Financial Policies

FN03 Substantiation, Disclosure, and Accountability for the Receipt of Contributions from Non-Governmental Sources

Policy Status: 

Active

Subject Matter Expert: 

Director, Treasury Operations, 814-863-6430, qus7@psu.edu

Policy Steward: 

Associate Vice President for Finance

Contents:

PURPOSE:

This policy governs The Pennsylvania State University (‘University”, “Penn State”, or “PSU”) substantiation, disclosure, and accountability of all contributions (i.e., gifts, grants, etc.) received from non-governmental sources, such as gifts from alumni, friends, corporations, foundations and other organizations and fulfills the Office of the Corporate Controller’s mission of providing quality financial, accounting, and information services that foster a culture of responsible stewardship and sound fiscal management of University resources,

DEFINITIONS:

  • Cash Contributions - coin, currency, checks, money orders, credit cards, wires, EFTs, and/or ACH payments.
  • Charitable Contribution – financial assistance donated or otherwise made to support the operations or other activities undertaken by the University where the donor/grantor may direct the general purpose of the funds, but the actual expenditure of funds is not controlled by the donor/grantor and where there is no Quid Pro Quo. The intent of the donor is philanthropic.
  • Gift-in-Kind - non-monetary items of tangible personal property such as art, collectibles, books, equipment, inventory and other physical assets (including fixed assets such as land and buildings) or materials and supplies and/or the use of fixed assets or utilities and recognized contributed services that represent value to the University.
  • Quid Pro Quo - A situation where goods, services, or another benefit (e.g., a "deliverable") are provided to a donor in consideration for a contribution of cash or property.
  • Restricted Gifts and Grants Contributions - financial assistance provided by a for-profit organization or a non-profit organization where the sponsor expects detailed technical reports or establishes a quid pro quo relationship. In addition to the detailed technical report, the agreement underlying the restricted gift or grant may contain other specific terms and conditions, including financial reporting requirements.
  • Unrestricted Gifts and Grants Contributions - a charitable contribution not accompanied by a letter identifying it as such. Typically, when the University receives money without any terms and conditions, and the money is clearly intended as financial assistance (as opposed to a procurement), the financial assistance will be identified as an Unrestricted Grant.

SCOPE:

The University’s financial policies are applicable throughout the University, including all direct and indirect subsidiaries, and are required to be followed by all University employees who engage in financial, accounting, purchasing or other transactions, including University employees who, in the course of their assigned duties, engage in such transactions on behalf of third parties such as the Penn State Alumni Association or other related entities.  The University’s financial policies are not applicable to Penn State Health or its subsidiaries, or to Penn College of Technology, each of which has its own financial policies.

POLICY:

RECEIPTING REQUIREMENTS FOR CONTRIBUTIONS MADE TO THE UNIVERSITY:

Section 170(f)(8) of the Internal Revenue Code mandates that no deduction will be allowed for contributions of $250 or more unless the donor has a "contemporaneous written substantiation" (i.e., written receipt) from the entity receiving the contribution.  This written substantiation must include the following information:

  1. the amount of cash and description of any property other than cash that was contributed,
  2. whether the University provided any goods or services in consideration for the contribution, and
  3. a description and good faith estimate of the value of any goods or services provided in (2), if any.

The ultimate responsibility for obtaining this substantiation lies with the donor; however, the University will assist the donor in this regard, so as not to jeopardize a donor's deduction (and thus future contributions to the University). Furthermore, the University should do nothing that would mislead the donor regarding the amount of the gift and its deductibility.

For additional information regarding IRS regulations, contact the Division of Development and Alumni Relations, 116 Old Main.

Information Disclosure for "Quid Pro Quo" Contributions:

In accordance with Internal Revenue Service regulations, the University must provide a written statement to ALL donors making "quid pro quo" contributions in excess of $75 - meaning contribution of cash or property made to the University in excess of $75 "made partly as a charitable donation, and partly in consideration for goods or services provided to the donor by the University." This written statement must disclose the following:

  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 money (and value of any property other than money) contributed by the donor over the value of the goods or services provided by the University, and
  2. provide the donor with a good faith estimate of the value of goods or services furnished by the University.

