Wednesday, October 7, 2009

Endowments and Naming Opps Written in Stone?

A really good question came to me through a client situation. It involved a big naming opportunity on an existing building. The donor was solicited for close to a 7 figure gift, and he was ready to make the commitment. Problem came up - the board started having second thoughts about permanently naming this building for the price asked (make sure your board officially approves your naming opps list BEFORE making the asks). My colleague's job was to help save the gift - if you go back to the donor, after the ask was already done, what do think he is going to do? Not a good scenario.

My role was to finesse some language that could give the board the confidence that they could change the name on this building at some point in the future without disrupting the donor and the gift.

The answer came to me pretty quickly. Variance Power. This is the important clause that community foundations in particular use in their permanent gift agreements. It gives the non-profit the ability to change purposes of a fund or other donor agreement should circumstances change. Otherwise, technically you might be required to seek attorney general approval and/or a Cy Pres action in court to make the change. Of course, if a donor is still alive, it always makes sense to ask the donor to consent to a change.

Here the are samples I came up with (based on old samples I had in my old files from my days working with Jewish Federations):

Variance Provision (long version)

While it is absolute aim and obligation of the Board of XYZ to fulfill the intentions of all written pledges and designated gifts to the ABC campaign, in the event of changed conditions, laws or other circumstances in the future, whereby any gift’s purpose may no longer exist or may be impossible to continue or perform, the Board of XYZ requires that this Variance Provision be included in every gift agreement. This provision permits the Board of Trustees to vary, when necessary, from the donor’s original stated purpose or naming opportunity to a similar new purpose or naming opportunity. Any new purpose or naming opportunity shall be as closely aligned to the donor’s original intent as possible. The Board of XYZ will notify any donors and/or surviving family members of the donor if this provision is ever exercised.


Shortened Version for Pledge Agreements

All pledges and commitments to the campaign are subject to the Variance Policy of the Board of Directors. This policy allows the Board to vary, when required to due to changed circumstances, from the original stated purpose from a gift or pledge agreement to one that is as closely aligned to the donor’s original intent as possible.


Shortest Version for Pledge Agreements

Should the purposes and/or intent of this pledge be impossible or impractical to perform/maintain, the Board of XYZ reserves the power to vary the use or naming opportunity created by this pledge to one as closely aligned to the donor’s original intent as possible.


After going through this exercise, it dawned on me that use of this type of clause in all gift agreements, especially ones that involve permanent naming opportunities, is a really good idea.

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