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Business and Finance

Gift Acceptance (II.B.2)

Volume II: Business and Finance
Chapter B: Gifts
Issuing Office: University Development Office
Responsible Officer: Sr VP for Advancement
Responsible Office: University Development Office
Originally Issued: September 27, 2002
Most Recently Revised: November 18, 2011

TABLE OF CONTENTS

Statement of Policy
Reason for Policy
Who Should Know This Policy
Related Documents
Contacts
Definitions
Types of Gifts
Procedures
Special Situations
History

STATEMENT OF POLICY

Private giving helps ensure Purdue University's excellence in higher education. Private gifts allow the University to fund programs, scholarships, fellowships, professorships, research, campus renovations, and new facilities. Established in 1972, the University Development Office (UDO) plans, coordinates, and implements fund-raising programs with Purdue students, alumni, parents, friends, corporations, and foundations. UDO's mission is to increase the measure of private giving in support of Purdue's discovery, learning, and engagement activities and to develop and maintain positive relationships throughout the institution's broad range of constituents.

The Purdue Foundation (the Foundation) and the Purdue Research Foundation (PRF) exist to secure private gifts for the benefit of Purdue University (the University). Both Foundations are organized as corporations, exempt from federal tax liability by Internal Revenue Code Section 501(c)(3), and qualify as a Public Charity under Internal Revenue Code Section 509.

All gift acceptance policies and procedures at Purdue University shall be interpreted in light of two overriding principles:

Principle 1:
A gift shall not be accepted by the University if such acceptance would not be in the interest of the donor. A determination of the donor's "interest" shall include, but not be limited to, the donor's financial situation and philanthropic interests, as well as any tax or other legal matters revealed while planning for a gift. The University shall not encourage any gifts that are inappropriate in light of the donor's personal or financial situation.

In certain unique cases, a gift may be considered inappropriate due to particular restrictions imposed by the donor. By its very definition, a gift cannot be associated with a private benefit that would jeopardize the charitable contribution deduction under IRC section 170 if the donor and beneficiary of the restriction have less than an arms-length relationship. There must be a distance between the donor and recipient such that the recipient does not receive benefits that are otherwise not available to colleagues of similar status and interest. For example, in the capacity of donor, an individual cannot subsidize his/her own salary, travel funds, or fringe benefits.

Principle 2:
A gift shall not be accepted by the University unless there is a reasonable expectation that acceptance of the gift will support the University in its missions of learning, discovery, and engagement.

REASON FOR POLICY

While this document is intended to provide guidance to University Development Office and other University personnel regarding acceptance of prospective gifts, donors are ultimately responsible for ensuring that the proposed gift furthers their charitable, financial, and estate planning goals. The University Development Office does not provide legal, accounting, tax, or other advice to prospective donors. Therefore, each prospective donor is urged to seek the advice of independent legal counsel in the gift planning process.

WHO SHOULD KNOW THIS POLICY

  • President
  • Provost
  • Chancellors
  • Vice Chancellors
  • Vice Presidents
  • Deans
  • Directors/Department Heads
  • Faculty
  • University Development Staff
  • Business Office Staff

