Sample Financial Policies

Transcription

1 This document includes examples of one organization s (disguised as ABC) financial policies related to gift acceptance, expenditures, disbursements and investments. The samples may help other organizations determine what to include in their own policies. Gift Acceptance Policy Example Application All ABC employees, board members and volunteers Purpose ABC actively solicits gifts and grants to further the mission of the organization. There is a potential that the acceptance of certain gifts could compromise the ability of the organization to accomplish its goals or could jeopardize its exempt status. Hence, these guidelines have been established as parameters for the solicitation, receipt, acceptance, management, reporting, use and disposition of charitable contributions to ABC: Guarantee that all donors are treated fairly and equitably. Avoid misunderstandings concerning the kinds of gifts that can be accepted and credited on behalf of ABC. Ensure that charitable contribution totals accurately reflect the real value of every gift. Encourage donors to make the largest gifts possible in forms that may be the most convenient for them. Establish that certain gifts must be reviewed and approved by the board of directors. Assures that requests for gifts or grants are made within ethical business, professional and philanthropic practices, avoiding conflicts of interest in present or future relationships. Assure that, where tax liability and/or estate consequences are a factor, potential donors be advised to contact their own legal and/or tax advisors. Protect ABC s tax-exempt status from possible abuse by donors. Policies Legal ABC shall accept only those gifts, the transference and implementation of which, shall be deemed consistent with the public laws and/or regulations and/or public policy of the respective incorporating state 1

2 and federal governments. ABC reserves the right to decline any financial commitment, gift, or bequest, as well as the right to determine how a gift will be credited and/or recognized. Purpose The primary consideration in the pursuit of gifts is how they can benefit the organization in the most ethical and unencumbered manner. To that end, the following caveats must be considered: Core Values: Is the gift one that is consistent with the organization s standards, principles and core values? Compatibility of Cause: Will the gift unnecessarily challenge the organization s ability to further its mission, goals or objectives? Public Relations: Does the acceptance of the gift present the organization in an unfavorable light? Does it appear that there may exist a conflict of interest between the donor and the organization? Motivation: Is there clear charitable intent and a commitment to the organization? Consistency: Will the acceptance of the gift be compatible and in agreement with other fundraising activities or gifts of the organization? Credibility: Are the circumstances surrounding the donor and the gift believable? Organizational Stability: If controversy develops, will it be significant enough to weaken the structure of the organization? Form of Gift: Will the nature of the in-kind contribution create problems, such as in advertising or sponsorship? Source of Gift: Who is the donor? Is the gift from an individual or a corporation? Does the donor represent a perceived conflict of interest, or might the donor s objectives not fit with the mission of the organization? Bottom Line: Gifts can encourage others to give or do the opposite. What effect will the particular gift have on the organization s bottom line? Authority The board of directors, fundraising volunteers, executive director and fundraising staff are authorized to solicit funds in the name of ABC. The board president or his/her designee is authorized to enter into planned gift agreements on behalf of ABC and to execute any and all documents necessary or appropriate to consummate such agreements. Any 2

3 exceptions to these Gift Acceptance Policies may be made only in exceptional circumstances, on an individual basis, and shall require the approval of the treasurer and the executive and/or finance committee of the board of directors. These Gift Acceptance Policies may be recommended for amendment by the executive and/or finance committee and ratified by the board of directors. Types of Commitments Accepted Unrestricted gifts shall be encouraged, unless (1) the donor indicates that he or she is willing to make a restricted gift only, or (2) the option of a restricted gift will otherwise significantly increase the chances of obtaining a gift from the donor. Current Gifts Cash: Outright gifts of cash will be reported at face value. Gifts of Publicly Traded Securities: Gifts of publicly traded, marketable securities will be credited (in conformity with IRS guidelines) at the mean value between the high and low market prices on the date of the gift. The date of the gift is defined as the day the securities are delivered or postmarked in negotiable form to ABC or its agent, or the date they are placed in an account or registered in the name of ABC. Upon receipt of the securities, ABC shall implement an immediate sell-order. The board of directors, executive director and/or fundraising staff are expressly prohibited from delaying the sale of securities upon receipt. Brokerage fees, as well as changes in value of the securities after their receipt, are considered operating costs of fundraising activities and do not affect the value credited toward ABC s charitable contributions total. Regardless of the redeemed value upon sale of the securities, the donor receives recognition for the intended fair market value of the gift at the time of making the contribution. Pledges: Pledges will be recorded at the full value of the commitment upon receipt of the pledge (in conformity with IRS guidelines), provided they are to be paid within the stated pledge period. Pledges will ordinarily be expected to be paid in full within the pledge period, normally a one-year period. Under rare special circumstances, and with the approval of the board of directors, a donor may make a pledge commitment that will extend payments beyond a one-year period. Appreciated Property: Gifts of real estate or tangible personal property, which are accepted by ABC, will be reported at the 3

