Every fundraiser should cringe when offered a restricted gift. Sweet Briar College found out the hard way.
$56M out of their $84M endowment is restricted. That’s 2/3 of its endowment, but even more if you consider past, present and future earnings on those funds. And so it makes sense that the recent reprieve for the women’s college, which was about to shutter its doors, included an effort to waive some of those limitations.
Restrictions are popular with donors. Who wants to give millions for playing fields and find out they’ve been used to renovate the cafeteria? But the overarching driver should be delivering on mission. And tying the hands of leadership in making decisions for today’s students/patients/recipents etc. can, in fact, compromise the overall mission.
Of course, many donors have personal projects that motivate them to give. And tapping into those interests is part of Fundraising 101. But even when donors have the institution’s mission at heart, changing times and future needs are hard to plan for–in Sweet Briar’s case, many gifts were made over 100 years ago.
So how can a nonprofit institution ensure that funds raised today support the mission tomorrow?
1. Pose the What If’s. When speaking to a donor interested in a restricted gift, offer some examples of unforseen, mission-focused challenges. Use examples from other segments of the sector: Food banks once conceived to serve the urban poor are rethinking how to feed suburban underserved populations. Girls schools are grappling with how to meet the needs of transgender students. Pediatric hospitals are figuring out how to serve HIV survivors now in their twenties and thirties. Environmental groups focused on once endangered species are now pivoting to tackle the massive implications of global climate change.
2. Be Proactive. Board leaders need to think ahead by staying engaged with donors. Before a donor becomes elderly or infirm, they should discuss how restrictions can be eased to support original intent (as tied to mission) without limiting opportunities (the vision for the future of the nonprofit).
3. “Self Insure”. If a substantial gift is permanently restricted due to the donor being deceased, the financial leadership should target raising a percentage of that base gift every year to “insure” the institution against too much imbalance in the portfolio, much like they already adjust the balance in stock, bond or real estate holdings.
4. Just Say No. Occasionally, institutions have bravely declined large gifts, because they knew the restrictions could substantively alter their brand for decades to come.
Restricted gifts can be a godsend. But they can also kill your nonprofit brand, which means how you deliver on the mission for those you serve. Hopefully Sweet Briar’s experience will be a shoot across the bow for any other nonprofits–not just colleges–with too much restricted giving putting their mission at risk.
Amy DeLouise works with nonprofits on telling their mission story through video and other content. She has chaired nonprofit finance comittees and knows what it’s like to be responsible, as a volunteer board member working with staff, for overseeing endowment finances.