Key Decision Makers Track Sponsored by: Building Gifts that Work: The Art and Science of Gift Agreements

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Jeremy Martin
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1 Key Decision Makers Track Sponsored by: Building Gifts that Work: The Art and Science of Gift Agreements

2 UNDERSTANDING GIFT AGREEMENTS Building Gifts that Work The ART + SCIENCE of Gift Agreements 2

3 SHIFTING YOUR GIFT AGREEMENT EXPERIENCE FROM HERE... 3

4 4 TO HERE.

5 BLUEPRINT FOR TODAY S DISCUSSION Part I: The Science of Gift Agreements - Gift Agreement as a DOCUMENT Part II: The Art of Gift Agreement Drafting - Gift Agreement as a PROCESS Part III: Partnering Together for Successful Gift Agreements - Gift Agreement as a PARTNERSHIP 5

6 PART I: THE SCIENCE OF GIFT AGREEMENTS Gift agreement as a document & The case for standardization and broadness NEW BUSINESS PROCESS

7 PURPOSE OF GIFT AGREEMENTS Document the nature and purpose of the gift Confirm donor intent, negotiated gift terms, and key fund details Provide clear instructions on how to administer, steward, and recognize the gift Plan for what happens in the event of unforeseen changes Support various legal analyses 7

8 GIFT AGREEMENT SHOULD NOT Propose a gift - Vast majority of the gift structure should be known and agreed upon before the agreement is drafted Supersede institutional practices/policies - The gift agreement is not a forum for donors to control or determine academic decisions that faculty/leadership should be making Be written with the notion of amending it in the future - Control over gifted funds should remain with the institution to avoid donor tax issues. 8

9 TYPES OF GIFT AGREEMENTS Examples of types of gift agreements - Gift Agreement - Statement of Gift - Fund Agreement - Fund Statement - Non-Binding Intention or Letter of Intent - Memorandum of Understanding - Statement of Understanding These titles vary by institution 9

10 GENERAL TERMS INCLUDED IN GIFT AGREEMENTS Intention of the donor Identity of legal donor Schedule of gift/pledge Structure of fund - Type (endowed, expendable/current use) - Investment (for endowed, when will spending begin?) Purpose/use of the gift Recognition of the gift Stewardship of the gift Changed Conditions clause Disclosure of administrative terms 10

11 STAKEHOLDERS Benefactor of $ Beneficiary of $ Spend per terms mutually-agreed upon with donor Benefitting College or Dept Donor Co-creator of gift terms with institution Foundation/ Development Services Manager of $ Keeper of gift terms 11

12 THE SCIENCE OF STANDARDIZATION Standardization is based on: - Institution s historical experience - Industry best practices Examples of standardization in practice: - Agreement templates - Language Banks - Gift administration practices 12

13 BENEFITS OF STANDARDIZATION Speeds up gift agreement process - Standard terms are already pre-approved by leadership - Avoids lengthy, individualized review of gift terms - Avoids having to negotiate with donor Ensures gifts are manageable - Can be managed by standard institutional processes/practices - Less risk of confusion and mistakes Allows for management of donor expectation - Reduces likelihood that future/changed circumstances clause will need to be invoked 13

STANDARDIZATION Most houses are built with a relatively limited number of building supplies and techniques - Wood, bricks, PVC pipe, sheet rock, etc.

14 STANDARDIZATION Most houses are built with a relatively limited number of building supplies and techniques - Wood, bricks, PVC pipe, sheet rock, etc. - Building codes These standards are important to ensure houses are: - Built to last (based on best practices) - Consistent from one to another (so any plumber can fix your plumbing later) 14

15 STANDARDIZATION But even with standardization, you can build an infinite variety of houses 15

selection criterion - Reflective of and deferential to your institution s

16 BENEFITS OF BROAD PURPOSE TERMS Good gift agreements start with good gifts. Gift agreement purpose terms should be: - Broad and flexible - Minimal on selection criterion - Reflective of and deferential to your institution s policies, procedures, and practices - Designed to last! Remember to KISS 16

17 THINKING LONG-TERM We draft gift agreements with this institution in mind 17

18 PURPOSE PROVISIONS TO AVOID General purpose provisions to avoid - Future stewardship plans (e.g. institution will send donor an annual report ) - Exact amount to be spent each year - Composition of selection committee - Subjective information (e.g. good moral character ) - Too many selection criteria Scholarship-specific provisions to avoid - Specific high schools - Geographic locations Constitutionally protected classes 18

19 HAZARD! PROTECTED CLASS TERMS Do not suggest selection criteria related to protected class (race, gender, religion, citizenship, etc.) Know your institution's policies If donor suggests such criterion - Suggest alternative language Broader language (e.g. to improve diversity of student body) Non-discriminatory criteria (e.g. involvement with the Society of women engineers ) - Don t commit to anything and contact your gift agreement writer/adviser (aka your Gift Adviser ) for support! 19

