When Mega Gifts Are NOT Great – Donor Due Diligence
The fundraising landscape has changed so much in the last 25 plus years, the length of my career. When I began those many years ago, we operated under the 80/20 rule (also called the Pareto Principle)--that 80% of our dollars came from 20% of our donors. The evolution of our industry now dictates a different way of looking at that ratio, more likely a 95/5 rule, where a mere 5% of our donors make up 95% of our philanthropic dollars.
What this has done has caused many nonprofit leaders to almost chase those mega donors. And while that's not a bad thing based on the data, going too fast or without due diligence is crushing.
Take the case of Florida A&M University. According to reports (Mega-Gift Fiasco at Florida A&M Shows Nonprofits What Not to Do) in May, the university announced a $240 million gift from a 30 year old entrepreneur. The philanthropic world was aghast as Florida A&M University was ecstatic. And then the whole thing fell apart. Investigations are occurring, at the writing of this publication, to figure out if the donor actually has that money. The challenge is that the University announced it and allowed him to be the guest speaker at their graduation ceremony.
Where was the due diligence? The questions that should have been asked about “odd things?” It should have come to someone's attention that this individual really had no giving history with the University. It should have been illuminating that this was a 30-year-old making a quarter of a billion-dollar gift -- not really the norm. A simple Google search would have indicated that there was a nearly 9 figure gift a couple of years ago that fell apart at another university. And through a more detailed search, there's very little public information, particularly financial data, about the donor or his company, making it challenging to know some basic economic figures that would have created a sense of confidence regarding the gift.
Anyone in this profession can understand the pure emotional rush of having the conversations with a donor, and with organizational leaders, regarding a gift that would have an earth-shattering positive impact. But you can't forget about the basics.
The consequences of this debacle include an immense public relations nightmare for the University, the loss of a job (and potentially career) of the head of advancement at the University, the University president under immense heat, a formal statewide legal investigation into the gift discussions/outcomes, and a black eye to philanthropy everywhere.
The old adage that you hear often comes to mind. Don't let the cart get out ahead of the horse. In this case, the moral is that great processes and procedures, even when there's great excitement or despair, can save individuals and organizations from doing “stupid.” Working from a complete “cone of silence” (as this gift agreement had strong language about non-disclosure) can lead to individuals who are unqualified without the proper information to make catastrophic decisions. And that even when the news is of an incredibly positive opportunity, protecting the mission of the institution, including the trust and credibility of a number of relationships, can never be forgotten.
