Dead Money

“We have scholarships we can’t give away, and we can’t even locate the donors to change the rules.”

I’ve heard some version of that at every community college at which I’ve worked. It’s a weird problem.

College foundations are charged with not only with cultivating donations but with providing stewardship of them. In addition to the obvious—keeping track of the money, making sure that nobody is skimming the till—they’re supposed to adhere to the parameters set by each donor, within the boundaries of the law. “Restricted” funds can’t be reallocated lightly. That often leads to misunderstandings when people hear about the total size of an endowment or reserves and imagine it can be spent like a savings account. It can’t; that total figure may comprise dozens or hundreds of different pots of money, each with its own set of rules.

Those rules can be changed, but it usually takes discussions and negotiations with donors. When you have many small pots of money and a very thin staff in the foundation, tracking down the family of the original donor of a $500 scholarship that has lain fallow for years may not be the most productive use of time. Over the years, family members pass away, people move, foundation leaders change and some scholarships can go unawarded over and over again.

The languages of death and money often go together: “death and taxes,” “dead presidents” even Marx’s “dead hand of the past.” In these cases, death can paralyze money.

The narrower the criteria, the likelier that outcome is. An award for an outstanding student in engineering is likely to find takers every year; an award for left-handed dental hygienists from a particular small town may not.

In the face of historic student needs for such basics as food and transportation, leaving scholarship money unawarded isn’t a great look. I’d much rather see it go to students who need it than see it slowly pile up in some account established decades ago.

When I give to foundations, if given the choice, I always select the “unrestricted” or “give to the area of greatest need” option. It involves a certain amount of faith, but it greatly improves the chances that the money will actually accomplish something. And I’m not naïve enough to be offended that raising money costs money. It does. If my donation can be leveraged to generate more donations, I see that as a good thing. On the rare occasions that anyone asks, that’s always my recommendation.

I’ve never been an officer of a foundation, so I’d love to hear from some folks who are. How do you handle scholarships or other donations that have become unawardable?