4 appraised fair market value as determined by a qualified appraiser. Donors are responsible for obtaining their own appraisals for tax purposes of real property or tangible or intangible personal property being given to ABC and for any fees or other expenses related to such appraisals. ABC retains the right to obtain its own qualified appraisals of real property or tangible or intangible personal property being offered as a gift, at its own expense. ABC will acknowledge receipt of gifts of tangible personal of real property in accordance with IRS requirements and will sign any IRS form or other documents necessary for the donor to obtain a tax deduction for such gifts, so long as such acknowledgment does not entail valuing the gift. o Gifts of tangible personal property (art, furniture, books, stamps, coins, libraries and other collections) must be accompanied by a fund equal to 25 percent of the assessed valuation to cover insurance, maintenance, handling, storage and other costs. Also, such gifts must be accompanied by a statement permitting the board of directors to dispose of the gifts when they have served both the intent of the donor and ABC for a period of two years. o Gifts of real property (residences, farms, ranches or resorts, undeveloped or commercial) shall be encouraged, but the costs of transfer, maintenance, etc., must be borne by the donor. The executive or finance committee must be prepared to receive, hold, manage and resolve such gifts to the maximum advantage of ABC, including the retention of an external manager. These guidelines pertain to gifts of real estate in general: The donor shall secure a qualified appraisal of the property. ABC (or trustee in case of a charitable remainder or charitable lead trust) shall determine if the donor has clear title to the property. All gifts of commercial real estate will be subjected to an environmental audit, the cost of which is to be borne by the donor, and the results of which shall be provided to the executive or finance committee. Mortgaged property may be accepted as an outright gift provided that the property has sufficient equity to justify assumption of the liability, and provided that the property is marketable. 4

5 Charitable Income (Lead) Trusts: Donors of charitable income trusts will receive annual credit for all payments scheduled to be made to ABC on a yearly basis. Non-cash Donations: In-kind gifts will be valued at the donordesignated amount for non-capital contributions. In-kind donations will be counted separately from outright cash, pledges and other gifts. Gifts of Future Interest Some individuals may wish to use other assets, e.g., life insurance or annuities, appreciated real estate, or securities, to establish a trust or to make a bequest. Through these methods, the donor can make a significant contribution to ABC. Life Insurance: Policies, which are irrevocably signed to ABC, will be credited at present value. Life insurance policies in which ABC is named the outright beneficiary will be credited in the same manner as the crediting of bequests. Charitable Remainder Trusts: Gifts to charitable remainder trusts or annuity trusts will be credited at their actual value, based on the age of the life income beneficiary or beneficiaries as of the current fiscal year. Bequests: All receipts from unrestricted bequests shall become part of the operating fund, unless the executive or finance committee determines that a particular unrestricted bequest should be deposited in a different account. In order to be included in charitable contribution totals, the dollar amount (rounded) of the bequest needs to be stated in writing either by providing a copy of the will (or portion of the will) or a letter of understanding, even though it may have to be conservatively estimated. The donor must be 60 years of age or older. o Every provision receiving credit must be an outright rather than a contingent provision. o Credit will be granted for both new and previously existing (but not previously known) provisions. o For a bequest, the credit will be discounted (i.e., decreased) by the executive or finance committee in light of IRS life expectancy or other tables. o Unless otherwise instructed, only the name of the donor receiving credit will be included in periodic fundraising reports and summaries, along with the method (i.e., bequest), not the dollar amount. Additional information will 5

6 be revealed/published only with the expressed written consent of the donor. o In charitable contribution totals, bequests will be reported separately from cash, pledges or other donations. A combined total may be reported so long as the separate components of that total are acknowledged. Upon request, representatives of ABC may provide to the door sample bequest language for restricted and unrestricted gifts, to ensure that a bequest is properly designated. ABC may also provide, upon request, IRS approved specimen trust agreements, for review and consideration by the donor and his or her advisors. The specimen or sample nature of such language or agreements shall be clearly indicated on all documents given to donors, and donors shall be advised that consultation with their own legal advisors is essential prior to use of such standard language or specimen agreements. Council of Tax Advisor There are a wide variety of ways in which a donor may make a gift to ABC. Because each individual s financial and tax-planning circumstances can vary widely, donors shall be strongly encouraged in all cases to consult with their own independent legal and/or tax advisors about proposed gifts, including tax and estate planning implications of the gifts. No representative of ABC shall presume to act as tax or legal advisor to any donor or prospective donor. Restricted Gifts In drafting instruments giving restricted gifts to ABC, donors and their advisors shall be encouraged to use language that would permit application of the gift to a more general purpose if, in the opinion of the board of directors, the designated purpose is no longer feasible. Gifts to Other Organizations ABC will not accept donations restricted to the use of another organization, except for the situation in which ABC has a formal, written statement (contract, interagency agreement, etc.) regarding its relationship to and responsibilities for the other entity. Commissions and Finder s Fees ABC will pay no commissions or finder s fees as consideration for directing a gift to ABC or to any of ABC s affiliates. 6

