Let’s be honest, the word “policy” probably doesn’t bring to mind creative, innovating, life-changing ministry. Yet, wise leaders know policies are integral to directing, protecting, and leading organizations. This week we launch the first of a two week series on Gifts Policies. In today’s article, Bruce Barkhauer introduces Gifts Policies and their benefits. Next week, he’ll advise what to do with any tangible gifts that have fallen into disrepair or no longer fit the ministry needs of the congregation. Gifts Polices may not be personally inspiring, but there’s no doubt they can inspire faithful ministry.
Adam Copeland, Center for Stewardship Leaders
The Importance of Gifts Policies — Part One: Receiving and Refusing Gifts
Bruce A. Barkhauer
Churches and charities have one major thing in common: they are dependent on the generosity of others (expressed through gifts to the organization) to have the financial resources they need to perform their mission. For this reason, congregations need a policy about gifts that specifies how gifts may be received, refused, and/or retired at the end of their useful life.
What does a gifts policy do?
A good gifts policy will define a process as to how a gift is received and recorded by the church, and how it is to be receipted to the donor (along with assuring that a thank you has been given to the donor to demonstrate our gratitude). A gifts policy also outlines who is responsible for each step of the process, what do to with certain types of gifts (see “stocks, bonds and real property” below), and will establish a review process for designated (restricted) gifts, as well as for gifts that come from sources not within the established donor base.
Church leaders might imagine wanting to accept all gifts that come to your church. Fair enough, but there may be times when refusing a gift is in the best interest of the congregation. Is the gift a donor directed and designated/restricted in some way? Is that designation in keeping with the goals, values, and best interests of the church? What about the source of the income? How was it derived? Is the donor’s mission/values consistent with your own? Does the gift (and/or its conditions) create a conflict of interest? What are the “optics” of accepting the gift? For example, would a gift derived from so called “Pay Day Loans” earnings be acceptable with your own stated investment policy or your public witness regarding the exploitation of the poor?
Teamwork is Key
Having a team in place to review gifts can give you a quick and honest evaluation as to whether the gift should ultimately be accepted. The team, in some circumstances, might offer recommendations or suggest alternatives to the donor as to how to improve conditions so that a gift may be received and best utilized. You want to provide the benefit of the doubt to those wishing to be generous with you, so you accept as an operating premise that all donors truly believe in your mission. The review team is charged with helping the donor express his or her passion in ways that benefit both the giver and the organization. In the end, some gifts may simply not be a match, and with this process you have a polite but firm and carefully reasoned way to say, “no thank you.”
Types of Gifts
Gifts may come in the form of cash, gifts “in-kind,” real property, or stocks and securities. They might be given by the donor “in person,” they may come from an estate (testamentary gift), they can come from for-profit corporations, granting agencies, community foundations, and a host of other sources. The first question regarding any gift that is not cash should be, “Does the cost to accept the gift and convert it to cash exceed the realized value of the gift itself?” Some gifts may involve attorney costs, brokerage fees, or require appraisals. A gift of land might be tied up in ligation, have liens against it, or (worst case scenario) be contaminated and require costly mitigation (a cost that the organization would be responsible for once it accepted the gift!). Before you accept a deed, you had best allow your Gifts Review Committee to investigate. You don’t want to become a disposal site for expensive “white elephant” gifts that cost more to get rid of than they are worth.
If a gift of stock or financial security is received, the immediate question becomes, “Should we sell it or should we keep it and hope that it increases in value?” Unless directed by the donor to do otherwise, my recommendation is always to sell the financial instrument immediately and to receipt the donor for the full value of the gift on the day it was sold. (Yes, the church absorbs the cost of commissions.) Doing this allows the donor to receive the full potential tax related benefit of their gift at the time it was given. It further prevents the congregation from second guessing if they “hold” the investment property as to when it should be — or should have been — converted to achieve its maximum value.
Designating the Gift
The organization now has the full value of the gift (after expenses) to employ the gift as the donor intended. If there is no designation and the organization is not required to take certain actions (such as the placement of undesignated gifts into permanent funds), the gift might be prudently re-invested for income earnings and available to be employed at a future date when there is established need to utilize the principle gift. Even if not directed to place undesignated gifts into permanent funds, a church is doing its due diligence to consider such an act – both to preserve the donor’s legacy and the long-term impact of the gift for the sustaining of the congregation’s mission. Such a policy would likely be tied to the congregation’s endowment/memorial fund.
Endowment policies are related to Gifts Policies, though they are usually a separate set of rules/guidelines meant to provide for the governance of an Endowment Committee (or Trustees) and to guide the practices of investment, expenditure, and custodial responsibilities of these special funds. Congregations, regardless of size, are always wise to be prepared to receive significant gifts with a clear and direct processes for handling such generosity. It signals to a person of high capacity that they can give a gift, it will be managed prudently, and plus, will not start a church fight! Such a policy also reminds the church that it is a steward of resources that may have taken a person’s lifetime to accumulate. Honoring a person’s legacy includes the responsible management of their sacred trust in the congregation with such a gift.
For More Information:
Bruce A. Barkhauer was called as the first “Minister for Faith and Giving for Christian Church (Disciples of Christ)” in 2010, after 25 years of parish ministry. Since that time he has engaged the whole church in conversations about generosity and offered transformative ways for congregations to think about stewardship. For more, visit the Center for Faith & Giving.
Rethinking Stewardship: Join us on July 25-27 for three days of conversation and exploration at Luther Seminary’s Rethinking Stewardship: From Solemn Obligation to Inspired Choice. More information here.