No Strings Attached

Some charities are succeeding in getting big unrestricted gifts

Abigail Disney, a wealthy New York philanthropist, is the type of donor who is becoming increasingly rare: She likes to make big gifts with no strings attached.

“I am a big proponent of unrestricted gifts,” she says. “You should have enough confidence in the organization to say, ‘You know how to deploy this better than I do.’”

Ms. Disney, a great-niece of the entertainment mogul Walt Disney, says that her views on unrestricted giving evolved gradually over several years.

One influence was her experience serving on the board of the New York Women’s Foundation, where she says she saw how carefully the group’s leaders spent their money and learned to trust them.

She also wanted to counter what Ms. Disney calls the “flavor-of-the-month problem.”

Too many donors, she says, put their money into new or trendy programs, regardless of whether they have proved effective. “What we need to do is fund the things we know are working.”

Many people place no restrictions on their bequests, but more and more living donors — especially those who are giving large sums — earmark their money for specific uses, fund raisers say. The shift seems to be generational: While members of the World War II generation often make undesignated gifts, younger donors usually want to direct where large contributions go.

“We have not seen a big unrestricted gift for a decade,” says Scott Nichols, vice president of development at Boston University. Donors come to the university with very clear ideas about what they want to support now, he says, “and they move on if we cannot accommodate them.”

Tactics That Work

Even so, some charities are finding ways to persuade donors to make large gifts with few, if any, restrictions.

Community foundations have been among the latest to focus on unrestricted gifts, after more than a decade when those institutions concentrated on persuading donors to put their money into donor-advised funds. Such funds allow donors to recommend where their money should go, but now community foundations say they want more flexibility in meeting local needs.

Ralph Serpe, vice president of the Princeton Area Community Foundation, in Lawrenceville, N.J., has spent the past year holding monthly conference calls for 15 community-fund leaders around the country who are looking for ways to increase gifts that aren’t earmarked for specific purposes.

As a result of the conference calls, Mr. Serpe and his colleagues decided to start asking people who want to designate their gifts to discuss what they want to accomplish with the money.

In the past, if a donor said she wanted to set up a scholarship that would help a high-school swimmer go to college every year, foundation officials would likely have urged the woman to put money into a donor-advised fund that would be used to support that scholarship.

But now the foundation representative would ask the donor if she would like to see her gift benefit more people, for example by making a gift that could help anyone learn to swim, says Mr. Serpe. “Questions like this lead the donor to ask, ‘Why am I putting a restriction on the gift?’”

He adds: “You hear board members at the Red Cross saying, ‘Give us dollars for emergency housing.’ Why not say, ‘Give money because it is vital to have a strong Red Cross in your community?’”

Board members who come to know and trust an institution, Mr. Serpe and other fund raisers say, are the best candidates to make and ask others for large contributions with no strings attached.

At the Princeton Area Community Foundation, for example, one trustee agreed to help the foundation start a major push to build unrestricted assets. He donated $5-million and asked a close associate to do the same.

Those two donors then approached a third donor and asked that person to match their combined gifts by donating another $10-million. Now the foundation’s leaders have identified potential donors who will be asked to match the $20-million in unrestricted funds given by the first three donors.

Critical Needs

It’s not just knowing and trusting a charity that prompts board members to make unrestricted gifts.

Many trustees become intimately engaged with the charity’s finances and learn, sometimes the hard way, how crucial it is to have money available that the organization can use at its own discretion.

David J. Breazzano, an investment manager, gave a $2-million unrestricted gift to Union College, in Schenectady, N.Y., where he serves on the board.

“He really dug in and started understanding the needs of the college, and we spoke to him regularly about how he might give unrestricted,” says Michael O’Hara, director of development. “It is easier to make the case to donors who see that unrestricted is the largest shrinking share of gifts.”

By making a big donation with no restrictions, current and former board members can sometimes inspire smaller gifts that, together, add up to impressive totals.

Ms. Disney tried that approach in May, when she decided to turn an award she received from the New York Women’s Foundation into a fund-raising opportunity.

At the breakfast where she received the award, Ms. Disney challenged the audience, mostly women, to give up something they wanted or needed and instead make two unrestricted donations, both bigger than their usual contributions. She urged them to make one of the gifts to the women’s fund and the other to a charity working on social justice.

Ms. Disney said she would match all of their donations to social-justice organizations, dollar for dollar, with up to $1-million of her own for the women’s foundation. The offer led to a total of $2.2-million in unrestricted gifts for the women’s fund, as well as $434,000 for other organizations.

Lasting Impressions

Donors are sometimes willing to make an unrestricted gift when they are impressed by the leadership skills of a nonprofit executive.

In April, David R. Hayworth, a retired furniture manufacturer, promised to give $15-million with no strings attached to High Point University, in North Carolina, after decades of earmarking his family’s donations to the university. Mr. Hayworth says he decided to make the gift, the largest contribution in the university’s history, because he was impressed by the track record of its president, Nido Qubein.