RELATED DOCUMENTS

CONTACTS

Associate Vice President for Development (765) 494-6902

DEFINITIONS

Word Definition
Gift A gift is consideration given for which the donor receives no direct benefit and requires nothing in exchange beyond an assurance that the intent of the contribution will be honored. A gift may also include a "quid pro quo contribution" within the meaning of section 6115 of the Internal Revenue Code where goods or services may be provided to the donor in recognition of the consideration given by the donor. Where there is a quid pro quo contribution, the disclosure and substantiation requirements of the Internal Revenue Code will be complied with. Gifts made to the Foundation and gifts made directly to the University are both processed and reported by the University Development Office. Guidelines regarding classification, administration, and reporting of nongovernment support can be found in University Policy II.B.6, Classification, Administration, and Reporting of Nongovernmental Support.
Conditional Gift Gifts which, because of some qualifier or restriction, are considered nonroutine. Conditional gifts may commit the University to act within a specified time or use a gift for a specific purpose. A conditional gift may also include a bargain sale of property to the University or Foundation where the acquisition price paid for the property by the University or Foundation will be less than the property's fair market value and there is a donative intent in establishing the acquisition price of the property below its fair market value.
Outright Gift These gifts are typically gifts of cash, stocks, bonds, real property, tangible personal property, or gifts-in-kind.
Pledge Pledges are commitments to give a specific dollar amount according to a fixed time schedule.
Planned Gift Planned gifts generally are gifts or commitments made in the present with the benefit to Purdue "deferred" until a future date. However, planned gifts may include outright gifts of appreciated property (securities and real estate) or gifts of tangible personal property.
Endowment A gift of at least $25,000 to be invested for the purpose of producing present and future income that may be expended or reinvested with the original gift. The principal of the endowment is kept intact. Income is expended according to the donor's stipulation and may be unrestricted or restricted.
Qualified Appraisal Such appraisals are customarily obtained by the donor to support
the allowance of specific income tax charitable deductions. Qualified appraisals are required when the claimed deduction for the donated property, other than money or publicly traded securities, is more than $5,000, or $10,000 for non-publicly traded securities. Property may be valued internally by using the fair market value as determined by qualified appraisals supplied by the donor.

TYPES OF GIFTS

Gifts to the University or the Foundation may be in the form of outright gifts, pledges, or deferred commitments.

Outright Gifts

Cash and cash equivalents. Cash is often the easiest way to give and the most frequently received form of gift accepted by the University. These gifts can take the form of currency, check, or credit card contribution. Cash may be delivered in person, by mail, by Electronic Funds Transfer (EFT), or by wire transfer. Cash gifts are reported the date the cash is received in the Development Services processing area. If gifts are transferred by EFT or wire, the date of the gift is the date that the money is transferred into the University's bank account. Credit card gifts are reported on the date that the credit card charges are processed.

Publicly-traded securities. Securities (1) listed on an exchange in which quotations are published daily; (2) regularly traded in national or regional over-the-counter markets for which published quotations are available; or (3) that are shares of a mutual fund for which quotations are published on a daily basis in a newspaper of general circulation throughout the United States, will be accepted as outright gifts or toward pledges. The value of securities is determined on the recognized gift date, which is established when the donor relinquishes control of the securities. The average of the high and low trading prices on the gift date determine the value of securities for reporting purposes.

Closely held securities (non-public). The University shall examine any issue that is not publicly traded prior to its acceptance as a gift and may decline a gift of such securities if it deems them difficult to value or not easily marketable. The Gift Acceptance Committee must approve gifts of non-publicly held securities prior to acceptance.

Real property. Real property includes improved or unimproved land, personal residences, farmland, commercial property, rental property, and mineral interests. If it is the intention of the donor that the University not immediately dispose of real property, an agreement must be made in writing between the University and the donor before the University may accept such property. Gift real estate must be tested to be in conformity with state and federal laws, including EPA regulations, and the donor must provide satisfactory evidence of environmental compliance.

Personal property. The University may consider gifts of personal property, including but not limited to works of art, patents, copyrights, antiques, stamp and coin collections, jewelry, furniture, rare books, manuscripts, or any other item that has a determinable value. The Gift Acceptance Committee may approve such donations only after a review indicates that the property is either readily marketable or needed by the University. It is the policy of the University to sell or otherwise dispose of all gifts of personal property, unless the items can be used by the University in a manner related to learning, discovery, or engagement. The University's intention to either resell the property or to retain and use it to further its charitable activities shall be communicated to the donor in writing at the time of the gift.

Gifts-in-kind. Gifts-in-kind for which donors are eligible for a charitable gift deduction in accordance with current IRS regulations should be reported at the fair market value placed on them by an independent, expert appraiser. Only those gifts-in-kind that can be converted to cash, or items such as equipment, books, artworks, etc. that can be used in support of learning, discovery, or engagement, should be reported. Receiving departments must agree to use the in-kind materials before accepting the gift. Depending on the appraised value of the donated item, IRS Form 8283 may be submitted to the University. If the donor does not supply a value, someone in the receiving department who has knowledge of the general type of item should provide a value for internal purposes only. Internal values of donated items are not to be shared with donors.

