Some Ground Rules on Enforcing Pledges

To the Editor:

To Irving Warner’s recent interesting opinion piece “Making Donors Make Good on Their Pledges” (February 26), I would add two or three comments.

Though reneging on promises to give remains a relatively rare phenomenon for non-profits, my experience has been that moderate-sized pledges are more likely to go unpaid than either large or small commitments.

For instance, at the conclusion of a successful $5.1-million capital campaign that involved over 3,500 donors to our hospital in the early 1990s, just 37 pledges (accounting for only about $65,000, or less than 2 per cent of the total raised) had to be written off as uncollectable. The largest of these, a $6,000 commitment, was pledged by one of our staff physicians; he left our area during an early stage of the drive.

One cannot overemphasize the importance of quickly confirming pledges. The Financial Accounting Standards Board, in its valuable Statement of Standards No. 116, defines “verifiable evidence” of a pledge as “(a) written agreements, (b) pledge cards, and (c) oral promises documented by tape recordings, written contemporaneous registers, follow-up written confirmations, and other means that permit subsequent verification of the oral communications.”

However, it should be carefully noted by fund raisers that FASB (as well as the American Institute of Certified Public Accountants) actively avoids the term “pledge,” preferring “promise to give,” because the term pledge “may be misinterpreted.” The FASB statement also distinguishes “intentions to give” (defined as conditional promises to give which may be changed, such as an inclusion in a will) from unconditional promises and further distinguishes these from pledges with donor-imposed restrictions.

In sum, familiarity with these distinctions and adherence to very specific pledge confirmations will help keep fund raisers out of contentious relations with donors.

Yet (if worse comes to worst), with specific regard to the “legal enforceability of promises to give,” FASB states that “charitable promises generally have been enforced in this country, with the courts often applying the principles of contract law.”

But, FASB further notes, it is usually because of “social and moral sanctions . . . custom . . . ethical or moral constraints, rather than from rules of common or statute law . . . (that) promisors commonly feel bound by their unconditional promises, regardless of their legal status.”

Richard J. Gerber
Vice President-Development
Phelps Memorial Hospital Center
Sleepy Hollow, N.Y.