Episode 302: The Why and How to Say NO to a Philanthropic Gift
I love Mr. Rogers. So let me steal from him. It's another beautiful day right here on this edition of Around with Randall. I had something interesting happen to me with a client. Doesn't happen often. And it sparked an immense discussion internally with an organization that's growing its philanthropy into major gift opportunities. Scaling, so to speak. And he brought us all the way to the CEO, basically.
And what was all this about? What was the big issue? What was the challenge? Rejecting a very large gift. And it was cash or cash related bank transfer and the gift needed to be rejected. Which brings us to our subject today. Talking about something we don't see very often in our world is the needing or the process of, hey, we can't take this gift.
Today we want to discuss why this is important. What the challenges are in doing so. Why are we feeling pressure at times to think about this in kind of odd circumstances? And as we always try to do at the very end, six tactical things that you should think about to ensure that you don't run into a problem where you take a gift you don't want, and it's a little more robust than you might think.
And kind of thinking about this, I don't read from a script I've got, you know, note card or two. It brought up a lot of thoughts about, hey, maybe there's a lot more to this than we realize. And thus what we're going to talk about today here in Randall's little 21st century classroom. So as we tend to do, we'll start at the top and kind of build down into the tactical.
The big picture is, is why is it difficult to say no. Well, the first is pretty easy. A lot of our nonprofits need the money or work in healthcare, education, social service. I don't know one of them that sitting there going, oh, we're flush. We don't have a problem, which indicates a real pressure on the gift officers, on the organization, on the advancement team, on if done well, the CEO, board members to try to find opportunities in philanthropy.
No big surprise. And then in this case, as I was mentioning at the top, this was a massive seven figure gift. Opportunity could have been well used. And in doing so, the organization had to have a really hard conversation because they needed the money. Number two is kind of this subset of what we just talked about needing the money.
How about gift officers meeting their metrics. This blows this particular chief officer chief philanthropy officer's goals right out the door. I mean, it was perfectly done in terms of execution. This was not a layup gift like nothing happened or there was a challenge or, you know, hey, you know, we just kind of showed up and there was a check.
This was work. It took time to get to those levels even though they weren't noticeable in the beginning. Like any really good gift officer, worry about more of the passion than the dollars. Then began to realize, hey, opportunity here. We need to make sure that we get the chance to bring this gift in. And then we hit a roadblock.
There's also a psychological issue here. As I kind of let off in this particular podcast, is the discussion around it seems antithetical. I mean, that's our job. I mean, I spent almost 30 years doing this as a practitioner and a consultant and to say, no, we're not taking your money. Seems psychologically wrong. But there's implications when we do this that we should probably talk about.
There's also the fear of donor, of rejecting donors and what that might do to the relationship. In this case, it did losing future gift opportunities. That's a fear like oh my gosh, they have more. Why wouldn't we can't afford to lose this pipeline? We worked hard to build it up. Think the real question in this kind of overall discussion is can a gift, any gift, particularly significant gift, actually cost more than it's worth?
And the answer is yes. So let's take just a moment and talk about the consequences of not having a plan, something that helps you kind of work through this discussion and issue. And it doesn't happen in Austin. But if you don't have a process kind of lined out, what you end up with is a lot of haphazard, instantaneous, maybe 1 or 2 person without greater thought decisions.
And those tend not to work to your advantage. So the first is when we have consequences. What's consequence of not having. You get reactive decisions rather than based on financial pressure or metrics or whatever, rather than contemplate of thought. It's usually the unintended consequences that get us. I tried to teach that to my kids, my 13 and nine year old you.
If you don't step back for a moment and kind of think, and this is where I love the Jesuit thought process that I where I began my career raising money for a Jesuit high school. The art of reflection. Taking a moment. If you don't see the unintended consequences, that's one thing. But if you don't even think about it, that's another.
The second is, is that if you don't have a plan and we'll talk more about this because one of my favorite discussions does the gift create some type of unsustainable financial obligation down the road? It's not always reputational issues that we're talking about. Sometimes it's organizations accepting a gift and going oh my goodness, what do we do now that money's run out or it's not enough?
