Processing, Acceptance and Exchange Procedures

Affecting Gifts + Pledges

The following is a summary of policies, or standards, which affect either the gift entry process or the status of a gift:

Matching Gifts

In order to record a matching claim, three criteria must be met. First, there must be a “Business Affiliation” record (Employment record) between the donor and the matching entity. Second, the matching entity must have a ‘Y’ indicated in the ‘Matching’ field on Part 1 of the Organization Information screen indicating that it has an active matching program. Third, the donor must have a corresponding ‘Y’ on their business affiliation record. This is automatically done when the relationship is established, but can be overridden.

The Matching Gifts data entry position within the Gifts Processing unit is responsible for ensuring that all organization matching program information is current and properly maintained. Only this person should perform any modifications to this information. In the absence of this position, recommended changes should be brought to the attention of the Associate Director of Advancement Services or to the Manager of Biographical Maintenance.

Additionally, the Matching Gifts data entry position will, as necessary, create and maintain a ‘Matching’ address record for organizations. This record will be used to identify where to send matching gift applications and provide other pertinent information.

Matching claims will be automatically created based on the ratio and minimum and maximum amounts contained in the Organization Information record. This amount can be overridden during gift entry if it is a known fact that there will be an exception made. These exceptions should be noted and brought to the Matching Gift data entry position’s attention. At the time the claim is created the presence, or lack of, a matching gift application will be noted. If no form was submitted, a reminder to send a form will be printed in the gift acknowledgment letter. At the end of the fiscal year, if no form has been received, the claim will be deleted.


Pledges are only to be recorded when full payment is expected at some point in the future. There must be some document, either from the donor to the University or from the University to the donor, outlining the pledge agreement.

NOTE: Pledges made as a result of calling by the official Student Calling Center or special volunteer telethons are exempted from the requirement that there be a document signed by the donor or the university, since the pledges are secured from a telephone conversation. Pledges will be recorded from the forms filled out by the student callers or the volunteer callers.

Financial Accounting Standards Board statement FASB116 requires non-profit organizations to regard pledges in much the same manner as accounts receivable. As such we must have a very good understanding of the donor’s payment intentions/schedule so that future anticipated payments can be value dated. Furthermore there must be proof that pledges are in good standing. Pledges not in good standing, for which there is no amplifying correspondence with the donor outlining revised payment terms, are subject to direct investigation by our auditors. If full payment is received at the same time a pledge” is made, no pledge record should be created. FASB also requires that pledges be entered in the same year that they are received.

Pledges can be over-paid. In other words, if the final payment against a pledge will cause the sum of all payments to exceed the original pledged amount, the system will accept the payment without requiring a modification to the pledged amount. It is the policy of Advancement Services to increase the pledge to reflect the total sum of the payments. This situation will most likely occur when the payment is made by a gift of securities. If, however, the donor specifically indicates they are increasing their pledge, the pledge record must be modified and, if necessary, rescheduled.

Pledges of a donor’s assets should be documented, committing to a specific dollar amount that will be paid according to a fixed time schedule. A pledge can be made only by the entity exercising legal control over the assets to be given. Therefore, an individual cannot make a pledge that includes anticipated matching contributions from an employer or some other source. Nor can in individual commit funds that may be applied for through a donor-advised fund or community foundation. An enforceable, countable pledge includes only those funds that will be given by that legal entity.

Pledge Reminders

Pledge reminders will automatically be generated within 45 days of the date of the pledge (for Annual Fund pledges) and/or in accordance with the payment schedule provided by the donor. This will occur as long as there is an outstanding balance on the pledge, so donors with payments due will receive a pledge reminder each month until the outstanding pledge payment schedule is paid.

