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Donor Control Question

  • 1.  Donor Control Question

    Posted 01-31-2024 08:49 AM
    Hi all,
    I'd appreciate fresh opinions on a knotty question we've been trying to resolve. One of our donors wants to establish a fund that will always have a specific minimum amount in it. They do not want it to be endowed, it will be current use, but they want us to agree not to spend any more than whatever they give us beyond that minimum amount. They intend to sign a pledge agreement just for the minimum, and continue adding to the fund annually after that. 
    Would this level of donor control impact the philanthropic nature of the gift?
    We are also concerned if the donor doesn't follow through on their intent, we'll have funds that are permanently off-limits to us. 
    The department that's being supported by this gift is determined to make it work and we're concerned what promises they might have made to the donor outside of what we can put in writing. We need to protect our institution without damaging Advancement's relationship with this department.
    Any advice is appreciated!
    Meghan


    ------------------------------
    Meghan Hickey
    Rhode Island School of Design
    mhickey@risd.edu
    ------------------------------


  • 2.  RE: Donor Control Question

    Posted 01-31-2024 09:36 AM
    The CASE Standards (page 24) go into some detail on donor control and donor influence. While these conditions may not fall under the donor control category per the examples CASE offers, they may fall into a donor influence gray area.

    On page 24, CASE advises that a donor "must not be permitted to have undue influence on decisions made by the administration." On page 25, CASE offers examples of excessive influence, including "investment policies and strategies" and institutional decision-making or priority setting."

    With a copy of the CASE Standards in hand, I suggest a discussion by the Gift Acceptance Committee - ensuring attendance by the CFO and Counsel.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987




    Original Message


  • 3.  RE: Donor Control Question

    Posted 02-01-2024 11:34 AM

    John- where can I find the case standards you are referencing? I tried searching for donor control and CASE standards on the CASE site, but had no luck. We have a current issue with a fund agreement needing to be revised and I'd like to reference this document to back up our decisions to make revisions. Thanks



    ------------------------------
    Stacy Robinson
    University of Northern Iowa Advancement
    stacy.robinson@uni.edu
    ------------------------------

    Original Message


  • 4.  RE: Donor Control Question

    Posted 02-01-2024 11:57 AM
    As I noted, see page 24 of the CASE Standards published in 2021. It is a book - not found online (unless you paid for a digital copy).

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard



    Original Message


  • 5.  RE: Donor Control Question

    Posted 01-31-2024 09:44 AM

    Interesting.

     

    What is the rationale for having money in a fund that you're never able to spend?

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

    Alan

     

    Alan S. Hejnal (he/him)

    Data Quality Manager

     

    SNAGHTML5cbfa34

     




    Original Message


  • 6.  RE: Donor Control Question

    Posted 01-31-2024 09:53 AM
    It's a good question, Alan.

    I am unsure if this is what RISD is doing, but as information, I have observed institutions require holding an amount on "deposit" for a period of time as a form of gift assessment fee. The institution would keep the interest earned from those deposits rather than hit the gifts with a fee upfront.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 7.  RE: Donor Control Question

    Posted 01-31-2024 10:30 AM

    Thanks for your advice, John! Is there any guidance from an IRS standpoint? If this is deemed to be excessive donor control, what would be the tax implications?

    To answer Alan's question, this isn't our typical process. The donor provided us with a very specific spending schedule, and implied he expects to have input on specific purchases - another source of concern. We haven't outright rejected it because we want to keep a good working relationship with the department.



    ------------------------------
    Meghan Hickey
    Rhode Island School of Design
    mhickey@risd.edu
    ------------------------------

    Original Message


  • 8.  RE: Donor Control Question

    Posted 01-31-2024 10:33 AM
    See IRS Publication 526 for most IRS gift restrictions. A key factor in determining deductibility is that the gift must be given irrevocably.

    You do need to involve Counsel.

    John

    John H. Taylor, Principal
    John H. Taylor Consulting, LLC
    2604 Sevier Street
    Durham, NC     27705

    919.816.5903 (cell/text)

    Serving the Advancement Community Since 1987





    Original Message


  • 9.  RE: Donor Control Question

    Posted 01-31-2024 11:42 AM
    Is the department eager for this gift? Or are they just looking for someone else to be the bad guy who says no to it? 



    Isaac Shalev
    Data Strategy Expert
    (917) 859-0151
    isaac@sage70.com

    Autocorrect was used in composting this email, please excuse any typos




    Original Message


  • 10.  RE: Donor Control Question

    Posted 02-01-2024 12:14 PM

    The department's goal is to keep this donor engaged. We're working with our Legal to figure out an acceptable alternative.



    ------------------------------
    Meghan Hickey
    Rhode Island School of Design
    mhickey@risd.edu
    ------------------------------

    Original Message


  • 11.  RE: Donor Control Question

    Posted 01-31-2024 11:35 AM

    Hi Meghan,

    Nothing is said about the donor's reason for this requirement but say, for example, that the reason is that they are an entrepreneur where their income is cyclical and they just want that as a safety net for continuity in down years. If something like this is the case, you may want to advise them to use a donor advised fund where they can basically provide input on when the money is disbursed and let some of it sit for years as there is no requirement for DAFs to disburse funds by a certain time. Most do have their own policies for how funds can sit idol but the donor could technically work around this by disbursing the "held back" funds before the deadline and then simply make a new gift to replace it.

     

    Most donor advised funds have very broad mission statements that are along the lines of generally promoting philanthropic traditions so they have a wider girth for considering donations to be considered "supporting their mission" and I would assume taking donations and holding the funds can be considered contributing towards that mission because that's what they do all the time.  You'd definitely want to consult tax consul on all this though, including whether giving and having you hold funds would be considered supporting your mission and importantly the donor's desire to have input on how the funds are used.

     

    Best wishes on securing the support within acceptable regulations.

     

     

    John Smilde

    Director of Gifts and Records Administration

    Advancement and Alumni Relations

    George Mason University

    4400 University Drive, MSN 1A3

    Fairfax, VA 22030

    703.993.8680

    jsmilde@gmu.edu

     

    This electronic message contains confidential information which is, in whole or in part,

    subject to exclusion from disclosure under the Freedom of Information Act pursuant to

    §2.2-3705.4.7. of the Code of Virginia.

     

     

     




    Original Message


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