Understanding The Critical Role Of Non-Cash Giving In Nonprofit Fundraising

Created By: Brandon Emerson
June 28, 2024

Philanthropy is changing. Donors and nonprofits are more sophisticated than ever. Increasingly, the expectation is that nonprofits function like their for-profit counterparts – efficient, innovative, adaptable, and growth-minded. Fundraisers are consistently rising to the challenge of raising more revenue, with total giving growing by 1.9% over the last year. While that growth is admirable, there remains an under-leveraged source of philanthropy: non-cash assets. While an overwhelming 90% of wealth in the United States is held in non-cash assets, only 14% of nonprofits received non-cash contributions last year (data sourced from review of 2023 Form 990 data related to charitable contributions for 720,576 organizations via CauseIQ). This discrepancy represents a significant missed opportunity for many organizations seeking to diversify their revenue streams and enhance their impact.

Understanding Non-Cash Assets

Non-cash assets include a broad range of items such as stocks, real estate, personal property (vehicles, art, jewelry), intellectual property, and even cryptocurrency. These assets often appreciate over time, making them potentially more valuable than cash donations. Donors are sometimes more willing to contribute these types of assets due to their advantageous tax implications. By donating non-cash assets, donors can avoid capital gains taxes, resulting in a larger gift to the charity and a significant tax deduction for themselves.

The Benefits of Non-Cash Giving for Nonprofits

1. Increased Revenue Potential: Tapping into the wealth held in non-cash assets opens up a substantial source of funding. For instance, gifts of appreciated securities can significantly exceed typical cash donations, providing an immediate boost to an organization’s financial health.
2. Diversification of Income: Relying on cash donations alone can limit a nonprofit’s financial stability. Non-cash gifts offer a diversified revenue stream, which can safeguard the organization against economic fluctuations and donor fatigue.
3. Enhanced Donor Engagement: By accepting non-cash assets, nonprofits can engage with donors on a deeper level. Offering more giving options can attract a broader donor base, including those who may prefer to give in ways other than cash.
4. Legacy and Planned Giving: Non-cash assets play a vital role in planned giving strategies. Donors can include non-cash assets in their estate plans, ensuring long-term support for the nonprofit. This also provides a way for donors to make significant contributions that may not be possible during their lifetime.

Barriers to Non-Cash Giving

Despite these benefits, many nonprofits are hesitant to prioritize non-cash giving due to perceived complexities and risks. Common concerns include the valuation of non-cash assets, the legal and tax implications, and the operational challenges of processing these gifts. While these barriers can be daunting, they are not insurmountable. Organizations that have overcome these barriers have witnessed the power of non-cash giving and how it can transform their financial picture. With some creativity and dedicated focus, a plan can be created to begin accepting non-cash gifts now while growing expertise internally over time.

Overcoming the Challenges of Non-Cash Giving

1. Education and Training: Nonprofit leaders and development staff need education on the benefits and processes associated with non-cash gifts. Training can demystify the complexities and equip staff with the necessary skills and resources to facilitate these transactions.
2. Expert Partnerships: Collaborating with financial advisors, tax professionals, transaction managers, and legal experts can help nonprofits navigate the intricacies of non-cash giving. These partnerships can ensure compliance with regulations and optimize the benefits for both the donor and the organization. Many partnerships can be created with little to no immediate cost to the organization.
3. Clear Policies and Procedures: Establishing clear, written policies for accepting and processing non-cash gifts can provide a framework for action. These policies should address valuation methods, acceptance criteria, and procedures for liquidating assets.
4. Marketing and Communication: Promoting the benefits of non-cash giving through targeted marketing campaigns can raise awareness among potential donors. Highlighting successful case studies and testimonials can illustrate the positive impact of non-cash contributions.

Prioritizing non-cash giving represents a strategic imperative for nonprofits aiming to increase their revenues and enhance their sustainability. By embracing non-cash assets, organizations can unlock new funding sources, engage a wider donor base, and build a stronger financial foundation. As the philanthropic landscape continues to evolve, nonprofits that adapt and innovate in their fundraising approaches will be better positioned to fulfill their missions and drive lasting social change.

Orr Group has the expertise you need to help your organization diversify its fundraising and build sustainable revenue. Get in touch to learn more about our creative approach to planned, blended, and non-cash giving so you can make the most out of the present opportunity in philanthropy.

Brandon Emerson is a Senior Director and Co-Head of Advisory Services at Orr Group. Brandon collaborates with clients to build actionable strategies that optimize their fundraising and organizational function. Experienced in both organizational and departmental strategic planning, he is passionate about how maintaining a well-defined strategy will enable focus and growth.