Or you accept a gift that you can't handle. And we'll talk about both of these here in a few minutes. On the tactical side. It might be donor restrictions that cause you an issue if you don't have a kind of a plan, meaning the donor puts such limited restrictions on funding or usage of it that all of a sudden you're like, now what do we do?
There's a legal term called sigh pray, which really means as close as possible. And really what it means is, is that sometimes we run into situations where the restrictions are such. We actually can't physically use the gifts anymore, and that doctrine allows us to have to actually go to court to figure out how we can actually use the money in the closest, meaningful way.
A gift that brings reputational concern or cause or issue might bring branding challenges. Does our affiliation with someone possibly cause us strife?
The one that gets me the most often that I think that we should be able to handle, but we certainly don't, is this idea that when we don't have a plan, there becomes internal conflict, philanthropy, screaming we need to take the gift. Finances sitting there going we need the money. Leadership, legal, the board compliance is like, whoa, we don't all of these things really cause problems which lead to the damage.
Donor relationships. When we can't articulate these expectations. The goal here should be to have the plan. And we'll talk about some of the tactical things that come from this to help stop this. But it's really a protection of the organization and more importantly, protection of the gift officers. We'll talk about a gift acceptance plan is kind of the first tactical step.
I always talk about gift acceptance policies because those delineate, for the most part, what gifts we take, how we take them, what the process is for complicated gifts as a protection for gift officers not getting out over their skis. It's not meant to be a harbinger of negativity or hey, we're holding you back. It's hey. Here are the limitations.
And if you ask them, you won't get yourself in trouble to damage donor relationships. And by the way, that will also help you not only the gift officer, but the organization and everybody in it. So let's kind of jump into the tactical six things that you need to think about to create this plan, this process to have to at your ready to make sure that you are prepared for moments where you might have to say, hey, hold on a minute here.
As mentioned, number one, a robust gift acceptance policy is just quintessential number one against acceptance. Policy will restrict what kind of gifts you take. And I mean that in two ways. Number one, overall, I have a number of partner organizations that I work with where they don't take firearms, they don't take certain cars because they don't want to deal with it.
That's okay. Just the conversation about why or why not. It's the important piece. The second part of it is what types of gifts are restricted from being accepted without some type of review, which will talk about what the like in a moment. Then we don't get the right people in the room to say, particularly with I'm talking about talking about like a $25 check.
But we'll get to that in a moment.
I'm talking about gifts like real estate. And I mentioned earlier I had one of my favorite stories is not even a client. Just some organization I know fairly well. They accepted a hotel, and they ended up losing their shirts on it because they can't run a hotel. And what it ended up happening was it cost everybody money. The point is, is you want a process that's built into clearly identifies what the approval process is when you don't need approval cash, checks, stocks, bonds, things of that nature.
If the gift is over a certain level, do you need a profile review? Which is where we got into this situation that we started the show with. We went through a process and I kind of guided them through it. It was a large enough gift, and it was an odd number in terms of how quickly it had moved, although there was a lot of work to get there that I said, hey, you know, I don't know this person.
You know, this person does any. Nope. No new donor and heartfelt, genuinely believed in the mission. And what we found in the profile review was, oh, oh, there's some things that maybe we weren't aware of. Where is that line for reputational review and that process save this organization because it wasn't the complication of the gift, it was the reputation of the person giving it.
And we are all familiar with the issue that came out of the absolute tragedy of producing billions of pills in oxy cotton, oxycodone, and what that family trying to be generous people trying to give the money back. Like, oh my gosh, we can't be affiliated with this sometimes. Again, you can't foresee everything, but do you have a process in place?
And that starts with a gift acceptance policy number one. Number two is do you have an internal quick process to make sure we kind of dot our eyes and cross our t's. And that's really what I was talking about with the profile review or the research on the donor. It didn't take me about five seconds with Google. I was not a highly complicated process for me to find some stories, and that led back to a conversation, which means you have to really begin to think about what the donor's expectations are, what the organization's expectations are, what are the financial implications, what's the implications if that gets out to public?
How do you make all of this work together to make sure you're making the right decision? Well, who needs to be in the room for that? That is the evaluation process. Which brings us to number three. You need a decision team. Who makes that decision. Is it 1 or 2 people. And I would really advocate not want maybe some board representation.