20 STRATEGIES TO GETTING GOOD GIFTS Don t put thoughts into donor s mind Sell departmental priorities Come prepared with stories about the positive impact of un/loosely-restricted gifts When donors suggest overly restrictive use provisions, be prepared to educate them on how those restrictions can cause problems Move future reporting/communication to proposal or stewardship plan Manage expectations 20

21 THE FORMULA FOR A GOOD GIFT AND STEWARDSHIP SUCCESS Broad and Flexible Terms Standard Tested Language and Practices Long-Term Success (a Good Gift!)

22 CASE STUDY: SUSIE SMITH Susie Smith is proud of her undergraduate institution. She is forever indebted to the university for the outstanding education she received as a first generation college student. She wants to ensure others like her get that same experience. During your visit with her, Susie is delighted that you have asked her to fund a scholarship with an endowed gift of $100,000. Susie eagerly accepts, but with a few conditions... 22

23 CASE STUDY: SUSIE SMITH CONTINUED #1 scholarship must go to first-generation college students #2 scholarships must go to students from Middle of No Where City High School #3 scholarships must go to students who plan to study in her same field of study and who plan to teach after graduation #4 Susie expects the student recipients to receive exactly $4,000 each year #5 Students may renew their scholarships if they maintain at least a 3.5 GPA on a 4.0 scale #6 She wishes for a scholarship committee chaired by the Dean to review all applications for which she has a written application and requires an essay #7 Annually, she requires a personal letter from the student recipients outlining how this scholarship impacted their education #8 She requires them to join her for an annual pizza party that she hosts on campus with college administrators #9 Each May, she expects the Chancellor to travel to her high school to present the scholarship award to any incoming freshman receiving the award

24 PART II THE ART OF GIFT AGREEMENT DRAFTING The gift agreement drafting process as an opportunity to analyze and negotiate the gift terms NEW BUSINESS PROCESS

25 GIFT AGREEMENT PROCESS Design Draft Adjust Finalize Discovery Informal Yes from Donor Donor Responds Donor Formally Says Yes Cultivation (Informal Idea Generation) Request Gift Agreement Internal Review w/ Stakeholders (Gift Acceptance) Obtain Signatures Strategize for Solicitation Gift Agreement Drafted Broadly/Flexibly Notify Stakeholders Gift Agreement Revisions Engage Gift Adviser(s) to ID Advance Reviews (Gift Acceptance) Internal Review w/stakeholders (Gift Acceptance) Implement Gift Solicit Donor Submitted to Donor Revision Submitted to Donor Steward 25

26 PROCESS DESIGN STAGE (SOLICITATION PLANNING) Typically the design stage involves the gift officer and leadership determining the best type of gift to propose in order to: - Align donor s passions with institutional needs - Fulfill donor s short and long-term philanthropic goals Consulting with Gift Agreement Advisers can help with both - Identifying latent issues e.g., specific details that will hamstring institution in future - Suggesting a fund structure to accommodate the donor s current gift and future giving 26

27 PROCESS DRAFTING STAGE In order to request a gift agreement, the gift officer must determine/learn all of the details of the gift - Who is the legal donor? - Purpose of the gift The gift agreement request is a critical opportunity to confirm that the institution can and wants to accept the gift as-is. - Does the gift: Comply with gift acceptance policies/practices? Include complex/unique gift terms that may present administrative challenges? Have those gift terms been qualified? Require further negotiation or alternative language? 27

28 PROCESS ANALYSIS OF UNIQUE/COMPLEX TERMS What is the incentive to say Yes to the unique gift? Does the unique gift respond to an institutional priority? What are the risks and responsibilities of saying Yes to the unique gift? List risks/responsibilities. Identify who can accept/manage risks and responsibilities. What does Yes look like? (Measured Risk-taking) Disclose gift terms to stakeholders (both incentives AND risks/responsibilities). Stakeholders confirm acceptance. 28

29 PROCESS UNACCEPTABLE TERMS The gift or gift transaction involves an illegality Gifts that threaten donor s tax deductibility The gift or gift transaction in some manner conflicts with institution s mission or policies The benefit of the gift is outweighed by the potential of negative publicity the institution that would result from the gift The benefit of the gift is insufficient to offset the extent of administrative and/or legal effort involved The donor, or other prohibited party, wishes to exert control over how the donated funds are used beyond the gift agreement 29

30 PROCESS ADJUST STAGE This stage gives the institution and the donor the opportunity to adjust gift terms to ensure alignment with donor intent with institutional priorities Opportunity to: - Negotiate donor terms that do not work well for the institution, to help their gift be more successful - Educate the donor on why certain terms are problematic - Achieve a meeting of the minds with donor for the betterment of the gift as a whole! 30

