Stanford benefits from a dedicated community of donors who support students, drive groundbreaking research, and advance solutions to address societal challenges through their gifts. Stewardship of donor gifts is important throughout the gift’s lifecycle: from understanding and documenting a donor’s wishes, receiving the funds, and spending the funds in accordance with the gift terms until the gift is fully expended, or managing the fund in perpetuity for endowment gifts. This page provides general information on gifts, how gifts should be received and managed and, key considerations and best practices for stewarding gifts.
A donor gift is defined as any item of value given to the university by a donor who expects nothing significant of value in return, other than recognition and that Stanford uses the gift in accordance with the donor's gift terms. A gift fund is created to hold the gift. For information about the concept of a fund and all fund types, refer to Fund Types.
Examples of Donor Gifts:
- General support of a school or department
- Support of a specific school or departmental, including projects or events
- General support of an individual faculty member's research program or of a specific research activity
Any proposed fund-raising activities should be coordinated in advance with the Office of Development (OOD) to ensure compliance with appropriate laws, regulations, and university policies. When donors receive something other than recognition in exchange for their contribution, additional considerations and processing are required. Additionally, OOD manages all direct contact with donors and advises on any proposed fundraising activities, in part to avoid donor fatigue, and to streamline and coordinate donor outreach activities.
University gift funds must be handled and spent according to donor and university-approved terms and restrictions. Financial managers must be able to explain to other university and external relations staff and donors how donor funds were used, for stewardship, financial audit, and donor reporting purposes. In many cases the Office of Development reports to donors on the uses of their gifts as part of the ongoing stewardship of the gift and the relationship with the donor.
All use of funds is guided by a common set of principles. Refer to Policy: Proper Use of Funds.
For more information about gift policies see:
- Administrative Guide Policy 4.1.1: Gifts to the University
- Administrative Guide Policy 4.2.1: Receiving and Processing Gifts
- Policy: IRS Requirements for Tax Deductions on Charitable Donations
Types of Donor Gifts
Donor Gifts is an award type which has two sub-types: expendable and endowment. Gift funds are also called “expendable gift funds,” in contrast to “endowment gift funds,” which are also called “endowments.”
- Expendable Gift (Award Type starts with GIF) – A gift to the university that can and often is intended to be used immediately. Gift terms often stipulate how the money may be spent.
- Endowment Gift (Award Type starts with END) – An endowment is established by a donor gift that has additional restrictions requiring that the initial funding may not be spent directly but instead must be placed in a principal fund and invested in perpetuity with a goal of producing income. The endowment payout as determined by the Board of Trustees is transferred each year to an income fund where it can be spent. The payout is maintained in an Endowment Income Fund, which is maintained separately from the endowment principal. For details, refer to Topic Overview: Endowment Payout Process.
For information about the concept of a fund and all fund types, refer to Fund Types.
Restricted versus Unrestricted Donor Gifts
When a donor makes a gift to the university, the donor may provide terms for the use of that gift. If the terms specify a particular purpose (i.e. for a specific area of research or faculty member), the funds are “Restricted” to that purpose. If donor terms allow a gift to be used broadly within a school or unit (i.e. for general purposes of the School of Law), it is deemed “Unrestricted” at the unit level, but "Restricted" by central university administration. Income and appreciation produced by restricted endowments is also restricted as per the terms of the endowment.
There are multiple restricted definitions. Internally, Stanford refers to three levels of restriction––"Restricted," "Unrestricted," and "Designated." Refer to Administrative Guide Policy 3.1.2: University Funds.
If gift terms are too restrictive and have no obvious use, staff should contact the Restricted Funds Group in the Office of Planned Giving in the Office of Development.
Sponsored Projects versus Donor Gifts
For information about what defines sponsored projects and how they are distinguished from gifts, student aid, and other supported activities, find guidance related to making these distinctions in DoResearch Policy 13.1: Gift vs. Sponsored Projects and Distinctions from Other Forms of Funding and in the job aid on that page, “Determining Whether Funding is a Gift or Support for a Sponsored Project.”
Contact the school or department’s fund accountant for any questions regarding non-sponsored funds.
When a gift is anticipated, school and unit staff should ensure all correspondence and communications related to the donor’s intent are documented and included as part of the information submitted to OOD. Donors may make contributions to group funds (a fund with gifts from many donors such as a departmental general fund) or may create their own donor gift fund for expendable or endowed purposes.
Rather than receiving a check, departments can provide electronic payment instructions to students, donors, agencies, and sponsors. This can replace cash and checks being sent in by mail. Either a wire or ACH electronic payment is acceptable. When possible, donors should be encouraged to donate electronically.
Adding New Gifts to Existing Awards
Gifts with different restrictions may not be commingled in a common fund. When funds are directed to an incorrect fund or are combined with existing funding in an existing award (e.g. adding donor gifts to a fund that was created with internal funds or adding one donor’s gifts to a fund created expressly by another donor), support that is less restricted may become commingled with support that is more restricted. This increases the risk of the gift not being stewarded appropriately, and may result in funds going unused over a longer period of time.
