Stewarding Gifts from our Donors
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Gifts are an important funding source for the university’s current and long-term operations and infrastructure. In the most recent annual financial report, the university reported $1.75B of gifts and pledges received in fiscal year 2022. This amount represented over 60,000 gifts across a variety of gift types including endowment, capital, expendable and others.
When a donor makes a gift to the university they often stipulate how they would like the university to spend the funds, such as on specific initiatives or programs, professorships or buildings. Failure to follow the gift terms or appropriately steward the gift at any point during the gift’s life may result in the university having to return the money, a loss of donor trust and future gifts, and/or reputational risk to the university.
In this newsletter, we will illustrate some of the major risks associated with stewarding gifts using scenarios based on real (anonymized) situations. We will also provide some best practices to mitigate these risks. The scenarios will focus on:
- Spending in accordance with the gift terms
- When a donor’s gift is unspent
- Navigating difficult and uncertain situations
We have also updated the Donor Gifts Fingate resources and created a checklist which consolidates some of the best practices from these resources related to stewarding donor gifts. I hope you find these resources helpful and take the time to provide feedback on how we might further our support. Thank you for all that you do to help steward our donors' gifts and keep the university safe by mitigating financial risks.
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Anne Sweeney-Hoy
Senior Associate Vice President of Finance
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Donor gifts: Best practices and lessons learned
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Stewarding the donor’s gift is important throughout the gift's lifecycle: from understanding and documenting a donor’s wishes to receiving the funds and spending them, all the way through the end of the gift’s life, or in perpetuity for endowment gifts. Below are three scenarios based on real situations that we have used to highlight risks and best practices related to stewarding donors’ gifts.
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Scenario 1: Spending in accordance with the gift terms
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In 2006, an anonymous donor made a gift to the university to establish an endowment to “support a world class experience for people with disabilities while they are at the university. The Board shall use the endowment payout from the Fund to provide superior tools and equipment to these students.”
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Further, in 2008, discussions with the donor were communicated to the fund administrator related to specific services for students with disabilities.
In 2014, the fund administrator who had managed this program since its inception moved to another department. Her successor, trying to save costs, declined to purchase electric wheelchairs for several students. This situation angered some staff who filed a complaint with the university's compliance hotline and upset students who expressed concerns over administration of the gift in the student newspaper.
As a result, there was a review of the situation. After conferring with a number of employees involved in establishing this fund and reviewing donor correspondence related to a list of approved expenses, it was found that certain communications with the donor were not formally documented in the gift agreement or fund authorization, including the allowability of expenses such as electric wheelchairs for students. In addition, review of expenses charged to the fund identified certain staff salary expenses that were incorrectly charged to it. As a result, funds were not spent in accordance with the donor’s intent and the purpose for which the fund was established.
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The university reimbursed the fund for the inappropriate expenses, the donor lost faith in the university’s ability to fulfill the purpose and the university subsequently transferred the entire fund to another charity to be administered “in accordance with the donor’s original intent.”
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Best Practices
- Schools and units in partnership with the Office of Development (OoD) should ensure that the gift agreement is complete and appropriately documents the full understanding of all parties as this will form the basis of the Fund Authorization and support the accurate transfer of knowledge to successive users of the Fund. New, changed, or revised terms must be reflected in an award's fund authorization.
- After the gift agreement has been signed, share any new donor correspondence that might change or even slightly update the terms of that agreement with the Restricted Funds Group (in OoD’s Office of Planned Giving) and FMS Fund Accounting, and then follow up to make sure the Fund Authorization has been updated as needed.
- Regularly review the Fund Authorization for the funds you manage to ensure you understand the gift terms.
- If you are unclear about the gift terms, contact your Dean’s Office and Donor Relations Officer and then FMS Fund Accounting. They can help with a review of the original gift documentation when needed.
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In 2010, a donor made a $250,000 expendable gift to the university to support five annual wellness conferences where researchers would present data on the latest developments around nutritional immunology.
