The Art & Science of Crafting Gift Agreements

Introduction 

In the world of fundraising and advancement, gift agreements serve as the conduit through which meaningful, lasting relationships with major donors are built. Gift agreements set the stage for a shared vision between organizations and their benefactors while serving as a tool to outline and ensure both parties share the same vision, goals, and desired outcomes. However, crafting effective gift agreements is both an art and a science that requires a delicate balance between fulfilling institutional priorities and meeting donor preferences. 

Gift agreements ensure that both parties' needs and interests are equitably accommodated, fostering a sense of mutual respect, and understanding. This builds trust over time, as donors feel that their intentions are valued and honored, and organizations can smoothly advance their missions. This delicate balance is of paramount importance in the ongoing management of relationships and the cultivation of trust between donors and organizations, and it's this harmonious synergy that forms the bedrock of long-term, successful relationships in the realm of fundraising and advancement. 

Understanding Gift Agreements 

Simply put, a gift agreement is a contract between a donor and recipient, outlining the terms of the donation. Key elements of gift agreements often include information on the parties involved, purpose of the gift, gift specifics, manner of disbursement, reporting or recognition provisions, and any other stipulations the donor or institution wishes to impose.   

While gift agreements are not required for all charitable donations, they are especially important for larger gifts or those with restrictions. Institutions typically use different types of agreements of forms for when a donor is establishing a new restricted fund versus adding to an existing one or giving an unrestricted gift. Often, a simple pledge or commitment form is used in instances where a donor is adding funding to an existing fund with already outlined restrictions or giving to an unrestricted fund.  

Proposals: The Starting Place 

Often, an agreement to create a new fund begins with a proposal. Proposals are the starting place to begin outlining what will eventually go into the gift agreement. So, consideration should be given to what goes into the proposal as it is the first building block of gaining alignment.  

When writing a proposal, it's essential to remember that this step is not just about presenting a need, but about laying the foundation for a partnership grounded in mutual respect and shared vision. Effective proposals clearly articulate how the funds will be used, the potential impact of the gift, and how the proposal aligns with the donor's values and the institution's mission.  

Once a well-crafted proposal is complete, the focus shifts from broad alignment to specific commitments outlined in the gift agreement. This pivot is crucial in ensuring that both parties are not just in agreement but are excited about the potential impact of the gift. This commitment to alignment, transparency, and shared goals paves the way for the next critical phase: drafting a gift agreement that honors the intent, ambitions, and expectations of both the donor and the institution. 

The Importance of Alignment 

Effective gift agreements are those that align the interests of all parties involved. This means ensuring that the donation supports the institution's overall mission, goals, and strategic objectives while aligning donor priorities and individual departments. 

For donors, this means ensuring that their preferences and wishes are respected and upheld in the agreement. When both parties' interests are aligned, it not only establishes a strong foundation for a successful relationship but also sets expectations for future interactions. Without donor alignment, donors may feel disconnected from the impact of their gift, leading to a lack of trust, disengagement, and loss of future giving. 

It’s also important to consider achievable goals to ensure delivery of the commitments. Aligning donor intentions with institutional capabilities requires a nuanced, collaborative approach, particularly when involving departmental fund managers in the conversation. It's vital to ensure that scholarship criteria, for instance, are not only generous but practical, aligning seamlessly with the scholarship office's capabilities and regulatory guidelines. Similarly, departments must be equipped to utilize funds in ways that honor donor restrictions while advancing institutional priorities. This intricate dance of alignment demands open, ongoing dialogue, and a shared commitment to finding creative solutions that respect the donor's vision, meet institutional needs, and ultimately, serve the greater purpose. By fostering a culture of collaboration and flexibility, we lay the groundwork for agreements that are not only legally sound but deeply meaningful, ensuring the longevity and impact of each gift. 

One way to ensure alignment with all parties is through clear communication and collaboration throughout the gift agreement drafting process. This means actively involving donors and departments in discussions and providing them with information about the organization's needs and priorities, and seeking their input on how their donation can best support those goals. Regular updates and progress reports can also help keep donors invested in the impact of their gift. 

Successful Gift Agreements 

When drafting a gift agreement, special attention must be paid to the nuanced language and potential long-term impact of criteria and restrictions. The choice between ‘and’ versus ‘or’ is not merely grammatical but strategic, shaping the flexibility and applicability of the agreement over decades. Remember, especially with endowed funds, these agreements will exist in perpetuity and relationships often outlive the people who were involved in crafting them. 

