FN03 Substantiation, Disclosure and Accountability for the Receipt of Contributions from Non-Governmental Sources (See also FNG01)
Policy Steward:Office of the Corporate Controller>
- Receipting Requirements for Contributions Made to the University
- Contribution Processing
- Gifts of Real Estate
- Scholarships, Awards, Fellowships and Miscellaneous Loan Sources
- Presidential Response
- Further Information
- Cross References
To state the University policy for the 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.
Quid Pro Quo:
- A situation where goods/services (i.e., a "deliverable") are provided in consideration for funds contributed by a donor.
Contribution - this policy addresses 2 types:
- Gift and Unrestricted Grant Contributions- funding given to support on-going activities of the University, but funding is NOT contractually binding NOR requires any type of quid pro quo in return for the funds given.
- Restricted Gifts/Grants- funding which IS contractually binding, and requires/establishes a quid pro quo relationship. Also referred to as "Research Projects or Research Grants."
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. (Benefactors may no longer rely solely on a canceled check to substantiate such contributions.) This written substantiation must include the following information:
- the amount of cash and description of any property other than cash that was contributed;
- whether the donee organization (PSU) provided any goods or services in consideration for the contribution;
- a description and good faith estimate of the value of any goods or services provided in (2).
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 benefactor'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 AlumniRelations, 116 Old Main.
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 payments made in excess of $75 "made partly as a contribution, and partly in consideration for goods or services provided to the donor by the University." This written statement must disclose the following:
- 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
- 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.
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. 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 received as specified in the "Purpose" statement of the form instructions.
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 deliverables are required by the donor). Such awards must be promptly forwarded to the college/campus/administrative 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 "Disposition of Contributions Received," below, and RAG04 - Guidelines For Gifts, Grants and Contracts (The Funding Matrix).
Likewise, contributions are received meeting the above parameters, but are accompanied by certain terms, conditions or limitations to which the University must agree in accepting the funds. Like those gifts received without conditions, these monies must be taken, with all supporting data, to the college/campus/administrative area's Research Office (or area that has been assigned this particular function by the area budget executive) immediately upon receipt for processing in accordance with "Disposition of Contributions Received," below. For additional information, contact the Office of Sponsored Programs.
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 Fund number is properly credited, the Research Office (or area that has been assigned this particular function by the area budget executive) must specify the appropriate Fund number for the contract portion on the Report of Cash Receipts, ROCR, prior to the deposit of funds (as specified in "Disposition of Contributions Received," below).
It is imperative that cash and checks are deposited as quickly as possible upon receipt, as mandated by Policy FN01 and Guideline FNG01. Likewise, it is important that monies are also deposited to the correct accounts. 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 Report of Cash Receipts (IBIS form "ROCR"). Monies will then be promptly forwarded for deposit, as established by the Financial Officer and in accordance with Policy FN01.
Non-cash gifts must be processed promptly as well, as categorized and specified in the sections that follow (as applicable).
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.
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.
The University is not able to accept Savings Bonds, Series E, H, EE and HH Bonds.
For all gifts of securities, the Office of Gift Planning will work with the Corporate Controller’s Office to value gifts as well as prepare all Gift Recording Transmittals (GRTs) to be submitted to the Office of Donor and Member Services for gift recording and acknowledgment.
All material pertaining to gifts-in-kind must be taken to the Director of Development for that area/unit. Except for gifts of real estate (see below), the Director of Development will acknowledge (to the donor) receipt of such gifts and prepare a Gift Reporting and Transmittal (GRT) form. The GRT and all support must be forwarded to the Office of Gift Planning at University Park per FNG01. The Office of Donor and Member Services will distribute GRT copies and supporting documents to other University departments who need this information, and initiate formal acceptance and acknowledgment of the gift- in-kind to the donor.
Gifts-in-Kind accepted by Penn State 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) information provided by the donor to the IRS; (2)a qualified appraisal by someone who holds himself out in the industry as an expert; and/or (3) 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.
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 purchase or 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).
For scholarships and fellowships that are NOT processed as Unrestricted Grants (like those discussed in "Special Acceptance Situations"), processing will occur as discussed here. Any cash or checks received for scholarships, awards, fellowships, and loan fund sources must be taken to the Director of Development for completion of a Gift Reporting and Transmittal (GRT) form and Report of Cash Receipts (ROCR) . The Director of Development will then subsequently forward the cash or checks (with pertinent supporting information) for deposit, as established by the Financial Officer and in accordance with Policy FN01.
For gifts to established University scholarships, awards, fellowships and loan fund sources, the deposit will be to the Gifts Account 06800. Check with Student Financial Services for appropriate final destination budget/fund numbers to enter on the GRT form where required.
For gifts for proposed scholarships, awards, fellowships and loan fund sources, deposits will be to the Gifts Account 06800. Funds are transferred to the appropriate budget/fund numbers when allocation codes are assigned.
When the deposit is made, all supporting material and a copy of the check are returned to the Director of Development, who will in turn forward the information to the Office of Donor and Member Services at University Park. The document number of the ROCR involved with this deposit/transaction must also be indicated in the documentation to assist in verification by the Office of Donor and Member Services that the money was indeed deposited/credited to the correct budget and fund number. (Refer to Policy FN09, "Processing Scholarship/Award/Grant Monies" section for information concerning further processing of University scholarships.)
For outside scholarships (defined as having no University Board of Trustees guidelines for awarding, but identifying a specific student recipient), the deposit must be to Budget 09-056-057, Fund 19700, Object Code 040. Deposit activity to this budget/fund automatically generates a report to Student Financial Services, which is used to identify and post such awards to the correct student's account.
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.
For questions, additional detail, or to request changes to this policy, please contact the Office of the Corporate Controller.
Other Policies in this Manual may apply, especially:
FN01 - Processing Cash Revenues,
FN09 - Scholarships, and
FNG01 - Flow and Accountability of Gifts and Grants from Non-Governmental Sources.
Effective Date: July 28, 2016
Date Approved: July 27, 2016
Date Published: July 28, 2016
Most recent changes:
- 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.
Revision History (and effective dates):
- 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:July 27, 2016>
Date Published:July 28, 2016>