Questions regarding current code, restrictions and/or limitations regarding “Quid Pro Quo” contributions should be directed to the Office of Gift Planning.

CONTRIBUTION GENERAL ACCEPTANCE PRACTICES:

Typically, gifts are solicited and initially accepted by the Office of University Development (OUD) personnel. Gifts of cash/checks will be promptly deposited in accordance with Policy FN01 Cash Revenues. Other types of gifts are categorized in the sections that follow, along with their appropriate handling instructions.

A Gift Reporting and Transmittal (GRT) form must be completed to initiate acceptance, acknowledgment, and recordkeeping of gifts including gifts of cash or checks; securities; gifts-in-kind; gifts of real estate; and scholarships, awards, fellowships, and miscellaneous loan sources.

CONTRIBUTION SPECIAL ACCEPTANCE PRACTICES:

Restricted Grants

Special Acceptance Practices are contributions received meeting the above parameters, but are accompanied by certain Quid Pro Quo terms, conditions, or limitations to which the University must agree before accepting the funds. Like those gifts received without conditions, these monies must be taken promptly, with all supporting data, to the college/campus/business area's Research Office (or area that has been assigned this particular function by the area budget executive) for processing in accordance with Policies FN01 Cash Revenues, RA04 Guidelines for Gifts, Grants, and Contracts (The Funding Matrix), and Procedures CR2005 Depositing Cash Revenues and CR2021 Accountability of Gifts and Grants from Non-Governmental Sources. For additional information, contact the Office of Sponsored Programs (OSP).

Restricted Research Grants

Research Administration (RA) and University Development (UD) have complementary roles in the submission of proposals and administration of charitable contributions, primarily from corporate and foundation sources. Effective collaboration between these offices helps faculty to navigate our collective resources and enhances our ability to secure and steward private support. Since the same funding can be treated as sponsored activity for management purposes, while also being classified as a charitable contribution for fundraising, care must be taken to comply with both Research and Development policies and procedures.

Refer to the RA-UD Collaborative Procedures document for guidance on the proper characterization of funding, specific workflows for each categorization of funding for both pre-award and post-award, as well as other related resources.

The College of Medicine has an addendum to the RA-UD Collaborative Procedures. This addendum summarizes the process for handling gifts, charitable grants, and unrestricted grants specifically at the College of Medicine.

Unrestricted Grants:

There are times when contributions are received by a faculty or staff member of the University. Generally, these awards are given to the University in an unrestricted manner (i.e., no Quid Pro Quo (deliverables) are required by the donor). Such awards must be promptly forwarded to the college/campus/business area's Research Office (or area that has been assigned this particular function by the area budget executive) with all corresponding supporting documentation, for processing in accordance with Policies FN01 Cash Revenues, RA04 Guidelines For Gifts, Grants and Contracts (The Funding Matrix), and Procedures CR2005 Depositing Cash Revenues and CR2021 Accountability of Gifts and Grants from Non-Governmental Sources.

Unrestricted Research Grants

Unrestricted Grants related to research also need to be routed to the Research Office for completion of an Internal Approval Form, budget, and if applicable, a scope of work, and then forwarded to OSP for processing. Please refer to the RA-UP Collaborative Procedures document.

The College of Medicine has an addendum to the RA-UD Collaborative Procedures. This addendum summarizes the process for handling gifts, charitable grants, and unrestricted grants specifically at the College of Medicine.