If no payment has been made on Annual Fund pledges by the end of the fiscal year, Annual Fund pledges will be “washed” or canceled provided the pledge does not have a payment schedule that extends past the first day of the next fiscal year. For example, if a pledge is secured on May 1, 2008, and the donor does not specify a particular payment schedule, Advancement Services will enter the pledge and set the first payment due as of July 1, 2008. Since there is a payment schedule that is greater than June 30 (the end of the fiscal year), this pledge will not programmatically be “washed” or canceled at the end of the fiscal year.

Non-annual fund pledges are not washed systematically, however non-annual fund pledges are audited annually. The Advancement Services Office notifies the appropriate development officer on non-annual pledges that have late or no payments prior to washing these pledges. The development officer is asked to contact the donor and see whether a new payment schedule can be set up. If so, the change in payment schedules will be made.

The Office of Advancement Services has a policy to review unpaid pledges throughout the year. Annual Fund pledges that are unpaid are washed/canceled programmatically twice per year; once at the end of the fiscal year during the June 30 close procedures, and again at the end of December.

Non-Annual Fund pledges are reviewed twice per year. In January/February each year, the list of High Risk Pledges, and a report of all non-annual pledges of $100,000 or more with past due pledge schedules, is sent with a letter to all senior development officers at the schools/units with a request to review the pledges and let us know if there, after conferring with the donors, there are changes that should be made to payment schedules, amounts, or if the donor has decided not to fulfill the pledge. In May of each year, the letter and reports are sent again to the senior development officers so any relevant changes to pledges can be made before the end of the fiscal year.

As part of the annual internal audit process in May/June each year, Advancement Services (the Assistant Director Donor Records), the Data Integrity Manager, and a representative from the Controller’s Office meet to discuss past due pledges. The group researches any pledges that are past due; speaks with development officers for advice on past due schedules; and makes decisions about the collectability of pledges. If the pledge is deemed unable to be collected, the pledge is washed (written off ) in the Development system. A report of the outcome of this pledge analysis is provided to the Office of Internal Audit.

If a donor ceases payment on his/her pledge, the High Risk Pledge Report and the Pledges with Unpaid Payment Schedules Report will alert the Development Officer to the problem. The Development Officer will contact the donor to resolve the problem. The donor may request that the payment schedule be modified. The donor may also request reduction of the pledge, or he/she may ask that the pledge be canceled. The Development Officer will notify the Office of Gifts Processing of the donor’s wishes. The Office of Gifts Processing makes the appropriate adjustments to the gifts system.

At all times throughout the fiscal year, if a donor advises us that he/she wants to change their pledge schedule, or is unable to fulfill their pledge, the necessary steps are taken to cancel the pledge, or adjust the schedules as requested. This process is donor driven, and we comply with donor wishes/intent immediately.

Case Western Reserve University will accept charitable gift and grant income defined as follows:

Gift: A voluntary transfer of things of value from individuals, industry, foundations, and other sources to the University for either unrestricted or restricted utilization in the operation of the University, for which the University has made no commitment of resources or services, other than the possible agreement to the designation of the use of the gift by the donor. Gifts usually take the form of cash, checks, securities, real property, or personal property.

Grant: Revenues received by the University from individuals, industry, foundations, and other sources for the support of University programs and projects. Grants normally fall into two categories:

  1. Non-Specific Grants are those received by the University in support of restricted programs or projects, but which do not result from a specific grant proposal, no specific resources are committed, and no accounting of the use of funds is required.
  2. Specific Grants are those received by the University in accordance with the terms of approved grant proposals for specific programs and projects. Commitments of University resources or services are made as a condition of the grant, and an accounting of the use of the funds may be required by the grantor.

Funding for research is considered a grant where the funding organization does not receive a license or option to license inventions resulting from the research or otherwise acquire University deliverables, apart from a report of the research results.

The University will include in its gift and grant attainment grant income from private, non-government sources.

Exchange transaction revenue will be excluded. Exchange transactions are defined as restricted payments received by the University from various contractors, made in accordance with the terms of contracts entered into by the University to conduct specific programs. Exchange transactions include arrangements whereby research sponsors acquire an interest in the deliverables of the research program.

