Foundation Gift Policies

Foundation Gift Policies

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February 2002

GENERAL GUIDELINES

1. A gift is defined as:
   1. contribution of cash, securities, real or personal property;
   2. executed life income agreement (charitable gift annuity, charitable remainder unitrust, or charitable remainder annuity trust);
   3. documented charitable lead trust
   4. contribution of life insurance
2. Gifts can be designated for: a. unrestricted or restricted current operations; b. restricted or unrestricted current endowment; c. buildings; d. equipment; e. other capital purposes (including fund-raising expenses)
3. Charitable intent must accompany all gifts accepted by the Fredonia College Foundation. A donor’s primary motive for making a gift should be to further the work and goals of Fredonia.
4. The purpose of the Fredonia College Foundation is to motivate, cultivate, and give proper direction to prospective donors. The Foundation should not act as legal counsel. In every situation, the donor should be advised to seek his/her own competent legal counsel. (This last statement should appear on any written proposal or document given to a prospective donor.)
5. The Fredonia College Foundation, acting on the authority given by its board, should assume responsibility for the receipt of gifts and life income arrangements. Report of such gifts should be made at regular meetings of the Foundation Board.
6. Gifts of land and personal property should be marketable within a reasonable period of time.
7. It is against Fredonia College Foundation policy to accept personal property on loan.
8. When an income interest is to be retained by the donor, the asset offered must be of sufficient value to produce the income the donor anticipates. If the donor’s valuation is unrealistic, the potential gift should not be accepted.
9. Trusts and Annuities should be limited to two (2) income beneficiaries.
10. Gift annuity rates should be based on those established by the American Council on Gift Annuities.
11. The following amounts are the minimum values needed to fund a life-income instrument:
    1. charitable gift annuity: $5,000
    2. charitable remainder unitrust: $100,000
    3. charitable remainder annuity trust: $100,000

Recommendations on the subject of evaluation of the most common types of gifts:
(Clarification and amplification of what follows, as well as standards for reporting and valuing others types of gifts for management report purposes, can be found in the CASE Management Reporting Standards, 1996 edition, published by the Council for Advancement and Support of Education.)

1. Securities: The Fredonia College Foundation will count gifts of marketable securities at the mean between the high value and the low value at which the security was traded on the date the donor(s) relinquished control of the asset in favor of the Foundation. It is the policy of the Foundation to liquidate gifts of marketable securities upon receipt, investing the proceeds in accordance with the current investment policy. Net gains realized by the Foundation from such sale of gifts of marketable securities will be added to the fund designated by the donor as recipient of the gift. Losses realized upon sale, including net realization of a lesser value than the amount of the gift due to brokerage fees or other transaction-related expenses, will be charged against the endowment’s earnings reserve.

2. Real Estate and Personal Property: Gifts of real estate and personal property (such as land, homes, paintings, coins, and rare books) should be counted at the full fair- market value placed on them by an independent appraiser. The donor should be advised that two independent appraisals are preferred. Small gifts of real estate and personal property with an apparent worth of less than $5,000 may be valued by a member of the college staff with expertise (e.g. a librarian or art faculty member), with these informal evaluations used only for internal reporting purposes.

3. Charitable Remainder Trusts: Gifts made to establish these types of arrangements, where the remainder is irrevocable, should be reported on the Foundation’s reports at the full fair-market value of the asset used to fund the gift. The charitable remainder trust interest (present value) will also be recorded on the donor’s gift record. If such deferred gifts increase in value after the time they are received, the donor will be given credit for the difference between the initial fair-market value of the contribution and the amount realized by the Fredonia College Foundation.

4. Charitable Gift Annuities: Charitable gift annuities will be reported at full fair- market value. The amount allowable as a tax deduction for the donor will be the present value.

5. Charitable Lead Trusts: In reporting the value of a charitable lead trust, only the income received from it each year during the period of operation of the trust should be included in the Foundation’s gift totals. For accounting purposes, contribution revenue will be recognized equal to the present value of the expected cash flow.

6. Trusts Administered by Others: The value of the gifts held in trust in the name of the Fredonia College Foundation should be counted as gifts to the Foundation provided the institution has an irrevocable right to all or a predetermined portion of the income or remainder interest in the gift.

7. Life Insurance: The following standards apply in reporting gifts of life insurance:

   • The Fredonia College Foundation must be named both beneficiary and irrevocable owner of a life insurance policy before a policy can be recorded as a gift. The Foundation should report the cash surrender value. (Cash surrender values are approximately equal to present value.)

   • Premium payments made by the donor directly to the insurer or to the Foundation (which, in turn pays the premium to the insurer) on new or existing policies, should be reported as an outright gift at the full value of the premiums paid.

   • Realized death benefits should be reported as gift income only if the institution has never previously recorded the policy value or any donor-paid premium as gift income and if the institution has not been paying the premiums.

   • If the Foundation receives the proceeds of an insurance policy in which it was named beneficiary, but not owner, the full amount of the insurance company’s settlement at the death of the donor should be reported as a gift on the date the Foundation receives the proceeds.

8. Pledges: Pledges represent signed statements of intent and should be recorded on the donor’s gift record. Such statements are not legally binding upon the donor, the donor’s heirs, or the donor’s estate. Pledge totals will be included in campaign totals. Pledges will be recorded at present value, i.e. the face value of the pledge, discounted at the established spending rate set by the Board.

9. Testamentary Pledge Commitments: For the purposes of gift accounting, the Fredonia College Foundation should record as a pledge a testamentary commitment which is documented by a photocopy of the pertinent portion of the will, trust document, or insurance policy, and/or letter describing the commitment and its ultimate financial value to the Foundation. Such pledges should be recorded as Testamentary Pledge Commitments and should be kept separate from pledge commitments which are being paid on a predetermined pledge schedule. Provisions that name the Foundation as a contingent beneficiary should not be included in the testamentary pledge commitment total. Testamentary pledge commitments will not be included in financial statement totals until such time as notification of probate is received.

In order to administer a sound development program and secure annual and capital gifts for the Fredonia College Foundation, the above recommendations were proposed by the Planned Giving Committee and approved by the Foundation’s Board of Directors on Feb. 2002.