Finance needs to be in the room. We'll talk about another issue here in a moment. That finance is probably driving legal counsel a president board. Who is this? Is there a place in the gift acceptance policy that when certain limits are reached, dollar figures, complicated gifts, something comes up in the review? This has to go before the board.
There's lots of implications, but I'm not saying there's a good or a bad or a right or wrong answer other than wrongs, probably we don't think about it. We've never talked about it. So two is a process. Three is a group to drive that process. Number four is there needs to be some kind of conversation around the true cost of the gift.
And I mentioned this a few moments ago in terms of finance and mentioned earlier in the show, I've been a part of multiple conversations. This is especially true in healthcare, where somebody has the best of intentions of starting something. And my favorite example is either music therapy or pet therapy. There's medical science that says having music therapy, having music played or be a part of a patient's experience during a clinical need or pet therapy, meaning you bring dogs or pets.
I see dogs most often into the hospital to play with pipette by the patients, kids and adults. There's medical sciences. It's really strong, but you don't get reimbursed for that. And so it's got to be an extra in most cases. And here comes Mr. or Mrs. Generous Donor who says, I want to do a pet therapy program and philanthropy and the organization takes enough money, let's say, for a year or two, and by year 2 or 3, the CFO is like, I haven't got extra money.
Now, how do we maintain this program? The point is, is that we have to look at the unfunded expenses, the unfunded mandate that might come if we start something so, which pushes us into maybe endowment conversations. And I have this exact why I use the pet therapy exact circumstance with a client where this exact discussion was started as a small gift, a low six figure gift.
It would fund a program for 2 or 3 years. And I said, wait a minute. Are you this is new for your hospital, good for your hospital. But where's finance on this? And once we ran it up the flagpole in the finance office and CFO, that's what's the response. And I had kind of predicted and thought it would happen.
What about your three? I care for whatever you're the end of. The money would run out. What are we going to do? That pushed us back. And we'll get to this in number five. A conversation with the donor to explain this, which then elevated the conversation to actually a multimillion dollar gift, which became an endowment. The point being is, is, is that you have to consider the gifts implications.
Not today, not just tomorrow, but down the road. If you're having a scholarship endowment, well, that money can always be used for scholarship. But if there's cost implications personnel program, you need to think about it because you might have to say, wait a minute here. So number four is to really think about the calculated costs that are kind of affiliated with certain kinds of gift levels or gift opportunities.
Number five, I was connecting at a moment ago in that story about going back and saying, wait a minute, is we should be renegotiating these situations, if at all possible. Before rejecting, can we explore alternative options, meaning can we lessen restrictions? Can we increase the gift level towards endowments because we can't have unfunded mandates? Are there different funding structures?
Meaning can we have some type of blending opportunity if it's a naming opportunity? Things of that nature. How is that? Can we do that so that there's some cash coming in? That's another famous story from a major university where they named a college, and then they didn't make all the payments. Now the universities got egg all over their face because they're pulling the gift back.
How do you set up these parameters to ensure your organization is protected? It's not being mean. It's being constructive. And when you have these, you're looking for solutions. When you go back and renegotiate along the interests of the donor, along the organizational need, fitting with the mission, if that's possible. And they're just sometimes there's some nos.
Number six, develop a respectful, defined process for when you say no. Some organizations aren't equipped to do a pooled income funds or a charitable renewal. Charitable trusts. Kratts or crust remainder trusts. The point is, is that not everybody's in the same place. We always think about the enormous nonprofits. Sometimes it's the smaller nonprofits that have this issue, because the dollar figures are lower for the gifts, and the implications can be greater.
So we have to start with we're really appreciative. We'd like to as mentioned in number five, start with could we look at some other options because here's our concerns and here's the organizational criteria that we make them and the process that we go through. And the group that was a part of that discussion. And we might even have some alternatives, things that we might recommend that might be possible, that would preserve that relationship if at all possible.
But at the end of the day, and that's kind of what happened, going all the way back to where we started with this very large seven figure cash basic gift is, is that they wanted naming opportunities. It was important to them and they wanted them for pure reasons of stewardship. It wasn't they weren't buying anything. But when you added it all together, that name in that community, which wasn't enormous, was going to cause some problems that we got the board involved.
