The Issue
Most donors are happy to give their gift, receive their tax deduction and be done with it. Unfortunately some donors want to attach strings to their gift. Perhaps they insist on it being managed in a certain way. Maybe they only want it used for specific purposes. With this legal and financial briar-patch in mind, I offer the following tips. Use them as talking points with your board and professional advisors.
1. Seek professional counsel.
Get advice from an attorney and/or an accountant. Pay for it if you must. All too often I see a posting on ISED-L or elsewhere asking for advice on legal and accounting issues. While it's nice to know what they do at St. Swithun's, that practice may not apply to your school. A professional can guide you and your board now so that you avoid legal and financial consequences later on.
2. Confirm understandings in writing.
If Dr. Jones gives your school $10,000, the thank you letter should not only acknowledge the gift but also restate the conditions of the gift. Again, your legal counsel can draft appropriate language suitable for most gifts. She will be glad to draft specific language for special gifts.
3. Spell out PTO fund-raising roles.
Where would we be without parents raising money for our schools? The problem arises when one or two well-intentioned parents decide that they want to control both the fund-raising AND the disbursement of funds. Get your lawyer to guide you if this issue arises. Everybody needs to understand their role and act accordingly in a spirit of comity and harmony to benefit the school.
4. Tax-deductibility questions.
Put the onus on the donor and the donor's lawyer when deciding the value of non-cash gifts. Real estate, art, stocks and bonds - all of these have their place in the charitable giving world. But they also bring sophisticated problems to the table. Make sure you run such things by your attornies BEFORE you accept the gift.
5. Don't use the money for a purpose other than the intended one.
That's pretty much what happened at Princeton University with a major gift from the A&P heirs. Read that sad story and you will understand why it is extremely important to use gifts for their intended purpose. If a change is required, assemble the lawyers and hammer out a new understanding.
Disclaimer: I am not an attorney nor am I an accountant. Seek competent professional advice for all your legal and accounting matters.
