Gift Documentation- Are Exceptions the Rule?

Below is a wonderful post from one of my friends and mentors, Debbie Meyers of Carnegie Mellon University. She gives us great insight on the wild world of gift documentation and is a wise and insightful resource. You can reach her at dkmeyers@andrew.cmu.edu should you have additional questions or thoughts.

The past several years, I have drafted gift documentation for new funds. At my disposal were these tools:

1.      a checklist submitted by the gift officer outlining the fund  particulars– fund name fund and purpose, donor, donor motivation, payment method and schedule, award criteria

2.      a gift document handbook, sort of a cook book for fund agreements

3.      templates and language for endowed, expendable, capital and deferred gifts

4.      old agreements

Everything I need is all right there in black and white, right? Just like a manual on how to raise a child or guide to building an atom bomb.

Just as in raising kids or building bombs, when it comes to documenting gifts, the exception is becoming the rule. Templates are only a starting point. Thus, because we often find ourselves in uncharted territory, it’s more important than ever to make sure that your agreements are accurate, precise and functional. Below are three common pitfalls and a suggested ounce of prevention.

1.      Inaccurate information

Not everyone is a stickler for detail. One gift officer spelled his $1.5 million donor’s name with every variation of capitalization, spacing and punctuation: bin Al Shanu, Bin Al-Shanu, bin al Shanu (fictional name). Another transposed his donor’s first and middle names. The agreement got up the food chain for signature and when the error was discovered, I had to take the hit.

Prevention: Regardless of who’s at fault, the buck stops with the agreement author. Assume nothing, verify everything.

2.      Payment vehicles

Donors use sophisticated payment methods these days: donor-advised funds, matching gifts, their family foundations. The IRS will recognize only one legal donor, and John Donor can’t pay off his personal pledge through money he gave to Fidelity.

Prevention: Teach your gift officers to proactively ask donors how they intend to pay. Also, review the donor’s record to see if previous payments came through any of these vehicles. Determining the legal donor can affect who gets the receipt and acknowledgment, so do what you can to avoid surprises at tax time.

3.      Unrealistic expectations

Donors, particularly scholarship donors, have good intentions…and you know how the first part of that saying goes. Some like the idea of a committee picking the winner of a student essay contest – a method that’s cumbersome and impossible to monitor. Some want to pick the recipient themselves, award it to an athlete or reward a student “of good moral character.” Last I saw, our admissions form doesn’t have a checkbox for good or bad moral character.

Prevention: To avoid having donors ask us to administer their funds in ways that are illegal, impractical or downright impossible, provide continuing education with your gift officers to make them aware of current laws, admissions procedures (if you’re in higher ed) and IRS standards that enable them to walk donors through the right paths at the outset. Create internet sites or publications that clearly outline your policies, for gift officers and donors.

A more philosophical pitfall I’ve run up against lately is the legalese rhetoric we use in our agreements – and I mean the Universal We, because I have yet to see a warm and fuzzy version of a gift agreement. The gauntlet has been thrown! If you think you change my mind, send me your template!

Ironically, gifts we deem important (large) enough to document can sound cold and off-putting to our biggest donors. Agreement can sound more like a contract than an acknowledgment of our gratitude and their intentions.

The problem, I think, is that many gift agreements and template language are like surf-and-turf or sleeper sofas – you get the worst of both, the best of neither. We try to document our gratitude to the donor then get into the legal housekeeping of when they’re going to pay and what happens if…

So my newest adventure is to revise the content and format of our agreements, to make the donor feel appreciated, the payment method clear and the fund easier to administer. I have some ideas but would love to hear yours. Check back in a month and I’ll give you an update.