviators in World War II and astronauts during the Space Age. Athletes still use it for cross-training and trampolining has become a competitive sport in itself.
The backyard trampoline with a safety net is as ubiquitous as the swing set and — even better — can be repurposed for other uses after the kids get tired of it. People have turned them into everything from chicken coops to greenhouses to sunshades.
You could say a Document Retention Policy is like a trampoline — it will always give you something good to fall back on. (Ouch!)
Seriously, though, nonprofits need a good Document Retention Policy to ensure all information related to their business operations, employees, and finances is managed in a systematic and well-organized manner.
A well-drafted Document Retention Policy sets guidelines for how long particular records and documents — both electronic and paper — must be kept and how and when they should be destroyed. It serves two primary functions. First, making sure your nonprofit meets federal and state legal and regulatory requirements. Second, and just as important, it protects the reputation, privacy, and interests of you and your employees.
It should include a description of each kind of document the Policy covers and the retention time for each, because these can vary. For example, bank statements should be kept for at least three (3) years. On the other hand, the IRS requires that year-end financial statements be kept permanently, while the minimum retention period for general correspondence is two (2) years.
The Policy must also provide detailed information about how to label and store paper documents and electronic files. There should be guidelines for backing up electronic files, as well as a secure method for purging this information.
Following the guidelines of a Document Retention Policy might seem rather time-consuming and nit-picky, but in reality it will improve the efficiency of your record management while at the same increasing the security of the sensitive information in your files.
If you’re dedicated to elevating your nonprofit to new heights, creating, implementing, and observing a Document Retention Policy is essential. (Double ouch!)
If your organization is interested in adopting (or revisiting!) a Document Retention Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Document Retention Policy) specific to the unique mission of your nonprofit.
https://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.png00Lexi Luneckashttps://www.gordonfischerlawfirm.com/wp-content/uploads/2017/05/GFLF-logo-300x141.pngLexi Luneckas2024-03-06 11:03:182024-03-06 11:05:39On March 6, 1945, Iowan George Nissen patents the trampoline
Iowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy
Happy Birthday, #Pocahontas!
Nonprofits[Conflict of Interest Policies for Nonprofits]
March 21, 2024
Happy Birthday, Pocahontas!
Legend tells us that on this date (March 21), Pocahontas was born. The exact year is unknown but is estimated to be around 1595 or 1596. She is believed to have been born in the vicinity of the present-day Gloucester County Courthouse in Virginia.
Pocahontas: Living Symbol of Love and Peace
For 400+ years, the true story of this remarkable woman was shrouded in mystery, clouded by myths, and told mainly from the point of view of the English colonists.
Fortunately, Pocahontas’s true story has finally been revealed in her definitive biography: The True Story of Pocahontas – The Other Side of History.
The book states directly that the life of Pocahontas is first and foremost a great love story.
Pocahontas’s father was the paramount chief of the Powhatan nation. Pocahontas, for many reasons well-explained in the book, was the very favorite child of the Chief. Even the English colonists were able to figure this out!
Pocahontas, held in such high regard, accompanied her elders when delivery of food and implements were made to the settlers. Her father wanted to put a young girl in a prominent position such that the English would know the Native Americans came in peace, only to help.
Unfortunately, the love and peace that Pocahontas shared was not enough to halt the perhaps inevitable conflict between the colonists and her Powhatan nation. I don’t need to inform readers about the disastrous results for Native Americans. Sometimes conflicts roar out of control.
Nonprofits and Conflict
Obviously nonprofits have far, far less at stake than conflicts occurring in colonial America. Nonetheless, conflicts still happen. To successfully continue their important work, nonprofits must manage conflicts in a positive, professional, and strategically smart manner.
The general term “conflicts” includes the more specific “conflict of interest.” Moving from the 1600s to modern day, our increasingly complex and interconnected world means more conflicts of interest and more potential conflicts of interest.
I have repeatedly written that all Iowa nonprofits should adopt the ten (10) polices which are referenced on IRS Form 990. All ten (10) policies are critically important. But if I was forced to pick just one single policy, a Conflict of Interest Policy might be the most necessary policy for a nonprofit to adopt.
Conflict of Interest Defined
A conflict of interest is present when an individual or entity has competing interests that could influence actions or decisions. Often this results in compromised judgment or lack of objectivity.
Conflicts of interest can lead to ethical dilemmas, biased decisions, or outright breaches of trust. While they can’t always be completely avoided, there are proper handling procedures that can significantly mitigate risks.
Common Examples of Conflicts of Interest
A common example of a conflict of interest, frequently given, is that of an Officer or Director who has a financial stake in a company that the nonprofit is considering for a contract. A similar issue would exist if an Officer or Director had a spouse with a financial stake in a company that the nonprofit is considering for a contract.
