Accepting Illiquid Assets: The Devil is in the Details


I was delighted to join the Partnership for Philanthropic Planning of Tampa Bay today for a program on accepting illiquid assets. My fellow panelists were Frank J. ‘Sandy’ Rief, III, a shareholder with Allen Dell Attorneys at Law, and Deborah McCarthy, CFO, Boys & Girls Clubs of Tampa Bay. Beverley McLain, Senior Vice President of Philanthropic Services, Community Foundation of Tampa Bay expertly facilitated the program.

As promised, here are the links to the resources that were mentioned during the program. If you weren’t able to join us, never fear – these resources can be useful to all nonprofits and donors. 

Let me start by covering a few questions that were discussed:

‘What’s an illiquid asset?’ An illiquid (or non-cash) asset is anything that can not easily be sold or exchanged for cash. Be careful that you don’t interpret ‘can not easily’ for ‘can’t ever.’ Illiquid assets can be sold, just not as easily as an asset like stocks. I would simplify the definition to something you can’t deposit in your bank account or a brokerage account. These items include artwork, real estate, and jewelry.

‘Should I care about this at all?’ I think you should if you are raising support for a nonprofit organization. There are many opportunities to accept illiquid assets but you have to be well informed. For instance, a donor could give your organization a building that becomes your permanent location. There are substantial tax benefits for the donor and your organization receives a valuable asset.

‘Is there any risk for my organization?’ Absolutely! That’s why you need to do your homework before accepting any non cash gifts. Several examples were cited of organizations that accepted non cash gifts that have eventually cost the organization more than the value of the gift. The first step in protecting your organization from unnecessary risk is to create gift acceptance policies.

‘How does my organization proceed?’ Carefully and armed with plenty of resources! Here you go:


Gifts of Non-Cash Assets
Community Foundation of Tampa Bay – Specific Property Gifts

Gift Acceptance Policies
Association of Fundraising Professionals (AFP) – Sample Gift Acceptance Policies
Partnership for Philanthropic Planning (PPP) – Model Documents
BoardSource – Nonprofit Policy Sampler
Kathryn Miree and Associates – Sample Gift Acceptance Policies

IRS Forms and Publications
Publication 526 – Charitable Contributions
Publication 561 – Determining the Value of Donated Property
Form 8283 – Noncash Charitable Contributions
Form 8282 – Donee Information Return

AFP Code of Ethical Principles and Standards
The Donor Bill of Rights

One of the most important takeaways from today’s session: know when to ask for help. I am not qualified to give tax or estate planning advice. But I do know when to call the experts.

Don’t Confuse Overhead with Fraud


Yesterday’s morning paper greeted me with a big headline about charity fraud. The Federal Trade Commission has filed a complaint against three national charities. I am pleased that action is being taken against charities who claim to make a difference in people’s lives but don’t. However, I fear that a national conversation will lead to confusion between overhead expenses and fraud.

If you missed the story here it is: Tampa Bay Times 
It was also on TV: CNN 

What are fraud and overhead? I like to start in the dictionary. Here’s how defines them:
fraud – deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage
overhead – the general, fixed cost of running a business, as rent, lighting, and heating expenses, which cannot be charged or attributed to a specific product or part of the work operation.

The charities in question claim that their high expenses are overhead. Charities need overhead, “fixed cost of running a business,” to operate. Staff must be paid. Buildings must be repaired. Fundraising activities must be conducted. I would urge everyone – nonprofit employees and board members, individual and institutional donors, regulators – to not confuse legitimate overhead expenses with the fraudulent practices at corrupt nonprofits.

As a career fundraiser, I am very aware that fundraising expenses are often maligned in these conversations. Many people say they want all of their donations to go directly to program support. That is not realistic. What if everyone said that? Nonprofits would not be able to operate without someone supporting the overhead expenses, including ethical fundraising activities.

In a written response to the action of the Federal Trade Commission against the three national charities, Association of Fundraising Professionals (AFP) President and CEO Andrew Watt stated, “These kinds of fraudulent organizations are not charities in any sense of the word, nor do they in any way represent the vast majority of charities that work tirelessly on a wide variety of causes.” I am a member of AFP and proudly adhere to the Code of Ethical Principles and Standards.

When making decisions about where to make a charitable gift, do your due diligence. Make sure that the organization is providing the program support it claims. But don’t make the mistake of thinking that any amount spent on overhead is bad. Those overhead expenses keep your favorite nonprofit operating and thriving. If you have questions about an organization, do some research before you give. There are resources online to help. The best way to learn more about a charity is to get involved – volunteer, take a tour, ask how you can best help.

Don’t let yesterday’s news deter the work of your nonprofit or your charitable giving. Never confuse fraud with overhead.

If you are interested in learning more about the Overhead Myth, check out these resources:
The Overhead Myth 
“The Way We Think About Charity Is Dead Wrong” a TED Talk by Dan Pallotta