CASH CONTRIBUTIONS:

It is imperative that cash and checks are deposited as quickly as possible upon receipt, as mandated by Policy FN01 Cash Revenues and Procedures CR2005 Depositing Cash Revenues and CR2021 Accountability of Gifts and Grants from Non-Governmental Sources. Likewise, it is important that monies are also deposited to the correct cost objects. To facilitate this process, departments must promptly forward monies received to their Research Office (or applicable office, as designated by the area budget executive), along with the corresponding support documentation. The Research Office (or designated area) will subsequently prepare a Cash Depsot Journal Entry. Monies will then be promptly forwarded for deposit, as established by the Financial Officer and in accordance with Policy FN01 Cash Revenues.

Gifts of cash or checks received by the University that are to be used to fund a gift annuity, charitable remainder trust or charitable lead trust, distributions from an estate or trust, or are life insurance premium payments should not be deposited or processed by the college, campus, or unit, but instead should be delivered directly to the Donor and Member Services because these types of gifts require special handling. Upon receipt of this type of gift, the college, campus, or unit should immediately contact the Donor and Member Services for further instructions.

Split Checks:

Checks received that are split between gifts and contracts must be deposited immediately upon receipt as noted for all other checks in this policy. However, in order to ensure that the appropriate cost object is properly credited, the Research Office (or area that has been assigned this particular function by the area budget executive) must specify the appropriate cost object for the contract portion on the Cash Deposit Journal Entry prior to the deposit of funds.

SECURITIES:

The Office of Gift Planning coordinates the acceptance of all gifts of securities on behalf of the University.

The mailing envelopes MUST BE SAVED and provided as proof of the date of gift for IRS regulations. Forward all materials (with the certificate and stock power in separate envelopes) to the Office of Gift Planning.

If the donor hand delivers the certificate and stock power – forward all materials (with the certificate and stock power in separate envelopes) to the Office of Gift Planning. Please attach a signed memorandum confirming the date the certificate and signed stock power were hand delivered and include the donor name, donor ID, and gift purpose.

 

At University Park – Hand deliver or forward all materials (with the certificate and stock power in separate envelopes) via Interoffice Mail to the Office of Gift Planning.

 

At Non-University Park Locations – Forward all materials (with the certificate and stock power in separate envelopes) via Overnight Mail (FedEx or UPS) to the Office of Gift Planning.

The unendorsed stock certificate is not negotiable without the signed stock power and the latter is worthless without the certificate. The separate envelopes protect the donor against security theft.

Appreciated Securities:

Donors who wish to donate appreciated securities to the University should be directed to the Office of Gift Planning in order that the appropriate asset delivery instructions may be provided. Delivery instructions vary based on how the asset is held (in brokerage, direct registration, physical certificates, closely held assets, restricted assets, etc.) and the ultimate gift purpose.

Gifts of appreciated securities for the funding of charitable trusts and charitable gift annuities are not processed in the same manner as an outright gift of securities. The Office of Gift Planning will provide special securities transfer instructions for the funding of charitable trusts and charitable gift annuities.

Most securities can transfer electronically via the DTC (Depository Trust Company) system. Many mutual funds are held with transfer agents and require unique transfer forms. The process for the transfer of mutual funds held with a transfer agent typically take six weeks to fully process and complete. It is important to keep this timeframe in mind for calendar year-end contributions.

Securities Valuation:

The Office of Gift Planning will work in conjunction with the Office of the Corporate Controller to value gifts of securities. The Office of Gift Planning notifies the Office of Donor and Member Services for gift recording and acknowledgment.

The amount that a donor may claim as a charitable deduction and the gift credit they receive for a gift of publicly-traded stock will be equal to the average of the high and low market price on the date the gift was received in Penn State’s brokerage account. The amount of the average of the high and low market price on the date the gift was received in Penn State’s brokerage account will be allocated to the gift purpose at the University, regardless of the actual proceeds realized from the sale of the securities by the University. Any exception to this policy shall be approved by the Office of the Corporate Controller.

Savings Bonds, Series E, H, EE, and HH Bonds:

The University is not able to accept Savings Bonds, Series E, H, EE and HH Bonds.

