Written by Sheila Filion, CPA, CA
Partner, Virtus Group
Many not for profit organizations are dependent on donations and fund raising activities to provide services and meet its strategic goals. Donation policies should be consistent with the strategic plans of the organization, so that activities can be focused on the most important initiatives. Developing and implementing a board policy about donations and fund raising provides the following positive outcomes:
- Enhances the “public trust” about the organization and ensures that funders, members, other stakeholders, and the public have clear expectations about the donation process,
- Defines the organization’s accountability to donors and the donor is clear about what to expect in return,
- Ensures donors are treated fairly (in accordance with giving levels) and treated consistently over time,
- Ensures that the organization has the appropriate personnel, accounting processes and internal controls to manage the donation process, the donation proceeds and protect against fraud.
Some things to consider in developing a policy:
- What kind of donations will you accept? Cash is always welcome, but will you accept non cash items such as investment securities, art, real estate? Will you hold these items, or immediately sell? What about in kind goods or services for your operation?
- Will you establish a planned giving program?
- Will you accept donations with restrictions?
- Will you accept endowments?
- How will you recognize donors?
The donation and fund raising policy will impact the accounting and financial reporting processes of the organization and thus, this aspect should be considered when deciding the nature of donations that will be accepted. For registered charities, donations which are “non cash” can make determining the amount for the donation receipt more complex. For larger donations, or those that may involve naming rights, a written donor agreement would be prudent and legal advice may be necessary.
Other articles on Board Governance to read:
- How big should our board be?
- How often should we review our policies?
- How do I find board members?
- What does oversight mean?
- What does risk management mean?
- What are the top internal control tips for small organizations?
- Why is effective budgeting important?
- Is the CEO doing a good job?
- How much should a not for profit organization hold in net assets?
- Should we meet with our auditor?