31 PROCESS ACCEPTING UNIQUE/COMPLEX TERMS If we are ok accepting a unique/non-standard term: - Custom language replaces standard language - All stakeholders approve new language - Gift Officer and other stakeholders coordinate on implementation of nonstandard language (identify roles/responsibilities) - Ensure implementation plan survives staff changes, etc. donor will not be sympathetic to these internal issues 31

32 PART III PARTNERING TOGETHER FOR SUCCESSFUL GIFT AGREEMENTS Partnering with your gift adviser term

33 THE PARTNERSHIP Fundraiser - Lead on donor relationship - Visionary of the gift matches institutional need and donor s passion Gift Adviser (Possibly a Team) - In-house consultant(s) who either review, draft, or advise on matters regarding the structure or content of the gift agreement - Help fundraiser ensure the gift works by using experience in gift administration to serve as neutral and objective sounding board, and offering creative solutions 33

34 GIFT ADVISER REVIEW PROCESS ENGAGE GIFT OFFICER The Gift Officer is a critical part of the process the Gift Officer knows what will resonate with the donor. DEVELOPMENT SERVICES/ FOUNDATION At some institutions, the Gift Officer may be responsible for assembling or notifying the gift advisement team. LEADERSHIP GIFT ADVISER TEAM Gift Officer FINANCE AND BUSINESS OFFICE STAFF 34

GIFT ADVISER REVIEW PROCESS ENGAGE LEADERSHIP Leadership sets the high level vision for gifts. Leadership defines gift policy and creates expectations for fundraising.

35 GIFT ADVISER REVIEW PROCESS ENGAGE LEADERSHIP Leadership sets the high level vision for gifts. Leadership defines gift policy and creates expectations for fundraising. Leadership is a driving force behind the scenes on all gifts. LEADERSHIP DEVELOPMENT SERVICES/ FOUNDATION GIFT ADVSER TEAM FINANCE AND BUSINES S OFFICE STAFF GIFT OFFICER 35

36 GIFT ADVISER REVIEW PROCESS ENGAGE DEVELOPMENT SERVICES/FOUNDATION Stewardship or Donor Relations How will we steward and recognize this gift? DEVELOPMENT SERVICES/ FOUNDATION Gift and Record Services How will this commitment be recorded? What fund will the gift be added to? How will the donor be reminded to make gifts? LEADERSHIP GIFT ADVISER TEAM GIFT OFFICER FINANCE AND BUSINESS OFFICE STAFF 36

37 GIFT ADVISER REVIEW PROCESS ENGAGE ACADEMIC STAFF Fund Administrators Are the gift restrictions clear and administrable? Can we promise to achieve the donor s vision? (Ties back to stewardship.) Accounting Services Will the way the gift agreement is written have an audit impact to consider? LEADERSHIP DEVELOPMENT SERVICES/ FOUNDATION GIFT ADVISER TEAM GIFT OFFICER FINANCE AND BUSINESS OFFICE STAFF 37

WHERE GIFT ADVISERS HELP IN THE PROCESS Design Draft Adjust Finalize Discovery Informal Yes from Donor Donor Responds Donor Formally Says Yes Cultivation (Informal Idea Generation) Request Gift

38 WHERE GIFT ADVISERS HELP IN THE PROCESS Design Draft Adjust Finalize Discovery Informal Yes from Donor Donor Responds Donor Formally Says Yes Cultivation (Informal Idea Generation) Request Gift Agreement Internal Review w/ Stakeholders (Gift Acceptance) Obtain Signatures Strategize for Solicitation Gift Agreement Drafted Broadly/Flexibly Notify Stakeholders Gift Agreement Revisions Engage Gift Adviser(s) to ID Advance Reviews (Gift Acceptance) Internal Review w/stakeholders (Gift Acceptance) Implement Gift Solicit Donor Submitted to Donor Revision Submitted to Donor Steward 38

39 WHERE WILL THIS NEW PERSPECTIVE TAKE YOU?

40 PRESENTERS Farheen Asif, JD, LLM - Northwestern University - Senior Associate Director, Gift Acceptance and Fund Management - farheen.asif@northwestern.edu Jenny Carroll, JD - University of Illinois Foundation - Director of Gift Planning Operations - jmcarrol@uif.uillinois.edu 40

41 Session evaluations will be ed.

INTERNAL POLICY FOR STELLENBOSCH UNIVERSITY FUNDRAISING

INTERNAL POLICY FOR STELLENBOSCH UNIVERSITY FUNDRAISING In the context of declining first (state subsidies) and second (student fees) stream income,* it is imperative that SU diversifies funding sources,