Syllabus for Gift Planners, section 3: Designing Charitable Gifts

This section of The Syllabus for Gift Planners covers topics related to Understanding and Designing Charitable Gifts, including asset types and gift vehicles.

Syllabus for Gift Planners, section 2: Donor Relations

This section of the Syllabus for Gift Planners covers topics related to Donor Relations, including marketing, demographics, communication with donors, etc.

Guidelines for Reporting and Counting Charitable Gifts

A method for showing external constituencies how all types of contributions contribute to an organization's fundraising goals, including outright gifts, irrevocable gift commitments and revocable gift commitments.

(September, 2006) The National Committee on Planned Giving® has published a revised edition of the Guidelines for Reporting and Counting Charitable Gifts. The Guidelines for Reporting and Counting Charitable Gifts were created to provide a tool for charitable organizations to use for reporting and counting fundraising activity. They provide a structure and methodology for showing how all types of gifts contribute to an organization's fundraising goals, whether in a traditional campaign context or other reporting period. The Guidelines focus on the range of reports charitable organizations make to their external constituencies.

NCPG's new guidelines are based on what has become standard counting and reporting practice for many charities. They specify that campaigns, of whatever duration, should be structured and fundraising activity reported, in three categories-outright gifts, irrevocable gift commitments and revocable gift commitments.

The Guidelines for Reporting and Counting Charitable Gifts were developed by a task force of NCPG members representing all types of charitable organizations. The creation of the guidelines came after a year of research and development, a six-week public comment period, and final revisions.

Former NCPG president and CEO Tanya Howe Johnson said, "The guidelines broaden the counting and reporting options available to organizations, so that they can choose a sound and straightforward methodology that best supports their organization's campaign goals."

The guidelines serve to complement NCPG's Valuation Standards for Charitable Planned Gifts, which were released in April 2004. The Valuation Standards are for internal use to help charitable organizations understand the future purchasing power of a planned gift, while The Guidelines for Counting and Reporting Charitable Gifts allow organizations to report all their fundraising results and especially gift planning achievements to external constituencies such as donors, the media and other charities.

Johnson points out, "It's important to note that valuing, counting and reporting are not accounting functions. The way planned gifts are reflected in a charity's financial statements is still governed by FASB."

Task force chair Bruce Bigelow said the guidelines offer a much clearer picture of an organization's true fundraising achievements.

"Without these counting guidelines, fundraisers are in a formidable quandary-the conflict between suggesting the charitable giving vehicle that works best within the donor's means and wishes-and facilitating a gift that can be reported right away. NCPG's Guidelines for Counting and Reporting Charitable Gifts effectively quash this quandary, and both the donor and fundraiser receive the recognition deserved for the acquisition of the gift. These guidelines allow us to focus on the ways our donors can make the best and most generous gift they can without being concerned about how the gift will look on our reports."

To read the full text, click here.

To read an Executive Summary of the revised Guidelines for Reporting and Counting Charitable Planned Gifts, click here.

To read CASE Updates Management and Reporting Standards; Revisions Consistent with NCPG Guidelines for Reporting and Counting Charitable Gifts (2/5/08), click here. 

To read Association of of Fundraising Professionals Endorses NCPG Guidelines for Reporting and Counting Charitable Gifts   (5/22/07), click here. 

To read “The New Paradigm: Counting Gifts and Contemporary Fundraising,” by Bruce Bigelow and Andrea Latchem (The Journal of Gift Planning, Vol. 9, No. 3), click here.

Syllabus for Gift Planners, section 4: Management of a Gift Planning Program

his section of The Syllabus for Gift Planners covers topics related to Management of a gift planning program, including planning and goal-setting, counting and reporting, hiring and evaluating personnel, etc.

Syllabus for Gift Planners, section 1: Philosophy and Practice

The section of The Syllabus for Gift Planners covers topics related to philosophy and practice.

Valuation Standards for Charitable Planned Gifts

 A method for determining, in today’s dollars, what a planned gift will accomplish when received and used for its intended charitable purpose.

To view the entire Valuation Standards for Charitable Planned Gifts in PDF format, click here.

What are the Valuation Standards for Charitable Planned Gifts and why are they needed?