In a little over two years at the university, Mr. Qubein has reversed declining student enrollment, helped raise more than $90-million, overseen construction of several new buildings on campus, and enabled the institution to achieve higher standing in the annual rankings published by U.S. News & World Report.

“I have great confidence in Qubein; it is incredible to see what he has done,” Mr. Hayworth says. “Just in the two years he’s been president, there are five or six new buildings, either completed or started. I have every confidence he will use this money to the best advantage.”

When asked how other fund raisers can imitate his success in winning donations without earmarks, Mr. Qubein quickly ticks off three major characteristics of such contributions. “Faith in the institution and trust in the leadership are the secret behind large unrestricted gifts,” he says. “That is number one.”

Second, he says, is the ability of the fund raiser to persuade donors that making a big unrestricted contribution is a good thing for the organization, enabling it to achieve a “vision” that is exciting to the donor.

Third, he says, “is having a record of successful execution. I came here and very quickly started to execute. So immediately donors could see that something is happening.”

Words Matter

It is not just what donors see, but also what they hear that can motivate them to give up control over how their donations will be used.

George Moore, a scrap-metal dealer, donated $100,000 to create a scholarship fund at Clinton Community College, in Plattsburgh, N.Y. After that, the college asked him to give a larger sum, and not to put any restrictions on the donation.

As Mr. Moore was considering the request, “he started doing his own inquiry about where people got their education. He did his own little survey by asking around,” says Steven Frederick, the college’s dean of development.

Around the same time, Mr. Moore ended up in the hospital for a week. Mr. Frederick visited him there, bringing him a blanket bearing the college’s name and logo, which he spread out on the donor’s hospital bed. “He instantly started getting lots of comments on the blanket from nurses who went to school here,” says Mr. Frederick. “He told me that really capped it.” The end result: a $2-million unrestricted donation.

Another thing that helps persuade donors to give undesignated dollars is when they are asked by fund raisers who have made such contributions themselves.

“I do not see how you can ask someone for an unrestricted gift unless you have done this yourself,” says Mary Holmes, executive director of the Cumberland Community Foundation, in Fayetteville, N.C. “I have.”

Ms. Holmes says she made an undesignated gift of $5,000 to the foundation last year. And she is also paying premiums on a life-insurance policy that will eventually provide $100,000, all unrestricted, to the charity at her death.

As one of the participants in the conference calls for community foundations, Ms. Holmes recalls posing a question during one of the discussions. “I asked how many people on the call had created an unrestricted fund themselves,” she says. “There was a long pause.”

Giving without restriction, she says, has helped her persuade other donors, one of whom donated $2-million, to do the same.

Ms. Holmes’s charity has also benefited from a special campaign to raise undesignated gifts in celebration of its 25th anniversary last year. The goal of the campaign is to nearly double the grants the foundation is able to make at its own discretion, using a percentage of its endowment.

To reach its goal of awarding $576,000 annually by 2010, the charity must raise $6-million in unrestricted dollars. “Just being intentional about it and stating a goal have been good steps for us,” says Ms. Holmes. The campaign, she adds, will achieve its goal early, with $5.5-million in cash and pledges already raised.

Some charities find that donors are willing to split their donations — earmarking a part of the gift for a specific cause and letting the nonprofit group do whatever it wants with the rest.

‘Creative Packaging’

Other groups use “creative packaging,” promoting one or more unrestricted funds that are tied to a particular aspect of the organization’s work and soliciting contributions for those funds, says Bill Sturtevant, a vice president at the University of Illinois Foundation, in Urbana, who leads fund-raising workshops nationwide.

For example, he says, a hospital might create funds for nursing care or cardiology in order to appeal to former patients, other potential donors, and even staff members in those professions. While the donor gets to say what general area it should go to, the hospital still has the freedom to decide how to spend the money for nursing or cardiology needs.

Many hospitals have difficulty raising money from doctors and other staff members. But Swedish Covenant Hospital, in Chicago, this year received an unrestricted contribution of more than $4-million from Rami Yelda, a retired surgeon who spent his entire career at the hospital and is giving the money in his family’s name.

The gift, made when Dr. Yelda retired after 27 years, underscores how difficult it is to raise big unrestricted gifts. It takes years for most donors to understand and trust a charity enough to part with such a large sum without trying to control how it’s spent.

“Asking for unrestricted gifts is one of the more difficult asks, so we typically just haven’t,” says Ken Strmiska, former president of the Greater Green Bay Community Foundation, in Wisconsin. Mr. Strmiska is now a director at the Council on Foundations, which is holding a session on seeking unrestricted gifts at its annual meeting for community funds this week.

“Asking for an unrestricted gift,” Mr. Strmiska says, “is like asking someone to marry you. It takes time, and the donor has to really know you.”