Give that gift back!

Hey, did you hear the one about the donor who wanted his money back? In January Robert Burton, a longtime supporter of the University of Connecticut’s athletics program asked the school to return his $3 million gift. From all appearances, Burton’s disagreement with the school is profound, personal and insurmountable.

He plans to cease all support to the University. Burton wants the family’s name removed from the “Burton Family Football Complex”, he won’t renew his luxury suite at the football field ($50,000/year), he won’t purchase an advertisement in the football program ($8,000/year), and he will cease funding a summer coaching clinic to the tune of $20K per year. Finally, he requested the funds from his two endowed scholarships transferred from athletics to the business school.

Certainly this is a problem that brewed for some time. Can any amount of customer service on the part of UCONN fix the relationship between it and the Burton family? It seems unlikely. It’s not unheard of that donor relationships sour to the point that a donor requests the return of his gift, but this level of acrimony is uncommon. Occasionally someone other than the donor requests a return of funds.

In 2010, Industrial Enterprises of America asked Yale to return a gift John Mazzuto made to Yale’s baseball program. The company alleged that the gift included stock that was improperly issued. Yale did not publish the size of Mazzuto’s gift but his donation paid for an endowed head coaching position. Yale’s giving catalog indicates a head coaching endowment requires a $1.5 Million gift. Mazzuto declared personal bankruptcy in 2002 but somehow managed to donate at least $1.5 million to Yale before he emerged from bankruptcy in 2008. Vice President for Development Inge Reichenbach said in 2010 that Yale did not have a policy of vetting its donors. According to the Yale Daily News she hoped this investigation would change that.

The federal government became involved in the case of Hassan Nemazee, a businessman convicted of fraud, requesting the return of funds from the Asia Society and The Spence School. Harvard, Brown University and the Council on Foreign Relations forfeited funds they received from Namazee.

How can an organization keep from becoming mired in these public relations nightmares?

Safeguard your relations.
Steward your donors and pay attention to your relationships.  Be aware of donors who make requests you cannot honor and work with them to manage their expectations.

Create a clearly defined gift policy.
A gift policy should define gifts accepted and any circumstances under which a gift may be returned, and major donors should be aware of your policies. Their design protects non-profits and donors by removing misconceptions about giving and spelling out everyone’s rights.

The University of Pennsylvania’s gift return policy begins this way:

“The University is a non-profit charitable organization. Under Pennsylvania law, a gift committed to charity may not be diverted from that charitable purpose. Therefore, once the University receives a gift, the gift must be used to further the University’s charitable purposes. Thus, the University policy, consistent with Pennsylvania law, is that no gifts to the University shall be returned to a donor.”

The policy continues by spelling out a few circumstances under which a donor may request the return of a gift like the unintentional overpayment of a pledge. The University of Central Oklahoma’s gift acceptance policy explains that “once the Foundation has accepted a gift, it becomes Foundation property. From this point, the donor has no direct decision making power regarding the disposition of the gift.”

The policy defines a gift as “a voluntary transfer of assets from a person or an organization to the Foundation where no goods or services are expected, implied or forthcoming for the donor.” It goes on to say that “Gifts are irrevocable transfers of assets. The Foundation is not obliged to return unexpended funds”, although it also states the foundation president has the authority to return a gift. Additionally, “the Foundation will not accept any gift that …violates any federal, state or local statute or ordinance”.

Act honorably.
Request for returns from a third party due to litigation is especially difficult. Make sure you exercise due diligence when soliciting and negotiating major gifts. Be cautious, not speedy. And if you are faced with such a situation, meet the challenge with integrity. Do what is right, even if it is difficult. Be honest with your constituents about the situation you face and ask for help. Your donors want to be part of an ethical enterprise. Your behavior matters to them and to your organization.