A new breed of benefactor: alumni, trustees drawing up contracts to direct how their gifts are spent

University Business, Jan, 2005

At a time when corteges and universities rely on fundraising to make up for budget shortfalls, the donors who write those big checks are applying some added pressure. Paul Glenn, the donor who sued the University of Southern California for allegedly misusing his $1.6 billion gift for biological research (and who received a settlement earlier this year), is one of a new breed of donor. Glenn insists that his gifts are "contracts" with universities and other nonprofits. He and other wealthy benefactors now draw up literal agreements on how their money will be spent.

Some call these agreements "memoranda of understanding," says Ann Neal, president of the American Council of Trustees and Alumni. The council formed in 1995 after Yale University (Conn.) returned a $20 million gift to donor Lee Bass, urges trustees, alumni and benefactors to monitor how their gifts are used. The council's book, The Intelligent Donor's Guide to College Giving, offers guidance on points to consider before a gift is given.

But IHEs are drawing up their own agreements. Duke University (N.C.), for example, made clear in its recent $2.6 billion fundraising campaign that generous donors would not be allowed a say-so in how the school is run. The rule is necessary in light of other high-profile cases, such as the ongoing battle between Princeton University (N.J.) and the children of benefactors Charles and Marie Robertson. Four decades ago the couple gave the Ivy League school $35 million to prepare graduate students for government work. The Robertson children contend that the money was not used as their parents intended. They claim they are entitled to a reimbursement from Princeton. But they don't just want $35 million. They are fighting for at least $600 million, which is the total value of the gift plus the income earned on the original sum.