Whether it is a car, jewelry, or real estate, every church has encountered gifts that come with challenges. Some gifts include restrictions, while others come with ongoing costs or minimal practical value. Navigating these situations effectively ensures the church remains mission-focused while managing donor expectations.
Challenges with Restricted Funds and Gifts
- Restrictions on use or sale: Gifts with donor-imposed restrictions can delay church plans or result in incomplete donations.
- Maintenance costs: Noncash gifts, such as property or vehicles, can lead to unexpected expenses for insurance, storage, or upkeep.
- Donor expectations: Rejecting or disposing of gifts may risk donor relationships, especially if expectations aren’t managed upfront.
Benefits of a Gift Acceptance Policy
Adopting a formal gift acceptance policy provides clarity and guidance for handling unusual gifts. It helps the church:
- Define acceptable and unacceptable gifts
- Outline receipting and valuation procedures
- Clarify disposal processes for noncash gifts
- Ensure regulatory compliance
Key Elements of a Gift Acceptance Policy
Acceptable Gifts
The policy should specify the types of gifts the church will accept, such as:
- Personal property, such as clothing and household goods
- Transportation equipment
- Real estate
- Securities (publicly traded or closely held)
- Jewelry and collectibles
- Life insurance beneficiary designations
Procedures and Authorizations
A strong policy outlines procedures for gift acceptance, including:
- Who can approve or decline gifts
- Documentation and IRS forms, such as Forms 8283 and 8282
- Clear processes for handling restricted gifts
Timing and Due Diligence
Timing considerations should address:
- Deadlines for completing due diligence (e.g., environmental assessments for real estate)
- Clear transfer of title or removal of restrictions before gift acceptance
- Quick disposal of gifts not suitable for church operations
Receipting and Valuation
The policy should state that receipts for noncash gifts will only describe the item and not include a valuation. It should also outline accounting practices for recording and disposing of gifts.
Disposal Guidelines
Disposing of gifts thoughtfully is crucial to avoid donor conflicts. Key considerations include:
- Real estate: Sell quickly if the property cannot be used.
- Jewelry and collectibles: Use third-party dealers to avoid personal involvement or undervaluing.
- Household items: Donate to other nonprofits if they don’t align with church needs.
To prevent conflicts of interest, prohibit the sale of donated items to staff or influential members.
Final Thoughts on Restricted Funds
A clear gift acceptance policy protects the church from costly obligations and ensures all gifts align with its mission. It empowers staff to navigate complex donor relationships and meet compliance standards effectively.
FAQs about Restricted Funds
- What are restricted funds? Restricted funds are donations with specific usage limitations set by the donor.
- Can churches refuse a gift? Yes, churches can decline gifts that are unsuitable or burdensome.
- How should churches receipt noncash gifts? Receipts should describe the gift but not include a valuation.
- What if a donor imposes unreasonable restrictions? Churches should clarify that ultimate decisions about gift use rest with their governing body.
For more expert advice on church finances, visit Church Law & Tax.
This article first appeared in Church Finance Today in December 2012.