GIFTS-IN-KIND:

The Office of Gift Planning should be contacted to determine the viability of a gift-in-kind (see definitions above) before a unit accepts the gift on behalf of the University.

All material pertaining to gifts-in-kind must be taken to the Director of Development for that area/unit for processing in accordance with Procedure CR2021 Accountability of Gifts and Grants from Non-Governmental Sources. Except for gifts of real estate (see below), the Director of Development will prepare a Gift Reporting and Transmittal form (GRT). The GRT and all support must be forwarded to the Office of Gift Planning at University Park per Procedure CR2021 Accountability of Contributions from Non-Governmental Sources. The Office of Gift Planning will issue the official receipt to the donor. The Office of Gift Planning will forward copies of these documents, any supporting documents (deed, appraisals, etc.) along with the GRT to the Office of Donor and Member Services to record the gift in the development database. The office of Donor and Member Services will provide a copy of the GRT to the Property Inventory Manager.

Gifts-in-Kind accepted by the University are to be valued at fair market value. In determining fair market value (FMV), the University can rely on any of the following: (1) a qualified appraisal by someone who holds themselves out in the industry as an expert; and/or (2) other pricing information including but not limited to retail pricing, comparisons to prior purchases or like item pricing. In the case of software, FMV can also be determined based on OUD's internal software evaluation policy. With specific regard to the valuation of gifts-in-kind of equipment from a corporation and valued at greater than or equal to $5,000, OUD will not record the gift until FMV as described above is determined and documented in writing. The Office of Gift Planning will coordinate the execution of IRS Form 8283 with the Office of the Corporate Controller if provided by the donor.

GIFTS OF REAL ESTATE:

Real property may be accepted for an outright gift or bargain sale with the agreement of the Treasurer’s Office. A gift of real property will be subject to the following requirements:

  • Personal inspection by staff
  • Title search
  • Minimum of level one environmental audit
  • Marketability review by at least two knowledgeable brokers
  • Qualified appraisal obtained by the donor
  • Written agreement by the donor to provide additional funds, if necessary, to provide for ongoing expenses and maintenance of the property until sold
  • Completed real estate checklist, including detailed financial information on the property if it is commercial real property

Mortgaged real property may not be accepted. Donors who own mortgaged real property should be encouraged to pay off or transfer the mortgage before making the gift.

Donors should be informed that the University accepts gifts of real property provided that the property is readily marketable. It is the preference of the University to arrange sales of real property on a cash basis.

Real property may not be accepted into a charitable remainder trust or charitable lead trust when the University is named as the trustee unless a special exception is granted by the Corporate Controller. Donors wanting to use real property to fund a trust should be encouraged to establish a flip unitrust and to serve initially as their own trustee. In this situation, the University may be named the successor trustee of the trust once the property has been sold. Acceptance of trusteeship at that time will be subject to the review and approval of the Corporate Controller.

The Board of Trustees needs to approve land and other real estate to be considered for sale, with the exception of the sale of land and other real estate up to $3 million in value, gifted to the University for the express purpose of sale with proceeds benefitting the University. Proceeds from the sale of land and other real estate gifted to the University for the express purpose of sale up to $3 million is reported to the Board of Trustees.

For all gifts of real estate, the Office of Gift Planning will coordinate evaluation and acceptance between the donor and the University, working through the Corporate Controller's Office. The Office of Gift Planning must be involved in any communication or negotiation with the donor. If the gift is acceptable to the University, the Corporate Controller's Office will handle formal acceptance and closure. The Office of Gift Planning will prepare and submit the GRT form indicating how the gift will be receipted to the donor. As with other gifts in kind, the Office of Gift Planning will also coordinate the processing of an 8283 form (see above).