We had the CEO, we had a decision team. The gift acceptance policy didn't really cover this. So the, you know, the crazy consultant that you're listening to here kind of guided them through the conversation around, hey, at gifts at certain levels, we probably need to think about this. They approach that donor and said, look, if your name comes off stuff and it's more anonymous, we might have a conversation, but at the end of the day, it just got too complicated and the reputational risk stopped the particular donation.
This can happen with real estate. I had a situation where it was a lumber yard, which like, well, it's a big deal. Well, lumber yards 150 years ago or 100 years ago had all on them. And it was a concern about being part of Superfund. Who you're doing environmental two studies and finding all in the ground like we can't take this gift.
It's going to encumber the organization, possibly to have to do cleanup gas stations. It can be things like the hotel I was talking about, like, we don't do that as a core competency. We shouldn't take that. Go have them go sell it or create some type of charitable trust where we own it. We sell it right away. All these things are about having the appropriate conversation and being firm, but being incredibly appreciative for the thought.
At the end of the day, these six things, from gift acceptance policy to having a process and a team number three that can help you kind of evaluate it. Number four, to correctly evaluate the cost. Number five, to really renegotiate before you reject. And if you have to say no. Be respectful. Be polite, but be firm. Try to find out alternatives, whatever it takes.
Because at the end of the day, there is no compromise for our brand. The cost? Too much to build, built on trust. And if we destroy that trust at times, we then have this chasm of opportunity because we can't get people to buy in one incredibly tactical thing. If you did all of these things, they're all perfect. Every gift agreement, every gift agreement should have something around a morality clause.
Meaning if something happens in the future, we can pull recognition, we can give the money back. And that's the situation in some cases, in some of the donations or philanthropy that came out of the family with the OxyContin and the pharmaceutical company that they owned. Some organizations didn't have these morality clauses. So even if you do it all correctly, there's a fallback position that your gift acceptance policy can say, look, if something happens in the future and there's negativity, we reserve the right as a formal vote to remove the recognition and also possibly to give the money back.
Our responsibility is not just to secure gifts. It's not just to drive revenue. It's to ensure that the process in accepting gifts is really fulfilling to the organization, to the donors, the people that we are making promises to in terms of stewardship. If that's a part of this conversation, and most importantly to our mission and our the brand and the trust that is the lifeblood of who we are.
If you think about these things as you go through these and these six tactical things, items that can help you, you'll alleviate a lot of problems. And again, it doesn't happen often, but it only has to happen once for it to have a negative impact on the organization you work with. Believe in the mission that's important, the mission that serves the community.
And I don't recommend trying to not trying, but allowing that to ever happen if at all possible. Don't let a lack of preparedness on your part tarnish the reputation of the gift officers, the CEO, the organization, the mission, the board because we didn't think about it. Don't forget. Check out the blogs two per week Tuesday. Thursday. I would say this and I apologize.
It's like a broken record. I'm stunned by how many people are reading them. I've had to do some work on the on the website and have been required to kind of see some things I didn't really want to know, and I'm just stunned. I'm honored if they're helpful or enlightening, that's great. I write them because I like to write and I see things and hopefully they're helpful or make you laugh or just go,
That's how it philanthropy backs us blogs. And if you'd like to get a hold of me, it's podcast at Hallettphilanthropy.com. Philanthropy. Nonprofits. Charity. Their part of hope and people who are struggling. People who are seeing the world maybe be a little bit up against them as they see it. They feel it need hope. And that's the greatness of nonprofits, of philanthropy, of working with donors to ensure that we have the opportunity to present some hope.
And that hope goes toward my favorite saying, the third group, people who are wondering what happened were people who make things happen. You're someone who makes things happen. You work with others who do the same, and you are helping the organizations, the people who are both wondering what happened. I mean, you're trying to help others. It's that chasm between nonprofit or between for profit, for you and government.
We fill that gap. Don't forget the value delivered. Don't forget how important it is. Because if you do it well, you change lives, your organization change lives. That's worth going to work every day. Trust me, it will make you rich, but in all the right ways. And that's the way I feel each and every day. That's just a small part of this great industry.
I'll look forward to seeing you the next time. Right back here on the next edition of Around With Randall. And don't forget. Make it a great day.