Every collaboration is unique, and the goal is to align the donor's expectations with the institution’s priorities while considering the feasibility and sustainability of the gift. In some cases, you need to be careful to not leave room for interpretation, and in some cases, will want to intentionally broaden language. In almost all cases, it is a goal to have the gift or purpose be as unrestricted as possible while still accomplishing the intended goals. 

Ask yourself the following questions while drafting an agreement: 

1. Are there any legal or ethical concerns for the criteria you are listing?
   Be aware of federal and state regulations, as well as laws that apply to your type of organization. Public schools may be restricted to federal guidelines in ways that private schools or foundations are not. In addition to state or federal guidelines, be sure you are aware of your organization's (or when applicable, system-wide entity’s) policies and procedures for reporting. Be sure to consult your legal team on this topic.  
2. Are you aligning the gift with goals?  
   It’s critical to ensure the gift supports both the donor’s vision and institution’s strategic objectives. This alignment maximizes the impact of the gift, fostering a partnership that benefits both parties and advances the institution’s mission.  
3. Are you capturing donor intent?  
   It is crucial to document the donor’s wishes in a manner that allows for adaptability over time. This involves broadening language where possible to accommodate future shifts in institutional priorities or societal needs, ensuring the gift remains relevant and impactful over long periods of time.  
4. Is this doable and how will you ensure that you deliver?  
   It is critical to involve the fund manager or department-head early on in the process, as they will be in charge of implementing the agreement. It is also important to confirm the practicality of the proposed use of funds as well as the plan and timeline for using the funds. Managers and department-heads' insights can validate the project’s feasibility, ensuring the gift can be implemented as intended and achieve the desired outcomes.  

The Role of Flexibility and Amendments 

While alignment is crucial, it's also important to recognize that circumstances and priorities can change over time. As such, a degree of flexibility is necessary in gift agreements to accommodate future potential changes or unexpected events. This requires open communication and understanding between both parties, as well as a willingness to adapt and adjust the agreement if needed. 

In some cases, this may mean processing a formal amendment to modify the original purpose of the donation to better fit the organization's current needs, or reallocating funds to a different program or initiative altogether. It may also involve revising the timeline for project completion and acknowledging that unexpected challenges may arise impacting the original plan. 

By incorporating flexibility into gift agreements, both donors and institutions can have peace of mind knowing that their donation will continue to make a meaningful difference, even if circumstances change. 

Transparency, Accountability, and Reporting 

One of the most critical aspects of successful gift agreements is maintaining transparency and accountability between both parties. Donors should feel confident that their funds are being used as intended and that progress is being made toward achieving the agreed-upon goals.  

Upon the closure of a new gift, a meticulously defined notification and tracking process should be activated, detailing who on campus needs to be informed and their subsequent responsibilities. This process typically involves key stakeholders such as the development office, finance department, scholarship office, relevant department heads, and fund managers. Each stakeholder plays a critical role, from ensuring funds are allocated according to the donor's intent, to aligning the gift with current laws and policies.  

Effective communication strategies like regular impact reporting and financial reporting, coupled with a proactive approach to fund management, safeguard the institution's integrity and foster enduring donor relationships.  

Communicate Next Steps 

The journey with our donors does not conclude with the signing of a gift agreement. Instead, it marks the beginning of a deeper engagement and stewardship pathway. This ongoing commitment honors the donor’s contribution but, more importantly, lays the groundwork for a lasting partnership that will continue to flourish and impact future generations. 

Ensure the donor knows what happens after they sign an agreement and what to expect in the future. It can be helpful to provide your development officers with a guide of what to explain to donors after they close a gift. 

It doesn’t end there: Effective Fund Management 

Crafting a successful gift agreement is just the beginning. Ensuring that actual utilization aligns with the agreed-upon intention requires diligent fund management. Robust tracking systems and regular communication with fund managers will help to ensure that donor funds are making the desired impact, and your organization is maintaining donor trust. This systemized approach ensures that all parties are aligned and act in the best interest of both the university and the donors.  

Overall, crafting gift agreements is both an art and a science, blending negotiation, understanding, alignment, creativity, and meticulous management. When institutional priorities align seamlessly with donor preferences, the result is not just a successful gift agreement, but a meaningful partnership that can leave a lasting legacy. As we continue to navigate the complex world of fundraising, remember the importance of this alignment and the critical follow-up and ongoing stewardship required for truly effective fund management.