Crafting a Comprehensive Gift Acceptance Policy for In-Kind Contributions
Published on by Amanda Meko in Not-for-Profit
Non-profit organizations often rely on a mix of monetary and non-monetary contributions to advance their missions. In-kind contributions, which include donated goods, services, and even real estate, can be a vital lifeline that helps non-profits stretch limited budgets and maximize impact in their communities. Yet accepting non-cash gifts without a clear set of guidelines can create unanticipated hurdles—from legal complications to costly storage and maintenance expenses.
A well-crafted gift acceptance policy can help an organization focus on the gifts that truly support its mission while shielding it from undue burdens and liabilities. It also helps vet in-kind donations to ensure they truly align with an organization’s mission and capacity, all while promoting fairness and transparency for donors.
Understanding in-kind contributions
In-kind contributions refer to any non-cash gifts provided to a non-profit. This category includes tangible items like furniture, technology, and even real estate, as well as intangible assets such as professional services—from legal representation to graphic design.
One of the greatest appeals of these contributions is that they diversify a non-profit’s resources and reduce the reliance on monetary donations. For example, gift cards can supply flexible purchasing power for specific needs, while pro bono services may allow an organization to access specialized expertise it could not otherwise afford. By welcoming the support of local businesses or individual donors who contribute goods and services, organizations foster ongoing engagement and expand their reach.
Key components of an in-kind gift acceptance policy
Statement of organizational mission
At the heart of any non-profit’s policy should be a clear reminder of why the organization exists. When a policy begins by reiterating the mission, it frames all gift acceptance decisions in terms of advancing that core purpose. This helps staff, board members, and donors alike see how accepting or declining specific contributions either supports or detracts from the main objectives.
Purpose and objectives of the policy
An effective policy clarifies the procedures around in-kind giving, articulating the goals the non-profit hopes to achieve. Organizations often state that the policy is meant to ensure consistency, protect against legal or financial risk, and preserve donor relationships. This explanation sets the stage for how every subsequent rule is to be interpreted.
Defining acceptable gifts
Non-profits receive a wide range of in-kind gifts — from physical goods to professional services. Real estate, vehicles, and intangible assets may also enter the conversation. A robust policy spells out what types of contributions align with the non-profit’s mission and the acceptance criteria (for example, the condition of a donated item or the need for specific professional services).
Restrictions and limitations
There are times when taking on an in-kind donation is more of a hindrance than a help. Clarity around unacceptable items is vital. For instance, a non-profit might restrict gifts that come with high storage costs or pose a conflict of interest. If a donor is offering goods that are unsafe, too deteriorated to use, or incongruent with the mission, it can be better to say ‘no’ upfront.
Valuation and fair market value requirements
Valuation can be one of the most challenging aspects of handling in-kind gifts, especially for non-profits that must accurately report these contributions for both GAAP financial statements and tax filings (like the IRS Form 990). Typically, donors bear the responsibility of determining and documenting the fair market value of their contributions; however, there are cases when non-profits should seek their own independent valuation. For example, a non-profit receiving a piece of real estate may decide to undertake an appraisal to confirm its value.
Legal counsel and professional fees
Large or complex gifts may prompt an organization to consult with legal advisors. In-kind contributions like closely held securities or specialized intellectual property can involve multiple layers of risk and compliance. A strong policy empowers the non-profit to require external expertise for certain categories of donations and explain who will cover legal or appraisal costs. In many cases, donors are reminded to use independent professional counsel, ensuring they receive unbiased advice and the non-profit’s interests are also protected.
Internal management and storage
When goods are donated, staff must have a protocol for receiving and organizing them. For example, inadequate storage space might make large or perishable donations impractical. The policy can detail basic standards for safe storage and inventory tracking, including using first-in, first-out (FIFO) systems for perishable donations or sealed bins for supplies to maintain their condition.
Procedures for declining gifts
Declining an in-kind contribution can be a sensitive area. The organization must maintain a positive rapport with donors, even when it declines an offer. A formal policy that spells out the process for turning down gifts—whether due to restrictions on use, unmanageable risk, or misalignment with the organization’s goals—empowers staff to act consistently and with respect.
Decision-making responsibility
Many non-profits form a small gift acceptance committee composed of board members or senior staff who can evaluate significant gift proposals. This group’s authority, procedures, and timeline should be clearly documented. Rapid decision-making can be crucial for certain time-sensitive gifts (like event space or a media slot), while more complex donations—like real estate or restricted stock—require careful deliberation.
Disclosure and donor acknowledgment
A solid gift acceptance policy also addresses the mechanics of thanking donors. In most cases, non-profits provide a written acknowledgment without establishing a monetary value for the donated item. The IRS has specific rules for higher-value non-cash donations, including Form 8283 when donors claim contributions above certain thresholds. The policy should note these requirements, as well as confirm the organization has not provided the donor with any goods or services in exchange for the donation.
Accounting and compliance considerations
From an accounting standpoint, it’s critical to distinguish between contributions and exchange transactions. If a funder or donor receives commensurate value back from the organization (for instance, in a sponsorship that includes advertising benefits), it may be classified differently than a pure in-kind donation.
Organizations should reference guidelines in Accounting Standards Codification (ASC) 958-605 for conditional contributions. If a non-profit receives assets before any stipulated conditions have been met, it may need to record a liability (often called a “refundable advance”) until the conditions are satisfied.
ASC 958-605-50 requires organizations to provide specific information about in-kind contributions. This includes details on whether the contributions were used or sold during the year, the organization’s policy on selling versus using in-kind gifts, any restrictions set by the donor, the methods used to value the gifts, and the main market used to determine the value if the organization is not allowed to sell or use the gift due to donor restrictions.
For in-kind services, organizations must also describe the programs or activities the services supported, the nature and extent of the services, and the amount recognized as revenue. Organizations are encouraged to disclose the value of any in-kind services received but not recognized, if possible.
Implementing and communicating the policy
Once the gift acceptance policy has been approved by the board of directors or a designated oversight committee, it’s important that staff and volunteers are trained on the rationale behind the policy and know how to handle in-kind donations consistently. Nothing frustrates donors more than inconsistent answers or confusion about what sorts of gifts are acceptable.
Externally, non-profits can display a concise version of the policy on their website. For instance, a short webpage might list categories of items or services needed and explain the process for inquiring about other forms of support. Ongoing review is also key: policies should be revisited on a set schedule—perhaps annually or biennially—to ensure they align with the organization’s evolving goals and compliance environment.
Your next steps for a comprehensive gift acceptance policy
A comprehensive gift acceptance policy is an indispensable tool in making sure that well-intended donations truly serve the non-profit’s mission. By clarifying what forms of in-kind contributions are most beneficial, how they should be administratively managed, and the conditions under which certain offerings must be declined, non-profits avoid many common pitfalls and strengthen their credibility with donors and the community at large.
We’re here to help organizations like yours confidently navigate the complex world of non-cash gifts. If you have questions about your gift acceptance policy, or what considerations you might encounter to put one into place, contact us today for a free consultation with one of our dedicated non-profit accounting professionals. We’re here to help!
Related resources
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