When frugal University of New Hampshire librarian Robert Morin died in 2015, he surprised the campus by leaving $4 million to the institution.
But for many, how the university spent the money would prove even more surprising. Just $100,000 went to fund the library, while $1 million was used to pay for a new scoreboard for the football stadium. The university’s decision led to a wave of criticism.
Like many donors, Morin provided few instructions on how the money should be spent. Of course, concerns about the preservation of “donor intent” aren’t unique to the University of New Hampshire. It warrants careful consideration anytime a donor is making a gift to an institution.
Here are five considerations to keep in mind when considering a gift that can help to ensure that college leaders honor your intentions.
Don’t Take The First ‘Term Sheet’
University leaders often have a wish list of projects to fund and resort to offering donors a pre-set, limited menu of choices such as scholarships, an endowed faculty chair or a named lecture hall. The fact is that while many of these gifts seem “targeted,” they may simply fund ongoing university operations.
We’re often surprised that otherwise savvy executives and entrepreneurs simply accept a template “term sheet” for “investments” in their university’s future. Donors don’t have to accept the first agreement the university presents and they shouldn’t rush to sign an agreement. Donors should take their time to communicate and express their intent clearly in the agreement. At the same time, negotiating a gift agreement should not be an adversarial process that is simply about forcing a school to concede to the donor’s terms and conditions.
Strongly consider seeking your own counsel to review or, better yet, draft the agreement. Rather than relying on your go-to counsel for business agreements, ask for a referral to an attorney or wealth advisor with expertise in crafting gift agreements. Such attorneys or advisors often specialize in working with philanthropic and charitable organizations and are able to help donors understand their options and what terms and conditions may or may not be reasonable or common in gift agreements.
Maximize Your Impact
Particularly if you graduated from a well-heeled top-tier college, you may find that the highest return on your investment will be at a school other than your alma mater.
Consider the case of engineer and philanthropist Henry Rowan. Although he graduated from MIT, Rowan donated $100 million to Glassboro State College in 1992, an unheralded regional university. At the time, it was the largest-ever gift to a public college. The institution is now called Rowan University and has a top-20 engineering program. Are there schools besides your alma mater where you would be glad to make an impact—schools in the state where you established your business, schools that your top employees attended, or from which your children earned their degrees? Schools where you might find academic or extracurricular programs aligned with your values or interests?
Take your time, and truly understand whether the school you consider first is the right institution for your money.
Find Faculty ‘Guarantors’
Faculty can be powerful allies in preserving donor intent and helping donors craft programs that create new opportunities for students. After all, it is faculty who will determine a program’s intellectual content, organize the program’s events, and advertise them to the student community and beyond.
More than anyone, they will serve as the intellectual “guarantors” of a program.
Over 15 years ago, Gary Gerst, a Duke University alumnus, Chicago businessman and philanthropist, collaborated with a political science professor at Duke to conceive an initiative focused on American ideals and institutions. With the professor’s on-campus leadership and the Gerst’s support, the initiative has grown into a leading program at Duke.
Establish ‘Audit’ Procedures At The Outset
University donors often create their wealth through astute business dealings and negotiations. They ask for information rights when making minority investments and set key performance indicators to track progress against clear goals. Gift agreements should also include a transparent process for measuring and reporting on progress with a pre-set timetable. Prioritize the key outcomes that are important in accomplishing a donor’s intent and, where appropriate, leave sufficient flexibility in how the gift is implemented to accomplish the intended purpose.
When Herbert W. Vaughan, a prominent Boston attorney and philanthropist, funded the creation of a Harvard Law School lecture series, his gift agreement stipulated that a statement outlining his reasons for funding the series must be read prior to each lecture, one of several provisions designed to ensure effective oversight of the program after his death. A gift agreement may include key performance indicators and reporting requirements that measure the success of a donor-funded program.
Long-term and endowment gifts should include provisions for a donor representative to receive reports and oversee gift use after the death of the donor. For donors who are giving while living, terms that allow for active engagement, such as serving on advisory committees established in connection with programs being funded, or regular meetings with university representatives, can play a critical role in preserving donor intent by providing donors information they need to evaluate how the gift is being used.
Make An Escape Plan
Every entrepreneur knows that even the best-thought-out arrangements may eventually sour. Donors should, likewise, establish an exit strategy at the outset in the event that an institution substantially deviates from an agreement or change in circumstances make the intended use of the gift impractical. A well-defined escape route may help avoid expensive and protracted judicial proceedings when seeking to change the use of the gift.
If the gift is being used to fund a faculty position, do you have the ability to redirect funding if necessary? Faculty interests and priorities can change, but your gift does not have to change to accommodate that. At the same time, college donors should take heed of the complicated issues that surround academic freedom that might affect their exit strategy.
Enjoy Your Gift
Look forward to receiving updates and reports. Check out the school’s calendar of events and plan a visit to see the results of your philanthropy first hand. Attend a lecture you’ve funded.
You’ve put a lot of money and effort into your gift. Don’t forget to enjoy it, too.
Jacqueline Pfeffer Merrill is the executive director of the Fund for Academic Renewal, which provides free programmatic and legal advisory services about higher education giving. Andras Kosaras is counsel at Arnold & Porter Kaye Scholer LLP, and serves as the lead attorney to the Fund for Academic Renewal.