Donor due diligence:
Why your nonprofit gift acceptance policy isn’t doing enough
Nonprofits should consider who a gift is from, as well as what the gift is. That’s where a gift acceptance policy comes in.
This month, Oxford University ended its relationship with the Sackler family after investigations by the media into the university’s continued ties with the billionaire owners of Purdue Pharma led to protests from academics and students.
In 2019, the Sacklers’ involvement in the US opioid crisis was exposed, leading to many other arts and academic institutions ending their associations with them.
These days, the media and the public are highly attuned to who nonprofits accept money from, and are ready to campaign if they think they’re unsuitable. Because of this, nonprofits should not only consider who a gift is from, but what the gift is.
In this blog, we’ll delve into what a nonprofit gift acceptance policy looks like, and provide insights on how to enhance it. We’ll also discuss how they can be helpful when receiving non-standard donations, such as cryptocurrency or real estate.
Then, we’ll explain why nonprofits should update their gift acceptance policies to encompass guidelines about donors and offer guidance on leveraging ‘know your donor’ research.
What is a gift acceptance policy?
Without contributions from donors, nonprofits can’t carry out their important work. But not all gifts are without consequences.
Accepting the wrong kind of gift or donor can lead to serious repercussions, including damaged reputations, financial penalties, or unwanted obligations.
Gift acceptance policies help nonprofits avoid these issues.
These policies provide clear guidelines on what types of gifts the nonprofit organization is open to receiving. This might include cash, stocks, real estate, and in-kind donations. The policy also outlines the step-by-step process for reviewing and accepting these gifts, ensuring a fair and efficient evaluation.
This ensures transparency in how gifts are valued, establishing consistent practices within the organization. It also defines how the nonprofit will handle gifts that come with specific restrictions or designated purposes, ensuring that the donor’s intentions are honored.
Another important aspect covered by the policy is the recognition and acknowledgement of donors. By establishing protocols for recognizing and expressing gratitude to donors, the nonprofit will be able to foster positive relationships and maintain donor trust.
Why are gift acceptance policies important?
These rules help manage donor expectations and provide guidance to staff and board members involved in soliciting or receiving gifts. By having a well-defined policy in place, nonprofits can promptly respond to unexpected gifts instead of wasting time working out the appropriate course of action.The difference is the rate at which Xapien can process this text – it can read thousands of times faster than any human, and can read in 187 languages.
Public gift acceptance policies enhance financial transparency and accountability, as well as provide insights for donors into the areas where the organization focuses its efforts and the specific types of support it’s seeking.
Gift acceptance policies come in useful in many scenarios.
- Certain gift types can create legal responsibilities that the nonprofit might not be equipped to manage. For example, non-cash contributions of cryptocurrency or real estate can give rise to property tax concerns. Nonprofits are obliged to disclose their gift acceptance policy and report non-monetary donations or gifts in kind on IRS Form 990.
- Cryptocurrency donations are becoming more popular. The IRS classifies cryptocurrency donations to 501(c)(3) nonprofits as property, meaning they are not subject to capital gains tax and are tax-deductible. Nonprofits may need to partner with a crypto donation solution such as Giving Block before they can accept these gifts. There are many different forms of cryptocurrencies, so gift acceptance policies should state which can be accepted.
- Certain gifts might prove impractical for the nonprofit to utilize or upkeep, such as an aged property, while others can bring about concerns regarding hazardous waste disposal or licensing.
How can you improve your gift acceptance policy?
Important initial steps include:
- Regularly updating your policies to reflect changes in the regulatory and financial environments.
- Ensuring that policies are communicated clearly to staff members and volunteers who may be involved in gift acceptance decisions.
The most effective gift acceptance policies also include a requirement to know your donor.
Automation changes that.
What do we mean by ‘know your donor’?
Knowing what the gift is, and how it’s going to be used, is a good start. But it’s also important to consider who the gift is from.
Accepting a gift from someone who is trying to launder their reputation through charitable giving, or who has problematic associations with issues such as environmental harm, poor working conditions, or tax avoidance can severely damage a nonprofit’s reputation.
Here are a few more reasons to know your donor.
Ensure alignment with the nonprofit’s mission and values
A nonprofit’s mission and values are at the core of its work. Accepting gifts that do not align with them can be detrimental to its reputation and credibility.
By researching donors, nonprofits can determine whether a potential donor’s values and interests are aligned with those of the organization and whether the gift being offered is likely to further the nonprofit’s mission… or obstruct it.
Avoid conflicts of interest
Accepting gifts from donors who have competing interests or may be seeking to influence the nonprofit’s work can create conflicts of interest that can undermine the organization’s integrity and impartiality.
For example, a nonprofit with a significant focus on the environment might want to avoid accepting donations from oil companies or company representatives.
Researching donors can help nonprofits identify any potential conflicts of interest and make informed decisions about whether to accept a gift.
Mitigate legal and financial risks
Accepting gifts that are illegal, unethical, or have hidden strings attached can expose nonprofits to legal and financial risks. By researching donors, nonprofits can identify any red flags or potential risks associated with a gift and take appropriate steps to mitigate them.
That means due diligence can take place at the very beginning of the fundraising process, resulting in no wasted time.
Improve donor relations
Researching donors can also help nonprofits better understand their interests, motivations, and giving history. Nonprofits can use that to inform their stewardship efforts and enable them to cultivate deeper relationships with their donors.
Xapien helps you learn about donors fast
Researching the background, business affiliations, real estate holdings, connections, and affiliations of a prospect is not a task that can be done quickly. As a result, many nonprofits accept donations with only a superficial understanding of the donor, which is a risk to their missions and reputations.
Xapien enables nonprofits to know everything there is to know about a donor in minutes. It saves fundraisers from spending hours researching donors on search engines and databases, entering different search terms and sifting through the results.
How Xapien works
Using AI, Xapien searches the entire indexed internet, reading and analyzing millions of results in over 130 languages, from a wide range of sources such as PEPs and sanctions databases, news and media articles, corporate records, and various internet data including LinkedIn, Wikileaks, offshore leaks, and more.
Nuanced and hard-to-find information about prospects’ careers, achievements and personal or philanthropic objectives are surfaced as soon as you hit go. Within 10 minutes, you’ve got a concise, sourced report that highlights all risks, wealth estimates, assets, associates and more.
Case study: How fundraisers at Dartmouth College use Xapien to research donors in minutes
Donations play a crucial role in funding Dartmouth College, supporting various aspects such as facilities, student access, and research.
The college’s donor prospect management team conducts extensive research on potential donors to understand their philanthropic interests and goals. This research ensures that Dartmouth avoids accepting gifts from unknown or inappropriate sources, thereby mitigating reputational risks for the institution and its stakeholders.
Due to the high volume of prospects, researchers would limit their investigation to one hour per prospect. This limited timeframe resulted in reports that only provided a superficial overview of an individual’s profile. Analysts would simply enter the prospect’s name into a search engine and add keywords like ‘investigation’ or ‘scam’. They also relied on database providers to check sanctions lists.
Researchers only need to enter a name and relevant details for Xapien to generate detailed, readable, and easily shareable reports in less than ten minutes. These reports provide nuanced and hard-to-find information about prospects’ careers, achievements, and personal or philanthropic objectives. The risk of someone else uncovering information about a prospect that could potentially jeopardize the organization is eliminated.
AI insights, straight to your inbox
Search engines are great but they are only the starting point. Finding, reading and condensing the full picture is slow, hard, and painstaking work. Xapien can help.