How long is forever?

[BERIGAN]

No.....great title though!

How long is forever?

Frederic J. Fransen

December 8, 2007

A billion-dollar controversy involving Princeton University has brought into sharp focus one of the most important issues facing the nonprofit community today: whether the terms of restricted gifts have an expiration date.

In 1961, donors Charles and Marie Robertson — he a loyal Princeton grad, she an heiress to the A&P supermarket fortune — endowed a foundation to finance the preparation of Princeton graduate students for federal government careers in international relations and foreign affairs.

Princeton officials told Fred Hechinger, the New York Times' legendary education writer, that the gift would enable the school to "do what it and other universities have long wished to do: establish professional education for public service at a level of excellence comparable to the country's best schools of medicine and law." Then Princeton President Robert Goheen made clear: "The donors wish to provide gifted students and government officials with the finest possible preparation for careers in the public service, with particular emphasis in foreign affairs."

Today, Princeton officials hold their noses at the very idea of a "professional school" dedicated to government service, and bristle at the suggestion that preparing students for careers in government was anything more than an "aspirational" goal.

The Robertson family is suing, charging Princeton not only violated the terms of the gift but has misspent some $200 million or more on activities and programs that have nothing to do with the donors' intent.

The Princeton dispute is not an isolated case. In New Orleans, Tulane University dumped the women's liberal arts college long affiliated with the university and grabbed its endowment. The money for Newcomb College was donated by Josephine Louise Newcomb more than 100 years ago for the sole purpose of establishing and supporting — in perpetuity — a women's college memorializing her late daughter. Her descendants are suing.

In Virginia, Randolph-Macon Woman's College (R-MWC) completed a $100 million capital campaign in 2005, exceeding the original $75 million goal, and soon thereafter announced the college would become coed. The $100 million was solicited and donated explicitly to guarantee R-MWC's long-term financial stability, not to finance a coed institution. Donors are suing.

While there may be times when it's legitimate for nonprofits to "repurpose" designated gifts, problems arise when institutions decide on their own to renege on their promises without following appropriate legal procedures.

This generally doesn't happen right away. In a remarkably candid conversation with The Washington Post's reporter Matthew Quirk, a retired New York University "naming" negotiator — a fund-raiser who solicits donations from people who want to have a room, building, or school named after them — said NYU is careful to use metal letters or plaques to recognize such donations, because, unlike carvings in stone, plaques and lettering can easily be removed from a building. She also said donors who endow chairs or buildings at universities shouldn't expect their gifts to be honored forever. "How long is perpetuity? About 75 years," she said.

Donor intent doesn't just abruptly end. More often, it fades away. A key faculty member retires, there is turnover in the president's office, a budget crisis arises or the donor dies, and people just plain forget. One major university inserts a clause into its standard donor agreement stating that the university can reallocate restricted funds after 25 years. Other universities don't even audit restricted gifts.

The half-life of donor intent may be no more than about 10 years. For the first few years, the institution probably will adhere to the terms of the gift. By the 10th year, the program will still exist, but with a different shape. By Year 20, the program might exist in name only. By the 30th year, it will be merged into something else. By the 40th year the program will disappear.

The money, however, won't disappear. Under normal circumstances, the value of an endowment remains constant, and may even grow over time.

Donors must understand this. On U.S. college campuses, forever doesn't mean forever. Money donors give today could be financing things they wouldn't imagine 10 or 20 years from now. That's why it's important to get gifts right and to hold colleges and universities accountable.

Frederic J. Fransen is executive director of the Center for Excellence in Higher Education (www.cehe.org), Indianapolis, Ind., a nonprofit organization that assists donors who wish to transform higher education through philanthropy.

http://www.washingtontimes.com/article/200.../112080007/1012

[The Magnificent Goldberg]

Interesting piece Berigan. Thanks for posting it.

The law is very different over here. The trustees of charitable endowments, including educational charities (which I used to be a bit of an expert on in the seventies), can't turn the endowment to purposes other than what was the strict intention of the donor without some kind of legal action - Parliamentary action in many cases, even down to a 200 year old village school - and the endowment must, in those circumstances, be able to be claimed back by the descendants of the original donor, if they wish.

MG

[Brownian Motion]

I'm astonished that a school readying students for "government careers in international relations and foreign affairs" is sniffed at by Princeton officials, especially given the many blunders in US foreign policy over the last 60 years.

[The Magnificent Goldberg]

I'm astonished that a school readying students for "government careers in international relations and foreign affairs" is sniffed at by Princeton officials, especially given the many blunders in US foreign policy over the last 60 years.

Maybe they've decided that the subject (or Americans?) is unteachable

MG

[Christiern]

Let me echo MG's thanks to you for posting this, Conrad. With all the negative talk about earmarks on the Hill, I do think there are times when they serve a useful rather than self-serving purpose. If money is donated for one thing it should not be accepted is that purpose is found unsuitable by the recipient. I used to run a non-profit radio station and there were times when we received sizable donations for specific programming, one foundation gave us $10,000 (it was a good sum in 1965) with a request that it be used for civil rights-oriented programs. I bought wireless microphones (very state-of-the-art, back then) and sent two guys to the South. The result was a a highly acclaimed series of programs. The foundation (it asked us not to identify it, and we didn't) was happy, the listeners were happy, and there are tapes in the Pacifica archives that still attract scholars. Had I found the earmark politically objectionable, and, say, decided to spend the money on children's programming, the result would also have been positive and commendable, but the foundation would have had every right to demand back its money.

It seems like a no-brainer to me. Meet terms or don't accept them.

[Jazzmoose]

Definitely. It's a shame this bait-and-switch practice is legal in the U.S.