Additionally, support that is more restricted may become commingled with support that is less restricted, which means that the more restricted gift may be spent on inappropriate expenses that violate the donor terms.
Typically, named funds should only contain gifts from the primary donor(s). Named funds are usually defined as funds that include the name of a donor(s) (as opposed to funds that contain a faculty member’s name) in the award title (e.g., The John Donovan Fund for Asteroid Research or the Mary Smith Undergraduate Research Fund). Memorial named funds are an exception, which should be clear based on the fund’s terms.
Because of changes in circumstances, funds may become unusable, such as if a fund is restricted to use by a specific faculty member and that faculty member leaves Stanford. When drafting gift documentation, alternate use language is often included to indicate how the funds should be spent if the original purpose can no longer be fulfilled. However, many new funds are established with donor-drafted gift documents versus Stanford-drafted gift documents, meaning that many funds lack alternate use language. Fund managers should prioritize spending funds without alternate use language over funds with appropriate alternate use language and should strive to close funds prior to them becoming unusable. If a fund becomes unusable (i.e. the original purpose can no longer be followed and there is no alternate use language), fund managers should contact the Restricted Funds Group in the Office of Planned Giving in the Office of Development.
When receiving new gifts, if a fund does not have alternate use language, consideration should be given to opening a new fund and requesting that donors agree to an alternate use provision. Oftentimes, funds don’t have language in their terms for dealing with unexpected circumstances, such as the discontinuation of a program or if a faculty member, department head, or program director leaves Stanford. Language added may be referred to as an alternative use or as “cy pres” language. In order to add this type of language to an existing fund, fund managers should coordinate with an appropriate development officer, and the donor must be informed and affirmatively agree to these terms. It may not be appropriate to include this language in group funds if all donors cannot be contacted to approve the language.
Particular attention should be paid to make sure that expendable gifts are not deposited into endowments. If a gift includes a donor designated specific purpose, and the department is unsure whether it can be deposited into an existing fund, request a new award via the Gift Transmittals system and/or contact the assigned Fund Accountant for Non-Sponsored Funding or Office of Development Donor Relations officer.
As described below, donors expect that their expendable gifts and the payout on their endowment gifts will be spent in a timely manner and in accordance with the gift terms. It is important to ensure that donors have confidence that the university will use their gifts in a way that the donor intended in furtherance of the university’s educational, research, and patient care missions. Below are several resources and best practices that support the stewardship of donor gifts and help ensure that gifts are spent in accordance with the donor’s terms as documented in the fund authorization.
Donor Gift Terms
Donor gifts should be spent according to the donor’s intentions - which are referred to as the “gift terms.” Gift terms are available in the Fund Authorization for the fund in which the gift is allocated, which can be found in the OBI Dashboard: Revenue and Fund Management (RFM) Award at a Glance tab, the Fund Authorization, or via the Oracle Financials Inquiry Tools through the Fund Title Query tool.
Please note that older funds may not have the full donor documentation represented in the fund authorization; in these cases, contact FMS Fund Accounting for more information.
Fund Authorization should be reviewed regularly by department fund managers to ensure that fund terms are understood and that the annual spending is consistent with the specific wording in the documentation.
Spending or Transferring Donor Gifts
It is critical to understand exactly how gift funds were spent or transferred and to have clear and complete documentation. Utilizing the system infrastructure to set up projects and tasks with appropriate titles makes it easy to see how funds are being used. Document transfers with appropriate business justifications, avoiding jargon and acronyms.
Originators and approvers of financial transactions should understand and confirm that the expenditure is consistent with the gift terms (use the Expenditure Transaction Approval Checklist and Cost Transfer Approval Checklist).
Fund managers who are unsure or concerned about whether the expense or transfer of the gift funds is in line with the donor gift terms should reach out for assistance. Resources include first consulting the department’s school or unit Dean’s Office, and the Donor Relations Officer, and then FMS Fund Accounting. There are also anonymous avenues for support including through the Ethics and Compliance Helpline and the Ombuds Office.
Changed Terms of Donor Gifts
New, changed, or revised terms must be reflected in an award's fund authorization. When a department receives a document or other communication from a faculty member, staff member, or donor requesting that the terms or title of an expendable gift or endowment be changed either temporarily or permanently, departments should contact the Restricted Funds Group in the Office of Planned Giving in the Office of Development (OOD) and then FMS Fund Accounting. These groups can ensure that the newly added, changed, or modified terms are valid and determine if a new signed donor gift agreement is required. Documentation related to a gift fund that changes the fund terms or fund title should be saved in the appropriate file for the funds, which can be facilitated by Fund Accounting. Fund Accounting will also update the Fund Authorization with the updated terms.