Valuation is the process of determining, in today’s dollars, what a planned gift will accomplish when received and used for its intended charitable purpose. Valuation does not seek to provide a comparison between an outright gift and a deferred gift. All things being equal, the outright gift is always more valuable to the charity. But if an equivalent outright gift isn't an option for the donor, then it is helpful to both the donor and the charity to consider the relative value (i.e., purchasing power) of the planned gift. Valuation is an essential component in helping donors and charities understand how to maximize the impact of charitable planned gifts.

Charitable organizations have had varying levels of guidance in accounting for planned gifts (Financial Accounting Standards Board procedures), determining the charitable tax deduction for planned gifts (US Treasury regulations) and counting planned gifts in annual and campaign reporting (PPP's Guidelines for Reporting and Counting Charitable Gifts).

Jeff Comfort, chair of the task force for valuing planned gifts, noted, “These methodologies are valid and useful for their intended purposes. However, none are intended to estimate the ultimate value of a planned gift to the charity that will receive it. In many cases, the accepted methods for accounting, counting, and determining the charitable deduction substantially underestimate the value of planned gifts. The valuation standards help charitable organizations and donors understand the value of a planned gift in terms of its present purchasing power. That present value is reached by considering real-world data, including the standards of the Prudent Investor Rule and historical indices of investment performance and inflation."

Valuation data can be used by charitable organizations to:

• Evaluate costs and benefits of planned gift fundraising.

• Determine financial effectiveness of an organization’s current investment in gift planning.

• Allocate appropriate resources to a gift planning program.

• Set planned gift fundraising expectations within a comprehensive fundraising program or campaign.

• Assess the effect of certain variables (e.g., term of the gift, investment strategy) on the ultimate value of the gift to the organization.

Because valuation is based upon information that may be unique to each charity, the valuation standards are not generally intended to be used for comparing one organization’s fundraising performance to that of another organization. (Comparison might be possible if a group of organizations agree to use the same default values for that purpose.)

How are planned gifts valued?

The Valuation Standards for Charitable Planned Gifts use mathematical formulas to arrive at the present value of a planned gift—its purchasing power in current dollars. The process involves two steps:

• Payout rates, donor life expectancy or term of the gift and assumed investment returns are used to determine the value of the gift at its projected termination.

• The total future value is discounted backward to the present using a discount rate that is based on expected cost rise rates.

There are four variables that must be factored into the valuation process: term of the gift (often related to the donor’s life expectancy), investment return, expenses, payout and cost-rise rate. For organizations that have not maintained their own data on investment performance and expenses, the Partnership provides default values based on historical indices.

How are revocable gifts valued?

Existing standards for counting or accounting for planned gifts may not include revocable gifts. However, these gifts—bequest intentions, charitable remainder trusts with revocable remainder interests, retirement account designations, etc.—are a significant component of most gift planning programs. Excluding these commitments from program evaluation significantly understates the contribution of the program to the charitable organization. At the same time, the Partnership urges that any report of these gift values include a full disclosure of the revocable nature of such commitments.

In general, revocable gifts are valued in light of the probability of receipt. The present value of the gift is further discounted by a probability factor, which is based on what is known about the gift and donor. If the donor has a close relationship to the organization, the amount of the gift is specific, there is a legally enforceable pledge and the estimated value of the estate is 20 times or more than the intended gift amount, then the probability of receiving the gift might be set at 95%. If the donor has no gift history or documented relationship with the organization, a life expectancy of more than 30 years and it is impossible to estimate the value of the estate, then the probability of receiving the gift might be as little as 5%.

Organizations with well-established planned giving programs may elect to calculate their own probability factors through careful analysis of the facts of each gift where larger commitments are involved. Organization-specific probability factors might also be based on a review of past experience, comparing previously known expectancies to actual receipts of specific bequests over time. Organizations with less planned giving history may choose to base probability factors on a model provided by the Partnership.

Who was responsible for developing the Valuation Standards for Charitable Planned Gifts?

A task force of twenty gift planners from all types of charitable organizations and the various financial and legal advisor professions developed the standards over a three-year period. The standards have been extensively reviewed and approved by the Partnership Board of Directors. Comments were solicited from Partnership members and the development community at large, and key areas of the standards were clarified in response to these comments.