Pledges

Pledges are commitments to give a specific dollar amount according to a fixed time schedule. Annual Fund pledges are usually for amounts less than $10,000 and for periods less than one year. All pledges other than Annual Fund pledges are required to be in writing.

The following minimum information must exist to substantiate a pledge:

  • the amount of the pledge must be clearly specified;
  • there should be a clearly defined payment schedule;
  • the donor may not prescribe contingencies or conditions;
  • the donor must be considered to be financially capable of making the gift;
  • changes to original pledges must be documented in writing.

Pledge recording:

  • Anticipated matching gifts will not be included in pledge amounts.
  • Pledges and expected matching gifts will qualify for donor recognition in appropriate giving level groups.
  • Under- and over-paid pledges (as a result of either rounding, gift valuation, or incremental giving) will be noted as paid in full when donors' intents are clearly to pay commitments in full.
  • Before defaulted pledges are written off, pledge deactivation requests must be reviewed and approved by the senior vice president for advancement, the executive vice president and treasurer, and the president.
  • Pledge balances will be written off when Purdue is notified of a donor's death, unless there are provisions in the donor's will or the family has indicated an intent to complete the pledge.

Planned Gifts

Charitable bequests. Donors can make charitable bequests to the Foundation in wills or living trusts.

Charitable gift annuities. A charitable gift annuity is a contract between the Purdue Research Foundation and the donor, not a trust agreement, whereby the donor makes an initial payment of cash or marketable securities to PRF and PRF agrees to pay the donor an annuity for the rest of his/her lifetime.

Charitable remainder trusts. A charitable remainder trust is established when a donor irrevocably transfers money or securities to a trustee who invests the assets to pay annual lifetime income to the donor or others chosen by the donor. At the end of the beneficiaries' lives, the remaining trust assets are distributed to the University. Annuity trusts provide the tax advantages of current contributions with the security of fixed, lifetime incomes, generally for the donors and their spouses. The agreed-upon annual payments remain unchanged regardless of how the investments perform. The unitrust differs from the annuity trust by providing a variable income. Payment is based on a fixed percentage of the net fair market value of the trust assets as valued annually.

Charitable lead trusts. This type of gift provides an income stream for a specified period of time to the Purdue Foundation. The University receives the income from the trust and applies it to the specific project. The principal is then returned at the end of the set period to whomever the donor designates.

Gifts of life insurance. Gifts of life insurance may name the University beneficiary of the policy or as beneficiary and owner.

Pooled income fund. This type of giving is sometimes called a charitable mutual fund, as it allows the donor to combine gifts with those from other individuals to participate in life income trusts with smaller initial gifts. The annual income is based upon the donor's investment in the fund and varies with the actual earnings of the fund.

Life estate. Donors can receive a sizable charitable income tax deduction by making a gift to the Purdue Research Foundation of their personal residence or farm, while retaining full use and rights to the property during their lifetime.

Revocable trust. Through a written agreement, the donor transfers assets to a trustee. Income is paid to the donor for the term of the trust.

Irrevocable planned gifts will be reported at full fair market value. Revocable planned gifts will be counted at full fair market value toward the campaign goals if donor will be 50 years of age or older by June 30, 2007. If the donor will be less than 50 years of age by June 30, 2007, the revocable gift will be discounted 100 percent.

Endowments

To assure the acceptability of endowment gifts, the development officer or original contact will notify general counsel, University Development Office. General counsel has the authority to recommend approval for standard agreements. Final approval for these agreements rests with the senior vice president for advancement.

Unique, nonstandard endowment agreements may require additional review and approvals. It is the responsibility of general counsel to obtain recommendations from either the vice president for business services and assistant treasurer, or the senior vice president for the Purdue Research Foundation before requesting final approval from the senior vice president for advancement.

An endowment account will be established for participation in the unitized endowment pool when a minimum of $2,000 is received. The endowment agreement must contain a commitment for future donations to bring the endowment to the minimum required (currently, $25,000) within five years. Distributions from the unitized endowment pool will be reinvested until the minimum amount is met. If the minimum is not met within the stated timeframe, the agreement will cease and all funds will be expendable for the stated purpose.