Grants and exchange transactions are further defined in the CASE Management Reporting Standards, Standards for Annual Giving and Campaigns in Educational Fund Raising. “The difference between a private grant and a contract depends on the intention of the awarding agency and the legal obligation incurred by the institution in accepting the award. A grant, like a gift, is donative in nature; it is bestowed voluntarily and without expectation of any tangible compensation. A contract carries an explicit quid pro quo relationship between the source and the institution. (1) (See also attached NACUBO Guide to Distinguishing Between Exchange Transactions and Contributions for more detailed definition.)

An increasing number of charitable gifts and grants are contractual in form. Some donors enter into a contractual agreement with the University when a gift or grant is made in order to outline certain requirements of the gift or grant such as publicity or donor recognition. The presence of a contractual agreement should not be used as the only determining factor when classifying a transaction as either an exchange transaction or a contribution. If funding is donative in nature; bestowed voluntarily and without expectation of any tangible compensation, it will be included in gift and grant attainment totals.

In the event that the appropriate classification for revenue is in question, the President, with the advice of the University Attorney, will make the final determination regarding the transaction.

(1) CASE Management Reporting Standards, Standards for Annual Giving and Campaigns in Educational Fund Raising, Council for Advancement and Support of Education, pages 4-5, February, 1996.

Factors Used to Clarify Revenue as a Contribution

The following factors identify “typical” classifications for Contribution transactions. No one single factor will provide sufficient information to determine the appropriate classification for the transaction.

  • Initiative for the project may come from the organization receiving the funds.
  • Proprietary results belong entirely to recipient organization after the work is completed.
  • Results of the work have no commercial value for the resource provider.
  • Recipient organization defines performance objectives such as a detailed report and a timetable for meeting objectives.
  • Time and place for delivery of results are not specified.
  • Resource provider does not receive commensurate value in return for support.
  • Recipient determines ownership of the products of research.
  • Recipient holds unconditional right to receive the funds.
  • Recipient retains control and ownership of any work completed after completion of the project.
  • Funds are used to carry out an already existing program of the recipient organization.
  • Recipient participates actively in determining how the funds will be spent.

Factors Used to Classify Revenue as an Exchange Transaction

The following factors identify “typical” classifications for Exchange Transactions. No one single factor will provide sufficient information to determine the appropriate classification for the transaction.

Funds provide goods/services for a program of the resource provider.

  • Initiative for the project may come from the organization providing the funds.
  • Proprietary results belong to funding organization, in whole or in part, after the work is completed.
  • Results of the work have a specific commercial value for the resource provider.
  • Resource provider sponsors research and development activities and retains patents, copyrights, advance and exclusive knowledge of outcomes.
  • Payment supports direct/immediate need of government organization that provides the funds.
  • Benefits to the resource provider are primary and public benefits are secondary.
  • Resource provider defines performance objectives such as a detailed report and a timetable for meeting objectives.
  • Time and place for delivery of results are specified.
  • Fulfills a service as prescribed by the resource provider.
  • Recipient gives up the benefits of the research to the resource provider.
  • Recipient pays economic/punitive penalties for failure to meet agreement.

Source: CASE Management Reporting Standards, Standard for Annual Giving and Campaigns in Educational Fund Raising, Appendix D, Council for Advancement and Support of Education, February, 1996.

The CASE/NACUBO Management Reporting Standards for Educational Institutions (1982) states on page 4: “In those cases where a contribution passes through several entities - such as from an individual to an organization to an institution, or from an organization to another organization to an institution - the last of the entities through which it passes before being received by the institution should be cited as its source.”

Therefore, a gift to CWRU made by an organization on behalf of an individual or other donor will be credited to the entity distributing the gift to the University. Such gifts will include, but not be limited to, gifts from family foundations, community foundations, family or closely held corporations, and other donor directed gifts which are not personally given.

