Gift agreements


Gift agreements have been greatly perplexing me for the last little while.

In the higher education advancement field it seems that “gift agreements” are the norm. These are formal documents which outline the pledge payment schedule for a large donation (as in the dates for donations to be made). They also articulate what the gift is for which is fair enough so that there is clarity about the purpose of the gift. But what concerns me a little is that they also outline in very clear terms what the donor will receive by way of acknowledgement, recognition and stewardship.

Having a written agreement is a little bit like having a contract I would have thought – and when a gift moves from a freely given gesture with no strings attached to a legal-like document with obligations of parties on both sides it seems to me that this can be veering very closely into the realm of sponsorship – and potential problems with the tax office.

The reason the benefits side of it worries me is that it creates an expectation – an expectation of a certain number of invitations to functions (such as lunch with the chief executive or Vice-Chancellor), an expectation of promotion of the donor – even if they are an individual – in terms of being written about in publications (such as a donor magazine) and perhaps might even offer the expectation of involvement in choosing scholarship winners.

An even larger dilemma is with the hypothetical instance of a gift agreement undertaking to recognise a donor with a large catered event which could well eat into the gift itself once food, wine and entertainment for say 60 people is factored in. For me, even promising an event announcing a large gift is a little bit unpalatable. An announcement is one thing – but a highly orchestrated event? Would you consider this to be an administration cost? I don’t think that I could.

I had never heard of gift agreements in the arts before this – and some quite high level arts donors I know who enjoy various lunches with chief executives have told me that they never signed any agreements and never had any expectation of hospitality. They also had no expectation of naming rights (which is a whole other kettle of fish/can of worms/how long is a piece of string issue) – but were pleased when something was named after them.

My question is – with a donor who is an individual – and therefore recognition of their generosity does not of itself constitute a material benefit – is it bad practice to state in an agreement that they will be recognised at every possible occasion? What if the organisation can no longer for some reason publish its magazine or what if the donor is not available for interview within the printing schedule? What would you think of running an ad in a community paper touting the generosity of a particular donor (particularly if that had been promised to them as a benefit of making their gift)?

I think that for a company who is donating this very clearly could be seen as publicity which the Australian Tax Office does consider to be a material benefit – and therefore negates the tax deductibility of the gift.

This kind of practise treads a very thin ethical line and I wonder if the problem is with the need to present to donors a document which looks like an agreement which has terms on both sides – ie the giver and the receiver – or if it is to do with a lack of understanding of some of the development staff as to the difference between sponsorship and donations. Sometimes the benefits are touted in writing even before the agreement is reached – in gift proposal documents. In higher education counting the philanthropic contribution is an important KPI and both CASE and the Group of Eight have strict guidelines about what can be counted in this tally. I wonder if there is sometimes a push to call things gifts even though they look like sponsorships to be able to compete in this environment? Perhaps this is where the grey areas begin to get really blurry.

There is no problem with supporters receiving the kinds of benefits offered – the problem is whether they understand that a tax deductible gift should have no expectation of anything in return.

What do you think about this issue? Is it all a matter of wording? Or is whether a gift is a gift or a sponsorship even important? After all a rose by any other name would smell as sweet.

I look forward to your comments on this one.

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About ozphilanthropy

#Philanthropy. Posts by Sharon Nathani. Consultant, blogger & committee member/grantmaker @Impact100Melb. Board member Outer Urban Projects and Pathways Melbourne. Learning more to share with you through philanthropy studies at Swinburne. Former Executive Officer Inner North Community Foundation.
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