7 Related Fees Prospective donors shall be responsible for their own legal, accounting, appraisal, transportation and other fees related to ABC. Recognition Donors of $ or more may receive special forms of recognition at the discretion of, and as determined by the fund development committee. Donors of $ or more will be recognized alphabetically in a printed donor honor roll during and at the end of each calendar year or special campaign. Donor Confidentiality and Anonymity All information about donors and prospective donors, including but not limited to their names, the names of their beneficiaries, the nature and amounts of their gifts, and the sizes of their estates, will be kept strictly confidential by ABC and its representatives, unless the donor grants permission to release such information and with the exception of donor recognition practices. All requests by donors for anonymity will be honored, except to the extent that ABC is legally required to disclose the identity of donors. 7

8 Expenditure Authorization and Disbursements Policy Example Cash disbursements are to be made only for valid transactions. The cash disbursement procedures should ensure that no unauthorized payments are made, that complete records are made of each payment, and that payments are recorded in the appropriate period. Additionally, physical access to cash and checks must be restricted to authorized personnel. Check-Signing Authority The board president, treasurer, chief executive and one senior staff member other than the director of finance, as designated by the executive director, are authorized to sign checks. These four individuals shall be bonded. Checks made within budget intent but less than $ require one signature. Checks made within budget intent over $ require two signatures. Checks over $10,000 or outside budget intent require board notification and two signatures, one of which is a qualified board member. The only exception is the monthly deposit of payroll taxes. Any checks payable to any one of the above-named persons shall be signed by someone other than the payee. Deposit of Funds All funds received by ABC shall be deposited at a minimum of twice weekly. All nonproductive funds shall be invested in accordance with the investment policy established by the board of directors. Bonding Each officer or designated signatory with authority to withdraw funds shall be bonded. The cost associated will secure the aforementioned coverage shall be that of ABC. The amount of insurance coverage will be reviewed annually by the finance committee. 8

9 Withdrawal of Funds All expenditures are to be made by check, except for minimal amounts paid through petty cash. All expenditures are to be approved and supported by documentation before being recorded in the accounts payable journal. Persons other than those who initiate or approve documents that give rise to disbursements should prepare checks. The following procedures are prohibited: o Checks payable to bearer or cash except once a month for petty cash replacement. o Checks signed in blank. o Altered checks. The supporting documents should be canceled to prevent subsequent use. All checks should be sequentially pre-numbered and recorded in a control log as issued. The person performing the bank reconciliation should ensure that all checks are accounted for. Supplies of checks should be properly safe guarded. 9

10 Investment Policy Example Application All ABC employees and board members. Purpose The chief executive shall invest ABC s funds in such a way as to maximize return while protecting principal and will follow the guidelines listed below. For purposes of clarity, the following definitions will be used to classify the types of funds held by the association: Operating Funds: Those funds expected to be spent in the normal course of business during the current budget year. Funds can be retained in a checking account or other suitable format. Excess funds should be shifted to the reserve fund whenever possible. Operating Reserve Funds: Excess funds not used for day-to-day operations or given as an endowment to ABC, which shall be targeted for long-term investment. ABC will maintain a minimum operating reserve of month s operating costs. Each budget year, the previous year s monthly average operating cost will be used to determine the base amount to be kept in reserves. Funds taken from the operating reserve for operating contingencies must be replaced within a reasonable timeframe not to exceed nine months. Capital Reserve Funds: Separate funds to be used to prepare financially for predictable expenses associated with extraordinary repairs and maintenance of the ABC facility. The initial amount contributed to this fund will be $15,000. Each year following the agency will contribute an additional $1,000 to the fund. Policy The finance committee should review investment activity on a regular basis. Investment of ABC funds should not exceed $100,000 in any one institution for federal insurance purposes. Primary investment accounts should include interest-bearing checking accounts, money market accounts, certificates of deposit, investment-grade commercial paper and government securities. Investing in any other type of investment vehicle 10

11 requires a recommendation by the finance committee and prior approval by the board of directors. Investments should be limited in term. Any investments with terms of longer than three years must be approved by the finance committee. A current list of financial institutions approved as depositories for investment will be kept on file and updated regularly by the finance committee. This list includes commercial banks, savings and loans, and brokerage houses insured by the Securities Protection Investment Corporation. Within guidelines, maximum interest rates shall be sought, with the maturity of the investments governed by expected cash needs. All securities are to be written in the name of ABC. Expenditures from the operating reserve fund or capital reserve fund require a full vote of the board of directors. Originally published by Points of Light Updated by HandsOn Network