All such second party gifts may be entered as soft credit or “on behalf of ” gifts under the individual records designated to receive gift credit by the second party. This ensures proper recognition and gift accounting. This is done only when specifically requested by an appropriate Development Officer.

Under no circumstances should a corporate contribution be recorded on an individual’s record. Not only does this apply to matching gifts, but any other corporate gift. Exceptions may be found, but they will be handled on a case-by-case basis.

Not only does this falsify information available in official IRS matters, but it negatively affects corporate fund-raising totals. Furthermore, the Management Reporting Standards specifically states that, “A check drawn from a business account should be credited to the CORPORATIONS AND BUSINESSES category...”.

We recognize that, for some donors, there is slight difference between personal and business checking accounts, but we must abide by the above standard. We may lessen the concern and give intentioned credit to the donor by inserting the following on the comment line for the gift: On behalf of [Name of individual].

Written Acknowledgment of Contributions of $250 or More Effective in 1994, Omnibus Budget Reconciliation Act of 1993 (OBRA) adds Internal Revenue Code section 170(f )(8), which denies a charitable deduction for any contribution of $250 or more unless the donor obtains a contemporaneous written acknowledgment of the contribution from the charity. Canceled checks will no longer constitute sufficient documentation to support a charitable contribution.

  • The written acknowledgment must include the following:
  • The amount of cash contributed.
  • A description -- but not the value -- of any non-cash property contributed.
  • Whether the charity provided any goods or services to the donor in exchange for all or part of the cash or property contributed.
  • A description and good faith estimate of the value of goods and services, if goods and services are provided.

A contemporaneous acknowledgment is one that is obtained on or before the earlier of:

  • The date on which the taxpayer files a return for the taxable year in which the contribution is made; or
  • The due date, including extensions, for filing such a return.

The new law also requires charities to provide written disclosures about the solicitation or receipt of quid pro quo contributions that exceed $75. A quid pro quo contribution is one in which the donor’s payment is made partly as a contribution and partly as consideration for goods or services.

The disclosure must:

  1. Inform the donor that the amount of the contribution that is deductible for federal income tax purposes is limited to the excess of the amount of any money and other property contributed by the donor, over the value of the goods or services provided by the charity; and
  2. Provide the donor with a good faith estimate of the value of such goods or services.

The disclosure must be made when the contribution is solicited or when the contribution is received. A charity that fails to make the required disclosure is subject to a penalty of $10 for each contribution for which the required disclosure is not made. The total penalty imposed for a particular fund-raising event or a mailing shall not exceed $5,000.

An exception to the disclosure rules exists when a charity provides goods or services of de minimis value to a donor in connection with a contribution. This exception is discussed in more detail later.

The quid pro quo disclosure requirement is effective for contributions made on or after January 1, 1994.

Both the donor substantiation and donor acknowledgment provisions of OBRA require a good faith estimate of the fair market value of goods and services provided by a charity. Historically the burden has been on the donor to establish that the amount of a payment exceeds the value of goods and services received. OBRA shifts the burden of establishing fair value to the charity. Unfortunately, OBRA does not provide guidance on how charities are to arrive at the value of goods and services provided.

In a 1967 ruling, Revenue Ruling 67-246, the IRS explained that “[w]here the affair is reasonably comparable to events for which there are established charges for admission, such as theatrical or athletic performances, the established charges should be treated as fixing the fair market value of the admission or privilege.” Thus the amount that would be paid by the donor for similar goods or services in a commercial setting should be used as a benchmark for disclosure purposes.

The requirement of a good faith estimate of value suggests that the process is as important as the result. Thus the manner in which the value of benefits is arrived at should be documented by the charity.

De Minimum Benefits

In 1990, the IRS published safe harbor guidelines that permitted charities to advise donors that contributions were fully deductible when only small items or other benefits of token value were provided to the donor (Revenue Procedure 90-12 and Revenue Procedure 92-49). These rules remain in effect after OBRA.