Other examples:
An employee works part-time at a nonprofit resale shop and works full-time as a realtor, which includes staging homes. If the employee were to buy furniture from the resale shop at a discount to use for staging in the realtor business, that is a clear conflict of interest.
A conflict of interest can also occur when an Officer for a nonprofit outright violates trust. Imagine, for example, the Treasurer of a nonprofit who owns an antique shop. The nonprofit owns antique desks and antique lamps. If the Treasurer sells the desks and lamps, and makes a commission on the sale, that is most definitely a conflict of interest.
Conflicts of interest can occur in the political realm, too. If a nonprofit organization contributed money to a public official in exchange for the public official agreeing to pass legislation that would benefit the nonprofit, that would also be a major conflict of interest.
What IS a Conflict of Interest Policy, Anyway?
A Conflict of Interest Policy provides a formal set of guidelines and procedures to identify, disclose, manage, and mitigate conflicts of interest. In sum, the Policy should accomplish two major goals:
The Policy should define what is considered a conflict of interest and strongly encourage individuals and entities to disclose potential conflicts. The Policy should also contain procedures for the nonprofit’s governing Board to evaluate the significance of the conflict.
Once conflicts are defined, disclosed, and evaluated, the Policy should provide mitigation strategies. Often, these will be safeguards to prevent bias and encourage recusal from decision- making. For example, mitigation might mean asking a Director with a conflict of interest to leave the meeting during discussion of the issue and also to refrain from voting on said issue.
Why Does a Nonprofit Need a Conflict of Interest Policy?
Nonprofits have a commitment to serving the public good, relying on community trust and support. This makes the implementation of a Conflict of Interest Policy imperative for several reasons:
Mitigating Bias
Clear guidelines for handling conflicts of interest reduces the risk of biased decision-making that may compromise the nonprofit’s work or even its very mission.
Protecting Stakeholders’ Interests
Such a policy helps Directors, Officers, agents, advisors, consultants, contractors, donors, employees, and volunteers, and other all stakeholders, have confidence that all decisions are made in the best interest of the nonprofits.
Legal and Regulatory Compliance
Transactions can be detrimental to a nonprofit if they breach laws or regulations. A policy can help a nonprofit navigate known conflicts of interest before they bring harm to the organization.
Enhancing Internal Accountability
A Conflict of Interest Policy promotes accountability within the organization, which further ensures stakeholders they can trust the nonprofit to make objective and impartial decisions.
Forbidding Retaliation
the Policy must prohibit retaliation against individuals who report conflicts in good faith, promoting transparency and accountability.
When to Adopt a Conflict of Interest Policy
Conflicts of interest can arise at any time and could even already exist during the formation process. Ideally, a Conflict of Interest Policy, along with other key policies, should be established during initial stages. This ensures proper governance practices are in place from the outset.
If the Conflict of Policy is already in place, it should be periodically reviewed. (I would say at least annually). During review, Officers and Directors need to consider possible revisions to account for internal or external changes.
As nonprofits grow and engage with more stakeholders, the potential for conflicts of interest increases. Therefore, having a clear policy in place as soon as possible helps establish ethical conduct within the organization and prepare for conflicts before and as they arise.
How to Adopt a Conflict of Interest Policy
The general steps you should take when adopting or revising a Conflict of Interest Policy:
and debate. The vote should be unanimous.
Who Should Have a Conflict of Interest Policy?
Every organization should have a Conflict of Interest Policy.
Conflicts of interest can surface at any time, within any organization. A proper policy is essential for promoting transparency, integrity, and ethical conduct in decision-making processes. All organizations, from small local nonprofits to multinational organizations, should establish and adhere to a Conflict of Interest Policy to safeguard against conflicts that could compromise their mission.
Email Me!
If your organization is interested in drafting (or revisiting!) its Conflict of Interest Policy, don’t hesitate to reach out today to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit, specific to the unique mission of your nonprofit, the ten (10) policies expressly referenced by the IRS on Form 990.
Questions about the ten (10) policies referenced on IRS Form 990? Email me now!
My email is:
gordon@gordonfischerlawfirm.com
####
[Conflict of Interest Policies for Nonprofits]
March 7: Happy Birthday to Poet and Activist Amanda Gorman!
Nonprofits[Nonprofits Need Gift Acceptance Policies]
March 7, 2024
Born on this day in 1998, Amanda Gorman was just 22 years-old when she became the youngest
U.S. inaugural poet at the 2021 swearing-in of President Joe Biden. She has said that she drew inspiration for her poem, “The Hill We Climb,” from Abraham Lincoln, the Rev. Martin Luther King Jr., and poet Maya Angelou, who became the first woman to read a poem at a presidential inauguration in 1993.