SCHOLARSHIPS, AWARDS, FELLOWSHIPS, AND MISCELLANEOUS LOAN SOURCES:

Restricted Scholarships, Awards, Fellowships, and Miscellaneous Loan Sources:

Contributions for restricted scholarship, awards, fellowships, and miscellaneous loan sources must have the Quid Pro Quo terms, conditions, or limitations approved by the University before accepting the funds. Approval by the Senior Vice President for Research or the Associate Vice President for Finance and Corporate Controller in consultation with the Vice President for Development and Alumni Relations is required prior to accepting these types of contributions. Upon approval of any Quid Pro Quo terms, conditions, or limitations, such awards must be promptly forwarded, to the Director of Development, with all supporting documentation for processing in accordance with Policies FN01 Cash Revenues and RA04 Guidelines for Gifts, Grants, and Contracts (The Funding Matrix), and Procedures CR2005 Depositing Cash Revenues and CR2021 Accountability of Gifts and Grants from Non-Governmental Sources.

Unrestricted Scholarships, Awards, Fellowships, and Miscellaneous Loan Sources:

Contributions for unrestricted scholarships, awards, fellowships, and miscellaneous loan sources must be taken to the Director of Development, along with all supporting documentation for processing in accordance with Policies FN01 Cash Revenues and RA04 Guidelines for Gifts, Grants and Contracts (The Funding Matrix), and Procedures CR2005 Depositing Cash Revenues and CR2021 Accountability of Gifts and Grants from Non-Governmental Sources.

Outside scholarships are overseen by the External Awards team in the Bursar’s Office. The Bursar’s office deposits the monies and posts the award to the student’s account. The Office of Student Aid extracts the award information to include in the student’s overall financial aid package. See Procedure CR2021 Accountability of Contributions from Non-Governmental Sources for complete details.

PRESIDENTIAL RESPONSE:

Notification of all gifts and contributions requiring acknowledgment by the President must be received by the Office of the President within five (5) working days of receipt by the University. Since the Office of Donor and Member Services must provide this notification, processing of such gifts and contributions by receiving areas must assure prompt transmittal of information to the Office of Donor and Member Services at University Park.

FURTHER INFORMATION:

For questions, additional detail, or to request changes to this policy, please contact the Office of the Corporate Controller.

CROSS REFERENCES:

POLICY STATUS:

MOST RECENT CHANGES:

  • September 21, 2021 - document rewritten to document SIMBA processes

REVISION HISTORY:

  • September 1, 2020 - Editorial revision to update GRT form link
  • November 8, 2018 - Subject Matter Expert added.
  • September 20, 2018 - Editorial changes to update all GURU hyperlinks from html formatting to cfm format.
  • September 10, 2018 - Editorial changes to correct hyperlinks and to remove redundant Date Approved, Date Published, and Effective Date information.
  • July 28, 2016 - Changes made in the SECURITIES and GIFTS OF REAL ESTATE sections to reflect the reassignment of these responsibilities from the Office of Investment Management to the Corporate Controller's Office.
  • September 25, 2013 - Editorial changes. Addition of policy steward information, in the event that there are questions or requests for changes to the policy.
  • August 9, 2013 - Editorial changes made in the SCHOLARSHIPS, AWARDS, FELLOWSHIPS and MISCELLANEOUS LOAN SOURCES section, to reflect a department name change. References to the Office of Student Loans and Scholarships have been changed to Student Financial Services.
  • February 23, 2009 - Revisions made to PURPOSE, RECEIPTING REQUIREMENTS, SECURITIES, GIFTS OF REAL ESTATE, and SCHOLARSHIPS, AWARDS, FELLOWSHIPS and MISCELLANEOUS LOAN SOURCES sections, to clarify the handling required when contributions are received from non-governmental sources.
  • January 22, 2002 - Under the GIFTS-IN-KIND section, added a stipulation that Gifts-in-Kind accepted by the University are to be valued at fair market value; also provided guidance for determining the fair market value.
  • November 18, 1996 - Substantial revisions.
  • April 11, 1989 - Update of Associate Treasurer title.

Date Approved: 

August 5, 2022

Date Published: 

August 5, 2022

Effective Date: 

August 5, 2022