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When the Gift is Not Enough
Submitted September 6, 2021
One of our major donors wanted to establish an endowed fund. We have a minimum of $50,000 to establish a named fund, but for an endowed fund — one where the income, based on our organization’s spending rule, is meant to cover the costs of the fund’s purpose — we have no pre-set amount: it depends on the cost of the program. For example, if a program costs $50,000 to run each year and our policy is to spend five percent of our endowment for operating purposes, we would require a gift of $1 million to fully endow the program. Our donor did not realize this distinction and wanted to establish a fund for $50,000 to pay for a program that costs too much for that amount to endow. My boss did not want to embarrass the donor and so did not get into any of the details with her. He simply okayed the deal. I realize many charities have varying policies about how to recognize donors, but, as I see it, this goes beyond that because the donor wants — as is our policy — annual reports on the progress of the fund. My boss says we can simply report the progress of the program and what he calls the named endowed fund without getting too deep with the donor or in the report. After all, he told me, unsatisfactorily, this is $50,000 we likely would not have had if we insisted on the full million dollars. I am perplexed and angry.
I understand. Donor relations can be tough, especially when truth is subsumed by convenience. Yes, you have the $50,000, but what it will accomplish and what it is intended to accomplish are two different things. Your boss painted the organization into a corner. The math simply doesn’t add up. At your endowment spending rate, you will be able to allot only $2,500 (five percent of $50,000) each year — with likely growth to offset inflation — and so very little of what your donor wants to be accomplished will be. This is a situation where honesty is not only the best policy, but honesty at the earliest possible moment is the best policy.
From the outset, it should have been made clear. Many people don’t understand the concept of endowment — other than that, the word is what the media uses to report wealth in large institutions, such as universities — and certainly many don’t know the financial intricacies. But the people who raise money for charities do understand.
Your charity must come clean, and your boss should assign himself the job. Speaking with the donor will likely be uncomfortable but, the way I see it, a meeting to lay out the realities of her gift is necessary. The best solution is to tell her that the income her named gift — yes, it’s named because she gave enough to meet your threshold — will generate each year will be applied to the program she wishes to support. She may be disappointed that it will be such a small amount, given her expectations, but there is no mathematical escape hatch here: the gift either does or does not provide the needed income to support the program in its entirety — and it does not.
Think of it this way: What if the program were a new one, one that you felt would further your mission? And the donor was led to believe that her gift would fund it all? Then, because that amount wouldn’t fund it all, your charity would be on the hook to come up with the needed money from other sources. Instead of providing a way to accomplish more of your mission with a new program, her gift would obligate you — a net negative, at least from the perspective of the business office if not the fundraising office.
Worse, though, is what led your boss to accept the deal in the first place. Saying no to a donor — essentially, in this case anyway, telling her that her gift is not enough — is anathema to a fundraiser’s instinct to satisfy the donor. But avoiding the truth at the outset is almost certain to ultimately disappoint and not satisfy the donor. This inclination goes beyond the specifics of your challenge. Fundraisers need to be certain that what they promise can be upheld by their organizations, now and well into the future. In a way, you are fortunate. In your situation, the consequences of not being able to honor the donor’s wishes are relatively immediate. Far too many examples are arising where donors, or their heirs, are objecting to a charity’s inability or refusal to do what was originally agreed to.
If you have a question, please feel free to contact Doug White at email@example.com. While all issues discussed are real, identities are kept confidential.
Doug White, a long-time leader and scholar in the nation's philanthropic community, is an author and an advisor to nonprofit organizations and philanthropists. He serves as the Co-Chair of the Walter Cronkite Committee at FoolProof, and as a board member of the Secular Coalition of America. He is the former Director of Columbia University's Master of Science in Fundraising Management program, where he also taught board governance, ethics and fundraising. Prior to that, he was a lecturer at and the academic director of New York University's Heyman Center for Philanthropy and Fundraising.
Doug has published five books. His most recent, "Wounded Charity" (Paragon House, 2019), analyzes the allegations of mismanagement made in January 2016 against Wounded Warrior Project. Kate Bahen, the managing director of Charity Intelligence Canada, wrote, "An epic whodunnit. A sweeping sector perspective. A gripping read for everyone interested in the charity sector. The facts behind the news headlines leaves one reeling. How could this happen? Using the dramatic case of Wounded Warrior Project, Doug White addresses the key forces shaping today's charity sector. From his unique perch, he generously shares his insights and those of the sector's thought leaders. Doug White's books should be required reading for charity directors, journalists, staff and donors alike."
"Abusing Donor Intent" (Paragon House, 2014) chronicles the historic lawsuit brought against Princeton University by the children of Charles and Marie Robertson, the couple who donated $35 million in 1961 to endow the graduate program at the Woodrow Wilson School. The family contended that Princeton abused its mandate to spend the money as the donors wished — and as the university agreed. The Foundation Center had this to say about the book: "Well-plotted with the slow burn of a decades-old frustration, and immensely readable with the fate of hundreds of millions of dollars at stake — to say nothing of the reputation of one of America's most august universities — Abusing Donor Intent is equal parts thriller and cautionary tale."
His three other books are: "The Nonprofit Challenge: Integrating Ethics into the Purpose and Promise of Our Nation's Charities" (Palgrave Macmillan, 2010), "Charity on Trial: What You Need to Know Before You Give" (Barricade Books, 2007), and "The Art of Planned Giving: Understanding Donors and the Culture of Giving" (John Wiley & Sons, 1997), which was awarded the 1996 Staley/Robeson/Ryan/St. Lawrence Prize for Research by the Association of Fundraising Professionals.
He has written several articles for a variety of magazines and periodicals, including Trusts and Estates, the Journal of Gift Planning, Charitable Gift Planning News, and the Chronicle of Philanthropy.
Since 1979 Doug has advised hundreds of charities of all types and sizes — including social service, educational, health and environmental organizations. Today, he works closely with select organizations on ethical decision-making, board governance, and fundraising, as well as with individual philanthropists who want to see their gifts used most effectively.
A graduate of Dartmouth College, Doug worked as the development director at Holderness School (NH). For almost two decades (1982 – 2000) he served on the Capital Giving Committee at Phillips Exeter Academy and as its national chair for several years during that time. He has served in leading roles with two national planned gift and endowment investment firms. As a long-term consultant to Blackbaud, Inc. in the 1980s and 1990s, he developed one of the first planned giving software programs.
In 1995 Doug testified before a Congressional committee in support of the Philanthropy Protection Act, and served as an expert witness for the charitable defendants in a national lawsuit - the "Texas Lawsuit" - that threatened the ability of charities to raise money. He has also since served as an expert witness in other lawsuits relating to donor intent.
Doug is a past member of the Board of Directors of the Partnership for Philanthropic Planning (formerly the National Committee on Planned Giving). In 1996, while on the NCPG board, he founded the national initiative of Leave A Legacy. He is also a past chair of the NCPG Ethics Committee and the 1995 NCPG National Conference. He is a past president of the Planned Giving Group of New England and a past president of the New Hampshire/Vermont chapter of the Association of Fundraising Professionals. He writes the ethics column for the National Capital Gift Planning Council; in 2002 the council presented Doug with its Distinguished Service Award.
Since 1981 he has spoken at over 750 conferences on philanthropy, including the Association for Fundraising Professionals, The Council for the Advancement and Support of Education, the Partnership for Philanthropic Planning, the Association for Healthcare Philanthropy, United Jewish Communities, and hundreds of local professional organizations and planned giving councils, as well as many audiences sponsored by local charities and other groups.
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