Ahead of her reading, Oprah Winfrey gave Gorman a ring shaped like a birdcage in reference to Angelou’s, “I Know Why the Caged Bird Sings.” It was a thoughtful and generous gesture.
Nonprofits receive thoughtful and generous gifts, too.
Indeed, they rely on the generosity of the public to support their work. But did you know it’s sometimes wiser to “just say no” to a gift?
Not every gift comes from an “Angel Network”!
Knowing which donations to accept, and sometimes even better, which gifts to decline, is critically important for every nonprofit. That’s because some gifts, offered with the best intentions, can jeopardize a nonprofit’s reputation, create financial headaches, and even compromise its mission.
A well-drafted Gift Acceptance Policy (sometimes referred to as a “GAP”) can help a nonprofit avoid potential pitfalls, as well as establish procedures for accepting, tracking, and managing donations.
The IRS and GAPs
While the IRS doesn’t require a nonprofit to have a Gift Acceptance Policy, its Form 990 does ask that it be filed if available. (You’ll recall that IRS Form 990 is the “tax return” nonprofits must file every year). By expressly referencing the Gift Acceptance Policy on its Form 990, it’s clear the IRS considers adopting and following a GAP “best practice” for nonprofits — and a strong signal your nonprofit should adopt one if it hasn’t already.
Gone are the days when a nonprofit’s responsibilities were no more complicated than depositing checks or acknowledging a donor in a newsletter. Today, accepting and managing gifts is a more complicated undertaking that comes with heightened donor expectations, increased fiduciary obligations for Officers and Directors, and greater reporting requirements. Overall, a Gift Acceptance Policy provides necessary safeguards for both nonprofits and donors.
What IS a Gift Acceptance Policy, Anyway?
Broadly, a Gift Acceptance Policy describes the kinds of gifts a nonprofit will and will not accept and how they will be administered. Adopting a robust written policy regarding gift acceptance is an important part of nonprofit best practices that serve to instill fiduciary discipline, provide legal protection, and contribute to an organization’s long-term viability by ensuring that the nonprofit will not accept gifts that it does not have the time or resources to manage.
The process of developing and adopting a Gift Acceptance Policy also enables staff and boards to understand the complexities and challenges associated with certain kinds of gifts, focuses attention on donor stewardship, presents new opportunities for fundraising, and introduces clarity, control, and consistency into the nonprofit development program.
A case-by-case approach to accepting gifts—or having no policy whatsoever—can lead to poor decision-making by boards who might be tempted by a dazzling but wholly impracticable gift or blinded by their own tastes and personal opinions. Haphazard or arbitrary decisions can also confuse and frustrate potential donors, who are left wondering why their proffered gift was rejected.
Crafting and Adopting a Gift Acceptance Policy
A Gift Acceptance Policy is created through collaboration among a nonprofit’s Officers, Directors, staff, and legal counsel. Because each nonprofit is unique, it needs its own individual policy specific to its needs and mission and not one borrowed from another organization.
In addition to outlining its position on gifts, a Gift Acceptance Policy provides a roadmap for the Board of Directors and other fiduciary decision-makers. A clear and well-designed GAP also gives donors and prospective donors information they need for tax and other reporting purposes.
Approval by Board
Once drafted, the Gift Acceptance Policy must be approved and adopted by the nonprofit’s Board of Directors. Hopefully, a consensus of Directors can be reached on all issues addressed by the GAP.
Regular Reference and Review
The GAP should not be considered written in stone or simply left on a shelf to gather dust. The Gift Acceptance Policy should be readily consulted in any case of a non-cash or unusual gift.
More broadly, the GAP should be reviewed every year, at the least, to take into consideration any changes in the nonprofit’s circumstances, accommodate unexpected types of gifts, or reflect developments in tax law or technology.
Critical Elements of a Gift Acceptance Policy
A well-drafted Gift Acceptance Policy follows best practices in transparency, financial control, legal responsibility, and donor support. It should include the following elements:
Types of Gifts
Donors have a number of options when it comes to charitable giving. For nonprofits, though, not all gifts are created equal. Some gifts may be more costly or complex to manage than a nonprofit can handle, or the nature of a gift might fall outside its mission and goals.
A Gift Acceptance Policy needs to take into consideration all of the issues related to each of these types of gifts and provide clear and objective reasons the nonprofit can point to for accepting—or refusing—a gift.
Refusing Gifts
Refusing a gift is difficult for both a nonprofit and a donor. A Gift Acceptance Policy can help in this regard because it serves to manage the expectations of donors and guide the nonprofit’s decision-making. The reasons for turning down a gift are many and not always obvious.
