One IHE that has had to navigate the politics of an institution-changing gift with its own spending rule is Yeshiva University in New York City.
In 2005, Yeshiva received $100 million from Ronald P. Stanton, a longtime supporter of the institution who ran a successful chemical company. It was its largest donation ever. As a youth, Stanton had been offered a scholarship to Yeshiva to study for the rabbinate, but he turned it down to pursue business. Still, he maintained his affinity for Yeshiva by serving on the board of trustees for 30 years, including a stint as chairman.
Because Stanton knew Yeshiva and its mission, he had some creative ideas for using his money to help the campus grow. Instead of a straightforward endowment contribution or named building, Stanton suggested an endowment gift set up as a short-term revolving fund, allowing the campus to start up research, professorship, and building projects before other donors were identified for them.
"It's a creative, nontraditional form of an endowed gift," says Daniel T. Forman, the university's vice president for institutional advancement.
The Stanton gift can be spent faster than Yeshiva's endowment as a whole as long as the replacement gifts materialize, and Forman says that other donors have stepped up because they are excited about what Stanton's donation means for the future of Yeshiva. "We're beginning to see the effect of Ron's magnificent gift," Forman says.
To head off foolish spending, Yeshiva's president, Richard Joel, appointed an internal academic committee chaired by the provost to screen proposals from Yeshiva's different schools, reducing the bureaucracy that might stifle the proposers' creativity.
At the same time, Yeshiva's development staff gives Stanton a customized annual report to show him how his gift is being used. Stanton does not have any authority to approve the spending, though. "It's a vote of confidence," Forman says.
Yeshiva's experience is a good model for other colleges and universities that may find themselves facing a potential windfall. Having a donor who has spent years working with the campus as a volunteer can lead to creative, responsible gifts that pay off for generations to come. They involve effort for all involved, but that work leads to better advancement, endowment, and spending decisions.
SEEKING CAPITAL GIFTS INSTEAD
One alternative to having endowment funds with a separate spending rule is to direct large donors toward capital projects. This April, New York University received a $100 million unrestricted capital contribution from Kenneth Langone, a longtime member of the board of trustees of the medical school, to launch a major construction program for what is now known as the Langone New York University Medical Center. The plan is to spend it all to make up for years of underinvestment in facilities.
"The gift, essentially, was a gift to transform the medical center," says Harold S. Koplewicz, MD, vice dean for external affairs at the medical center. To help the university community understand both the power and the limits of the donation, the development staff distributes a regular philanthropy report explaining the purpose of these types of gifts, the goals, and the progress.
"People see that we're putting together a systematic plan," Koplewicz says. They also understand that everyone has a job to do to create the major changes that the gift enables.
Ann C. Logue is a Chicago-based freelance writer who specializes in covering finance.
