Contributions matter: A primer on best practices for NFPs (part 4)
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Contributions matter: A primer on best practices for NFPs (part 4)

6 months ago · 3 min read

Contribution revenue is the lifeblood of most not-for-profits, yet many are unaware of the related regulatory requirements.

While not-for-profits (NFPs) actively solicit donations, doing so without fully understanding the associated laws and regulations can be detrimental. This multi-part article series covers the following important topics:

  • Providing donors with gift acknowledgement letters that comply with substantiation requirements for charitable contributions (part 1)

  • Tax Court cases regarding insufficient written acknowledgements and recommended best practices (part 2)

  • Complying with laws and regulations for fundraising and soliciting donor contributions (part 3)

  • Establishing donor privacy and gift acceptance policies (part 4)

To wrap up the series, this article outlines best practices for donor privacy and gift acceptance policies.

Donor privacy policy

Underlying this series of articles is the understanding that soliciting and receiving donors’ contributions is the lifeblood of most 501(c)(3) NFPs. Many factors affect a donor’s inclination to give, not the least of which is trust. The Association of Fundraising Professionals recommends that any organization that gathers personal information from donors and attendees at special events adopt a donor privacy policy. Making the NFP’s donor privacy policy available on the NFP’s website builds trust with donors by emphasizing that the organization will protect and not sell or share donors’ personal and private information.

There are two types of donor privacy policies: explicit and opt-out. An explicit policy informs donors that their personal information won’t be disseminated without permission and gives them the choice to advise whether or not their personal information can be used. An opt-out policy informs supporters that the organization can use their information unless they specifically decline.

Watchdog agencies and ratings groups check to see if organizations have a donor privacy policy. For example, Charity Navigator considers the presence of a donor privacy policy when determining the organization’s “accountability and transparency score.”
The following is non-exhaustive list of elements that, as a best practice, the donor privacy policy should identify, describe, or explain:

  • Personally identifiable or other information collected, the means by which it is captured, and how it is used

  • The reasons, if applicable, personally identifiable or other information is shared with third parties

  • How donors can opt-out or access their data to review or modify it

  • How the organization uses cookies

  • Links to third-party websites included on the organization’s website

  • Established security measures to protect personally identifiable or other information

  • The date of the current version of the policy and a statement that it can be changed in the future with or without advance notice

Gift acceptance policy

Prospective donors may offer contributions of many different types of assets. The main purpose of a gift acceptance policy is to provide a means of evaluating potential gifts to protect the organization from exposure to possible risks. A carefully crafted and well-thought-out policy strengthens donor relations and helps avoid potential burdens on the organization relating to a proposed gift, such as costly upkeep or maintenance of personal property or real estate. The nature and mission of an organization may likewise justify limitations on the receipt of unrestricted gifts of cash or sponsorships from certain proposed donors (for example, a controversial enterprise or one that promotes activities that are inconsistent with the organization’s mission). NFPs should consider posting their gift acceptance policies on their websites.

As a best practice, a gift acceptance policy should cover the following elements:

  • The types of cash and non-cash gifts that are acceptable, including virtual currency

  • The types of donor-imposed restrictions on gifts that are acceptable

  • The means by which the organization will administer gifts received

  • The levels of gift approval by authorized personnel in the organization

  • The means by which the organization will vet the prospective donor and the donor’s ownership of the gift

  • How donors will be recognized

The importance of establishing a gift acceptance policy is reinforced by a question on Schedule M of IRS Form 990 regarding whether the NFP has a gift acceptance policy that requires review of any nonstandard gifts.

Gift agreements are another dimension of gift acceptance, but they are beyond this article’s scope.


[1] There is no set format or length for a donor privacy policy. It should be tailored to fit the organization’s specific situation. Plenty of examples can be found on the Internet.

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