There is still a mindset among many nonprofits that any donation is better than no donation. For new—or less sophisticated—nonprofits, turning down any gift can seem counterintuitive or even rude. That’s why a Gift Acceptance Policy that clearly sets out an organization’s position on gifts is in the best interest of every nonprofit, no matter its size or its mission. A strong GAP helps nonprofits “just say no” by delineating important strategic and financial reasons for accepting some gifts while rejecting others.
Donors Rights
If nothing else convinces a nonprofit that it must either adopt or revise its Gift Acceptance Policy, the specter of alienating existing donors or discouraging potential ones can often be the spur it needs. Building strong relationships with donors and enhancing donor retention are fundamental to any fundraising strategy and start with a formal Gift Acceptance Policy.
At minimum, a well-thought-out Gift Acceptance Policy assures donors they will receive timely and meaningful recognition. Further, the GAP can emphasis that donor intent will always be followed. After all, donors have a right to expect that their gift will be used as promised and consistent with their intentions.
Whether it is determining the criteria for naming rights for new building or deciding how to acknowledge a ten dollars ($10) check, a Gift Acceptance Policy helps to enhance and preserve donor relationships—especially when gifts are rejected. For example, if a nonprofit has a formal, written policy of rejecting, say, anonymous gifts, this makes it easier to explain to the donor why his or her anonymous donation cannot be accepted even though it might be generous—and tempting.
Conclusion
A Gift Acceptance Policy is critical for promoting charitable giving as well as limiting risk to nonprofits. They also help donors by providing clarity and enhancing transparency when deciding to make a gift. A GAP should be as integral to a nonprofit as professionally prepared employee and endowment policy handbooks, governing documents like articles and bylaws, and practices like board training.
Importantly, a Gift Acceptance Policy can make it easier for a nonprofit to say, “thanks, but no thanks” to a gift. And, who knows, it could mean the opportunity to say “yes” to an even better one.
Email Me!
If your organization is interested in adopting (or revisiting!) a Gift Acceptance Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Gift Acceptance Policy) specific to the unique mission of your nonprofit.
My email is:
gordon@gordonfischerlawfirm.com
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[Nonprofits Need Gift Acceptance Policies]
On March 6, 1945, Iowan George Nissen patents the trampoline
NonprofitsIowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy
March 6, 2024
Iowa native George Nissen built his first “tumbling device” in 1934 out of angle iron, canvas, and rubber springs. He perfected the contraption, renamed it the “trampoline,” after the Spanish word for springboard. On March 6, 1945, Nissen received a patent for the springy piece of equipment.
Nissen’s trampoline was used to train aviators in World War II and astronauts during the Space Age. Athletes still use it for cross-training and trampolining has become a competitive sport in itself.
The backyard trampoline with a safety net is as ubiquitous as the swing set and — even better — can be repurposed for other uses after the kids get tired of it. People have turned them into everything from chicken coops to greenhouses to sunshades.
You could say a Document Retention Policy is like a trampoline — it will always give you something good to fall back on. (Ouch!)
Seriously, though, nonprofits need a good Document Retention Policy to ensure all information related to their business operations, employees, and finances is managed in a systematic and well-organized manner.
A well-drafted Document Retention Policy sets guidelines for how long particular records and documents — both electronic and paper — must be kept and how and when they should be destroyed. It serves two primary functions. First, making sure your nonprofit meets federal and state legal and regulatory requirements. Second, and just as important, it protects the reputation, privacy, and interests of you and your employees.
It should include a description of each kind of document the Policy covers and the retention time for each, because these can vary. For example, bank statements should be kept for at least three (3) years. On the other hand, the IRS requires that year-end financial statements be kept permanently, while the minimum retention period for general correspondence is two (2) years.
The Policy must also provide detailed information about how to label and store paper documents and electronic files. There should be guidelines for backing up electronic files, as well as a secure method for purging this information.
Following the guidelines of a Document Retention Policy might seem rather time-consuming and nit-picky, but in reality it will improve the efficiency of your record management while at the same increasing the security of the sensitive information in your files.
If you’re dedicated to elevating your nonprofit to new heights, creating, implementing, and observing a Document Retention Policy is essential. (Double ouch!)
If your organization is interested in adopting (or revisiting!) a Document Retention Policy, please don’t hesitate to reach out to Gordon Fischer Law Firm.
For the month of March, I’m offering a special to Iowa nonprofits. I will draft, revise, and edit the ten (10) policies expressly referenced by the IRS on Form 990 (which of course includes a Document Retention Policy) specific to the unique mission of your nonprofit.
My email is:
gordon@gordonfischerlawfirm.com
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Iowa Nonprofits Need to Jump Into Adopting and Implementing a Flexible-But-Firm Document Retention Policy