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The conferences did not take place and the money remained in the fund. In 2020, at the request of the faculty, and after working with the Donor Relations Officer and the Office of Planned Giving, the unit’s development officer contacted the donor explaining that they did not run the wellness conferences and asked permission to spend the monies on a workplace efficiency study instead. The donor questioned why the original gift was not spent and why it was unused for 10 years.
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The donor requested that the money be returned.
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Best Practices
- Regularly, and at least annually, monitor expendable and endowment income fund balances to ensure monies are being spent in a timely manner.
- Any expendable gift fund or payout balance that remains unspent after two years should be reviewed with the help of the appropriate Donor Relations Officer.
- When identifying funding sources, generally you should use the most restrictive funds first. Using the most restrictive funds first will help you steward the “harder to use” gifts and provide more flexibility for other needs going forward.
- If a gift is too restrictive or needs to be modified for any other reason, reach out to the Office of Development Restricted Funds Group (in the Office of Planned Giving) as soon as possible so the donor can be contacted in a timely manner. See Changed Terms of a Gift or Endowment Award or When Faculty or Other Fund Owners Become Unavailable.
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Scenario 3: Navigating difficult and uncertain situations
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A department was looking for funding to support student summer research travel. Professor Smith, the department chair, was responsible for various aspects of this program, including its funding. He contacted Sue Adams in the Dean’s Office seeking additional general funds support.
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Uncommitted general funds were tight in this unit, and Sue was aware that this department, like several others, had a tendency to not spend their restricted funds. Therefore, Sue worked with Stu Ard, Professor Smith’s department administrator, and identified a department endowment income fund with a large balance that could be used for this purpose.
Sue deferred the professor’s request for general funds, informing him of the available restricted fund and included a copy of the Fund Authorization in her communication.
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Professor Smith appealed the decision directly to the Dean. Sue had made the Dean aware of her decision and the Dean concurred. The Dean affirmed the original decision and encouraged the chair to work with his administrator to gain a better understanding of the funds available to his department.
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Best Practices
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When identifying funding sources, usually use the most restrictive funds first. Using the most restrictive funds first will help you steward the “harder to use” gifts and provide more flexibility for other needs going forward. See Order of Spending.
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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. See Timely Use of Donor Gifts
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To ensure that funds are spent in accordance with the donor's intent, refer to the Fund Authorization when determining how a fund can be used. Gift terms are available in the fund authorization for the fund in which the gift is allocated, which can be found in the Revenue and Fund Management Reporting dashboard (use the “Award at a Glance” tab), Fund Authorization or ofweb.stanford.edu via the SU inquiry Tools and Forms (the “Fund Title Query” tool).
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Initial inquiries regarding spending from a fund should be made to your local Dean’s Office. If they have further questions, the Dean’s Office can reach out to the unit’s Donor Relations Officer or FMS Fund Accounting.
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If an individual feels uncomfortable with the guidance regarding the use of a fund, there are several resources available to help resolve the situation, including your local Dean’s Office finance staff and the appropriate Donor Relations Officer. If these offices need additional help, they can reach out to the Office of Development Restricted Funds Group (in the Office of Planned Giving) and FMS Fund Accounting. The Ethics and Compliance Helpline and Ombuds Office (or School of Medicine Ombuds for SoM related issues) also have processes to report a concern anonymously.
These scenarios provide key considerations and best practices for stewarding gifts. These best practices and additional information and resources can be found on our updated Fingate page on Donor Gifts.
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Year in Review: Resources supporting financial stewardship
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Over the past year, Stanford Financial Management Services (FMS) focused on providing the financial community with the tools and knowledge needed to support financial stewardship of all our university resources.
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The efforts also built a common understanding of the key requirements around all our financial activities so that we can collectively operate more efficiently and effectively. Our time is also an important resource that we must steward, so we want to ensure that the university community is equipped with the tools and resources to facilitate financial transactions as quickly and easily as possible. Read more and access the resources.
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Don’t miss out on the latest news, updates, and tools to help you stay informed.
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