For the de minimis benefit exception to apply, the payment must occur in the context of a fund-raising campaign in which the charity informs donors of how much of their payment is a deductible contribution.

In addition, one of the following three requirements must be met:

2. a. The payment is $40 (for 2003), as adjusted for inflation, or more;

b. The only benefits received in connection with the payment are token items (for example, bookmarks, calendars, key chains, mugs, posters, or t-shirts) that bear the organization’s name or logo; and

c. The cost as opposed to the fair market value of all of the benefits received by a donor must in the aggregate be within the limits established for “low-cost articles” by the Internal Revenue Code, also adjusted for inflation. For 2005, the token item payment amount is $41.50, and the low-cost article amount is $8.30.

3. a. The charity mails or otherwise distributes free, unordered items to donors. Under this exception, the item received by the donor must not have been distributed at the donor’s request or with the express consent of the donor;

b. Any items distributed are accompanied by a request for a charitable contribution and by a statement that the donor may retain the item whether or not a contribution is made; and

c. The aggregate cost of the items distributed satisfies the low-cost articles limitations described in item 2(c).

Special rules also provide that newsletters or program guides will be treated as if they did not have a measurable fair market value or cost if the following criteria are satisfied:

  • The publication is not a “commercial-quality publication” (in general commercial-quality publications include professional journals or publications that contain articles written for compensation or that accept advertising);
  • The primary purpose of the publication is to inform members about the activities of the organization; and
  • The publication is not available to nonmembers by paid subscription or through newsstand sales.

If the goods and services furnished by the charity are of de minimis value, the solicitation material or written acknowledgment should include the following statement: “Under Internal Revenue Service guidelines the estimated value of [the benefits received] is not substantial; therefore, the full amount of your payment is a deductible contribution.”

In order to remain consistent with the new acknowledgment policy that stipulates both spouses will be acknowledged for a gift or pledge, the Office of Gifts Processing will credit both spouses for a donation to the university.

If both spouses are alumni from the same school, each will receive 50% legal credit and 100% soft credit for the donation. However, if a donor has a pledge in the system, the pledge will be paid off with 100% legal credit to the donor making the pledge. The spouse will receive 100% soft credit for the payment.

If the spouses are alumni from different schools, the primary donor is credited with 100% legal credit and 100% soft credit. The spouse of the primary donor will be credited with 0% legal and 100% soft credit. The primary donor is the alum indicated on the backup or the alum from the designated school of receipt of the donation. 

If both spouses are friends of the university, the primary donor will receive 100% legal credit and 100% soft credit for the donation. The spouse will receive 0% legal credit and 100% soft credit. The primary donor is the person who signed the check or who sent in the backup.

Donations to the Memorial and Honor Gifts program will not be split. However, both spouses will receive credit for the donation.

Any instruction from the donor on the designation of the gift always takes precedence over these policies.

Legal credit is given to the entity from whom a contribution is received. They could “legally” treat their gift as a charitable contribution. Soft credit is given to show affiliation with a gift. Soft credit donors cannot regard the gift as a charitable contribution. The Gifts System will create soft credit for every gift/payment equal to the primary legal gift/payment amount. This soft credit amount can be overridden to an amount less than the legal amount legal amount.

If there are associated donors for a gift, the soft amount will initially be set equal to the legal amount of the gift. As above, this amount can be overridden to an amount less than the legal amount, but not in excess of the legal amount.

In following the above, it is obvious that the sum of all soft amounts associated with a single gift can exceed the legal amount. This is acceptable. The system will not, however, permit the sum to be less than the legal amount.

The example below reflects the Primary donor (legal) while their spouse is considered the Joint donor.

An image of the Primary Gift Overview screen in Advance, with Primary Donor donations of $10,000 circled