Why Would an Institution Refuse a Charitable Contribution?

Every institution needs additional resources. Higher education faces historic challenges to viability and ensuring student success. During times of scarcity, and perhaps even critical need, accepting every contribution presented is tempting. While it may seem foolish or even counterintuitive to refuse a gift, in what circumstances should an institution reject an offer from a prospective donor?

• Cost to operationalize: Before accepting any contribution, and particularly gifts of tangible personal or real property, a cost-benefit analysis must take place. The value (both monetary and usefulness) may be negated by the ongoing costs of using and maintaining the gift. For examples, accepting a million-dollar yacht for research opportunities may be prohibitive due to the operation, maintenance, insurance and storage costs. In another scenario, what if your institution accepted a gift of land only to find out it could be considered a Superfund site and required expensive environmental remediation?
• Illegal purpose: Some proposed gifts might appear acceptable and even beneficial at first glance. But what if someone wanted to give funds for a scholarship restricting the award by gender, ethnicity, nationality and/or religion? These conditions are discriminatory. The gift should be rejected, or the restrictions should be renegotiated to be inclusive.
• Tax code violations: According to the IRS, once a donor gives a gift to the institution, the donor relinquishes the power to direct the gift further in a substantive way. For example, a donor may provide funds for a scholarship but may not be the sole decision maker on who receives the scholarship. If the donor makes the decision, the gift is to the student and not to the institution. Relatedly, a donor may give money to build a building but should not be permitted to direct or select the architect or builders. Also, there may be a conflict of interest if the donor makes the decision and has a financial interest in the company.
• Ill-gotten resources: Consider the costs of accepting looted cultural artifacts or money obtained through the exploitation of others. Recent news articles provide insights: the Metropolitan Museum of Art recently repatriated two bronze artworks plundered from the kingdom of Benin by the British in the 19th century. Numerous museums in the U.S. and the U.K. have now either returned or refused gifts from the Sackler family due to their company’s role in perpetuating the opioid crisis. Many institutions have removed statues and naming rights because the namesake was associated with wealth gained through atrocities such as slavery or views supporting the same.
• Unethical intent: One needs to look no farther than the 2020 news about the University of California, Berkeley’s Genealogical Eugenics Institute Fund to understand how vital it is to scrutinize gift intent and reject gifts that put the institution’s intellectual authority and ethical standards at risk. All donations should be reviewed to ensure the gift’s intent represents current scholarship and the tenets of diversity, equity and inclusion.
• Unacceptable donor behaviors: Some institutions may look the other way when prospective donors exhibit unacceptable or unlawful behaviors. Examples can include berating, threatening or harassing employees and expressing derogatory and discriminatory views. What does an institution do when a donor is accused or convicted of sexual assault or other crimes? Recent examples of how universities addressed donor behavior include Temple University and Bill Cosby and the University of Pennsylvania and Michael Steinhardt. Institutions must consider how a prospective donor may impact the institution in terms of reputation, liability and well-being of its employees and students.
• Jeopardizing academic freedom: In general, but with exceptions, the freedom of intellectual inquiry and debate (see the American Association of University Professors for more detail) conducted without official interference represents an essential tenet of higher education. Donors should not be permitted to demand or influence the content of coursework or the curriculum as a condition of a contribution. The importance of this issue has played out with the Koch Foundation and numerous universities. Nor should an institution accept money for a donor with the condition of choosing even one topic or a single book in a class.

Even in the best of times, institutions must contemplate whether a gift is in their best interest. Most people fear saying no to a donor because they perceive that wealth equals authority and power. Institutions must assert their own authority and power to uphold their missions, visions and values. Creating and enforcing gift acceptance policies inclusive of why a gift is not permittable, when a donation may be returned or recognition rescinded is paramount. It is not the donor’s right to make a gift; it’s the institution’s right to accept the gift or not.