Pitfalls to Avoid When You’re New to Your Planned Giving Office

If you’re new to your role in planned giving, either because you’re covering for someone on leave, you’ve had planned giving added to your major gift responsibilities, or you’re new to the field - welcome aboard! PG Calc is invested in your success, and we’ve gathered a list of planned giving pitfalls that could get you in hot water with donors, auditors, or the IRS that we hope to help you avoid.

Understanding FASB Valuations and Their Role in Your Financials

The poet Oscar Wilde noted that “consistency is the last refuge of the unimaginative.” He would appreciate the imagination required when valuing charitable contributions. Previously, we’ve discussed the range of approaches to contribution valuation: Deduction – The value of the charitable contribution income tax deduction. Counting – The value for the purposes of donor recognition and fundraising reporting. Economic – The value of the charitable work that will be accomplished by the contribution when it becomes fully available to the organization. In this post we’re focusing on the value reported on the formal financial statements of your organization, commonly referred to as the “FASB valuation.” Most of us wrestle with FASB requirements once a year when the business office calls during the annual financial audit. Nevertheless, it is helpful to understand the FASB valuation and the variables that affect it.

A Gift Annuity Is Not a Mortgage

We occasionally receive calls from clients regarding questions about the best way to perform internal accounting for charitable gift annuities. As a split-interest charitable gift arrangement, the CGA represents both a gift to the charity and a financial obligation to the annuitant(s). On this much, there is general consensus, but on the manner in which the charity should compute the estimated remaining liability for each CGA over time, there are two main approaches. Given that the total funding minus the charitable deduction equals the total estimated liability at the outset of the gift arrangement, some organizations choose to record the incremental changes in liability as a sort of mortgage payment plan, or straight-line depreciation schedule. This method essentially amortizes the total estimated liability at the beginning and breaks that total down into regular and consistent annual amounts (sometimes even quarterly amounts). There is a fundamental problem with this approach; A...

Beware Dramatic Increases in Estimated Gift Annuity Liabilities

[NOTE: The following is based on a true story.] Some of the numbers just didn’t make sense. It was that most wonderful time of the year for a non-profit organization – the closing of the June 30 fiscal year! Almost like Christmas in July, everyone was busy reviewing tally sheets and running various reports in an effort to provide comprehensive information about the gifts received over the previous 12 months. With outright gifts, of course, the process was fairly straightforward – whatever was received, for the most part, was counted with a few exceptions. With life income gifts, however, the process was a little more complicated, since the organization needs to report the total funding amount, the estimated liability, and the estimate of the charitable remainder.