A faculty member may have a conversation with a donor where they verbally discuss changes to the use of a gift. It is critical that any revised terms for the gift be documented to ensure alignment with the donor’s intent. Conversations can be forgotten or not communicated to parties that administer the fund. The documentation of changes to the gift terms provides the opportunity for the donor to confirm the terms of the gift that can then be added to the fund authorization and shared with colleagues that manage and administer the fund. Without an official change to the donor agreement and fund authorization that typically involves written acceptance by the donor and an authorized representative of Stanford, it is not permissible to use gift funds in any way other than that described in the fund authorization. Please contact the Restricted Funds Group in OOD’s Office of Planned Giving and then FMS Fund Accounting team for more information.
Order of Spending
When selecting a source of funding, it is usually best practice to use the most restricted funding available first. This practice avoids funds going unused over a longer period of time. Using the most restrictive funds first will help steward the “harder to use” gifts and provide more flexibility for other needs going forward.
- Research project funding sources: If there are two funding sources available: one which is specific to a research project and another which is for the professor's research in general, first use the specific fund for the research project identified in the gift document. Once that is expended fully, the research project's expenses can then be charged to the more general fund.
- Student fellowships: Rather than automatically reassigning a student to receive a particular fellowship each year, consider whether it is appropriate to reassign the student to a more specific funding source if their research, areas of study, or career plans have changed.
- Funds without contingency language: If there are two fund sources available for a faculty member, one that states the chair of the department may use the fund should the faculty member leave and one without contingency language, consider spending the fund without contingency language first.
Timely Use of Donor Gifts
Donors typically expect that expendable gifts will be used within a certain period of time and that payout from endowed funds will generally be used on an annual basis.
The best practice is to regularly, and at least annually, monitor expendable and endowment income fund balances to ensure monies are being spent in a timely manner.
- For endowment funds the OBI Revenue and Fund Management Reporting > Unused and Underwater Endowment Funds Dashboard will help you identify endowment funds that are accumulating unspent income.
- For expendable funds the OBI Revenue and Fund Management Reporting > Fund Trend Report will help you identify funds that are not being spent over time, resulting in growing fund balances.
Ensure that there is a plan in place for unspent expendable gifts or payout on endowed funds for the immediate or near-term use of these monies unless the gift terms indicate otherwise.
Any expendable gift fund or endowment payout balance that remains unspent after two years should be reviewed with the help of the appropriate Donation Relations Officer. Once a fund is fully spent down, the fund status should be shifted from “Active” to “Closed.”
When Faculty or Other Fund Owners Become Unavailable
If a unit anticipates a faculty’s (or other fund owner’s) retirement or departure, to the extent appropriate and feasible, repurpose funds under their management. Once a faculty member leaves Stanford, any funds limited to their use (i.e. the faculty member is mentioned by name in the fund authorization) may become unusable. As a result, to the extent possible, prior to their departure, take steps to use funds that are restricted to that faculty member's use and/or develop a plan for future use. Reach out to the appropriate Donor Relations Officer or Fund Accounting teams as soon as you are aware of a potential retirement or departure. These teams can work with the faculty member (or other fund owner) to help transition the funds or to verify if there’s appropriate alternative use.
In the School of Medicine (SoM), contact the Director of Finance and Administration for the department; they will work with the SoM Controller's Office to determine the most appropriate assignment. If no reassignment can be made, they will work with Medical Center Development to perform outreach to donors when necessary.
Net Investment Income Excise Tax Charges
The net investment income (NII) excise tax was introduced by the Tax Cuts and Jobs Act of 2017 and applies to investment income (dividends, interest, rents, etc.) and realized gains (including gains on appreciated gift securities). The tax became effective September 1, 2018.
Stanford Financial Management Services manages the tracking and charging of NII excise tax charges on gifts of securities. Schools and units who receive gifts of securities subject to the NII excise tax will see charges to the applicable awards typically in the same month close as the receipt of the gift.
Designated budget officers and finance managers have access, which is granted through Authority Manager, to view these charges in the Gift Securities Net Investment Income Excise Tax report located in the Other Financial Reports section of the OBI Financial Reporting Directory. Gifts of other types of Investments, for example stocks being held or Limited Liability Partnerships received, may produce an NII excise tax event, though this type of excise tax is not included in the report.
Requests to close a PTA (project, task, award) should be directed to the central office or department responsible for administering the PTA set up and close process. See the Topic Overview: Close PTAs for contacts and requirements for closing various PTA types.
- Donor Gift Stewardship Checklist
- Resource: Decision Tree: Order of Spending Sponsored Funds
- The Office of Development and the FMS Fund Accounting team are here to help. You can also reach out to the Restricted Funds Group in OOD’s Office of Planned Giving and Donor Relations Office for your school and unit.
- Additional Reporting:
- For information about revenue and fund management reporting, including details on fund statement, journals, transfers, fund trend, trial balance, fund variance, budget variance, budget transaction, endowment and pledge, refer to OBI Revenue and Fund Management Dashboard.
- To view information about pledges and pledge payments, use OBI Revenue and Fund Management Dashboard > Pledge Report.