PROCEDURES

A Gift Acceptance Committee (GAC) has been created to facilitate the gift acceptance process. The GAC is responsible for accepting all gifts. Once a gift has been accepted, the University Development Office is responsible for recording and acknowledging it.

Gift Acceptance Committee

The Gift Acceptance Committee (GAC) shall consist of the following:

  • Senior Vice President for Advancement
  • Provost
  • Senior Vice President and Treasurer for the Purdue Research Foundation
  • Vice President for Business Services and Assistant Treasurer
  • Chair of The Campaign for Purdue
  • General Counsel, University Development Office
  • Senior Business Manager for Advancement

The Gift Acceptance Committee shall review all gifts of significant risk. All such gifts shall be documented by a written understanding between the donor and the University, and must be approved by the Gift Acceptance Committee before the University Development Office may accept the gifts.

Gifts of Significant Risk

  • Non-publicly traded securities
  • All gifts of real property
  • Gifts of personal property if not to be used by the University
  • All gifts of real or tangible personal property subject to donor restrictions regarding the disposal of such property
  • Any bargain sale of property where a donative element is associated with the acquisition of property by the University or Foundation below its fair market value.
  • Cash gifts with significant donor restrictions
  • All gifts of unusual items or gifts of questionable value

The committee shall meet at least on a quarterly basis and shall call monthly meetings as necessary to approve specific gifts.

Decisions of the committee must be made by consensus. If consensus cannot be reached, gifts will be forwarded to the Office of the President for review and decision.

Based upon the recommendation of the appropriate school, division, department, or unit, all other gifts may be accepted by the University Development Office.

SPECIAL SITUATIONS

Gifts in Support of Faculty Scholarly Activities
In the case of a gift offered in support of a faculty member's scholarly activities, the business manager will characterize any business or pecuniary ties that exist between the donor and the faculty member. If any business or pecuniary ties are identified, acceptance of the gift would require approval from the dean, the provost, and the president. If an exception is granted for acceptance of the gift, a third Purdue University party, such as the head of the department or the dean of the school in which the faculty member holds his or her appointment, shall exercise oversight of the gift to ensure the conformance of gift utilization with this policy. Any special situation would require review by the president, the provost, and the executive vice president and treasurer.

Conditional Gifts
Conditional gifts are those gifts that, because of some qualifier or restriction, are considered nonroutine. Conditional gifts may commit the University to act within a specified time or use a gift for a specific purpose. If, in any instance, a gift offered by a donor would put the University in an embarrassing or untenable position with the general public, the University will decline acceptance. Time limits for holding a conditional gift may be reviewed by the Gift Acceptance Committee. Gift acceptance agreements should specify a time period for meeting the conditions for the gift and should also indicate what will happen to the gift if conditions are not met. Primary choices are to move the gift to a different account or to refund the gift. Development Services will draft an acknowledgment of a conditional acceptance for appropriate signature. This will be sent to a donor within 10 days of approval of this form. A second acknowledgment letter will be sent when conditions have been satisfied.

Refunding of Gifts
In rare instances, Purdue may deem it necessary to refund gifts, either because it is in the best interest of the University or because conditions agreed to in accepting a gift cannot or will not be met. Requests for refunds may come either from the donor or from the recipient department and must include a statement of reason addressed to the Gift Acceptance Committee.

Conditions under which gifts may be refunded:

  • When conditions of acceptance cannot be met or cannot be agreed to.
  • When it is in the University's interest and when continuing to hold a gift would not enhance Purdue's reputation either with the donor or with the general public.

Recognition of Discounts and Services
Purdue University recognizes that corporations or private individuals may offer significant discounts on materials or services to Purdue University. While these "gifts" do not qualify as tax-deductible donations, it is important to acknowledge and recognize these items through Purdue's formal stewardship programs. Donor acknowledgement of a significant discount on materials or services will be made by the University Development Office and the receiving department at its discretion.

HISTORY

November 18, 2011: Policy number changed to II.B.2 (formerly IX.2.1).

September 27, 2002: This policy is the first to formalize gift acceptance at Purdue University.