Sample Restricted Gift Agreement
“A gift agreement [or donation] can be used to ensure that one can rely on a donor`s promise, set the expectations of the donor and receiver, and avoid misunderstandings.” – ConservationTools.org, Pennsylvania Land Trust Association As discussed in the Not a Charitable Trust guide, preservation easements in themselves are not limited gifts in Pennsylvania. A preservation easement may be made as a restricted gift according to the procedure that would be used to create another restricted gift in Pennsylvania. If a donor wishes to make one or two simple changes to their existing donation contract, a change will be made to the donation contract. If several changes are planned, an amended and reformulated gift agreement will be executed to ensure that the resulting agreement is self-sufficient and includes a complete fund history. Given the adverse tax consequences of restricting a land donation, the donor and conservation organization may consider several alternatives: The FRA accompanies the donation agreement throughout the approval process to ensure that all academic parties (e.g., .B Development Officer, Dean/Department Head, Foundation President, Advocate General) agree.  Donations of real estate, whether restricted or not, generally require the approval of the Board of Directors. See Authorizing real estate transactions in ConservationTools.org. It is quite common for a gift agreement to exclude one or more provisions that may be necessary to determine whether a contribution should be recorded for accounting purposes and, if so, whether the contribution has been properly recorded. Since there is no simple process for answering all the questions that may be raised as part of a donation contract, additional judgments and research are often required to make an accurate decision. When accepting donations from donors, it is essential to consider the underlying laws and principles that govern these donation agreements.
Donation contracts may exist orally, in writing, only implicitly depending on the form and content of a donor advertisement, or not at all. Many donations are given by donors who have no contact with the NFP, the only proof of their intention to contribute is manifested by receiving a single cheque, an online payment or a cash donation. In some cases, typically when it comes to large and complex contributions and pledges, and in the case of fiduciary agreements or agencies, not-for-profit organizations and donors enter into written giving instruments to recall the terms of the donation and ensure mutual understanding. A moral clause or moral clause is a small but important segment that you can add to your gift contracts. A moral clause is used to define certain circumstances that would be embarrassing or detrimental to an organization`s reputation and values. According to Lynne Wester, nonprofits need to protect their organizations from unreasonable risks. Most not-for-profit organizations rely on the goodwill of the public to attract donors. Having a close connection with someone whose name has been severely damaged can tarnish the reputation of the nonprofit and affect their ability to get support. This conclusion was confirmed by the IRS in a 1986 private letter.  The IRS noted that land that was to be transferred with donor restrictions on mining and construction heights (and that gave the donor a right of first refusal if the land was to be sold by the charity to a nonprofit) had to be assessed in light of restrictions on charitable deductions. Organizations should be careful not to present themselves to donors in tax matters.
The donation agreement may include representation of the donor and recipient that each has relied on the advice of its own professional advisors with respect to the donation and not on the advice of the other or the other`s consultants or agents.  For examples of lengthy litigation that may arise from disputes over restricted donations, see John K. Eason, “The Restricted Gift Life Cycle, or What Comes Around Goes Around,” 76 Fordham L. Rev. 693 (2007). the article by AICPA.org deals here with considerations in the negotiation and design of gift contracts. Gift contracts are drawn up according to the most recent model agreement. The templates are approved by the Office of the Advocate General and available here.
As a state-funded public college, the university must comply with federal law, which regulates the lawfulness of donor restrictions in a donation agreement. These laws include, but are not limited to, Title VI of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972, and the Equal Protection Clause of the United States Constitution. State law and institutional policy may also limit the university`s ability to accept funding for scholarships limited to certain groups of protected persons. A conservation organization may inadvertently restrict donations when requesting donations for a particular project without including in its promotional materials another use of the funds raised. For example, if the land trust is asking for donations to acquire land for a reserve and for some reason there is no closure, can it use the funds raised for other land acquisition projects? Can he keep the money in his general fund? Appeal documents should be carefully formulated to avoid requiring the return of a gift on the grounds that it was only made on the condition that a specific event occurs. A variety of alternative uses are always recommended when applying for donations for the purchase of land or easements. Real estate transactions are never a sure thing until they are finally completed. General language in the tender documents also covers the fortunate circumstance where the call brings in more money than necessary for the requested project. Examples of the wording of the appeal that can help an organization avoid limited donation problems include: cases where a group of donors decides to coordinate fundraising efforts to establish a “real foundation” for a specific purpose, to be named after a professor, an advisory board, deceased classmates, etc., a memorandum is executed for the foundation of multiple donors. The unit development officer should be the point of contact to facilitate the process. It is recommended that before establishing a foundation for a monument or to honor a person, permission has been granted to the family or honoree. The minimum amount of funding for a foundation is $25,000 and must be reached within five years, if not made, the donation is considered dispensable for the purposes indicated.
In addition, it is good business practice to regularly review your systems of record to ensure that existing procedures and documentation on file meet the company`s reporting requirements. Reporting needs to change as a business evolves and fundraising strategies change. Determine if your development office is actively seeking or accepting non-traditional, cashless gifts. While there has been some turnover in the development office or other staff involved in attracting donors or acquiring and maintaining records, it is important to ensure that new employees have adequate training to put these procedures into practice. Additional Resources Sample Gift Acceptance Policy (Word) Form 990 Appendix M: Non-Monetary Contributions (IRS Website) Contribution Revenue (AICPA Store) If a donation agreement requires information or actions not included in the approved template, the Senior Director of Advancement Services and/or vice president of advancement should be asked to make recommendations. If necessary, the Gift Acceptance Committee may be consulted and the Office of the Advocate General may be invited to create a new gift contract. The main advantage of gift acceptance policies is to maintain discipline in the acceptance and management of gifts. Discipline prevents the acceptance of gifts that cost the nonprofit time, money, and perhaps reputation by reminding the organization when to say “no.”  If a scholarship donation of $10,000 or more is spent in full within one year of receipt, a donation contract is not required. However, the scholarship criteria must be approved by the Advancement Services Office. Scholarship donations of less than $10,000 are made into an existing general scholarship fund (usually the ministry`s general scholarship accounts), as determined in consultation with the donor.
An organization whose board of directors proactively reviews issues associated with limited donations and establishes a donation acceptance policy is well positioned when faced with the need to make a timely decision about whether or not to accept a gift offered. Kathryn W. Miree writes: To reassure the donor as to how to respond to this provision, the recipient could indicate to the donor a donation policy (assuming it exists) whereby the organization will contact donors (or, if they have died, interested family members) if circumstances change and the organization wants to redirect the use of the donation to a modified purpose. Example. Landowners offer a gift of farmland on the condition that the land trust employs a resident manager at all times to continue cultivating the land. The Land Trust is primarily concerned with the conservation of natural areas (not arable land) and, if it accepts the donation, can easily (and more profitably) lease the land to a competent and experienced farmer in the area. Acceptance of the gift does not support the main programmatic objectives of the land trust. Acceptance only makes sense if the donation provides cash flow to support the organization.
To make an informed decision, the organization must analyze the amount of free cash flow over time if the donor insists on restricting the resident manager. .
March 05, 2022
March 05, 2022