New Watchdog for Donors

September 19, 2007

Higher education is raising more money than ever before -- $28 billion in 2006, up 9.4 percent from a year earlier -- but the proportion of alumni who give is dropping slightly -- from 12.4 percent in 2005 to 11.8 a year later.

In this context, a new group presented itself Tuesday: the Center for Excellence in Higher Education, which wants to offer its services to philanthropists ready to make major gifts. As a nonprofit entity, the center says it will represent the interests of donors, in particular those who want to see structural reform in higher education but are unsure of how to spend their money.

The Center for Excellence sees its role as consultant and facilitator, not political advocate. But leaders don't hesitate to describe what's wrong with the gift-giving process and higher education as a whole. Colleges that redirect gifts intended for a specific purpose violate the trust of donors, the group says. In its view, accountability is also missing at the macro level: Most college and university trustees don't provide proper oversight of the institutions they serve, and administrators aren't held responsible for student outcomes.

Frederic J. Fransen, the center’s executive director, says donors should ask more questions of colleges and expect to know exactly how their money is being used. “Donors … are told that for them to get involved beyond a cursory way would be a gross violation of principle,” Fransen said. “We believe there is no necessary reason why this must be so. Increasing accountability is the way to bring about much-needed changes to the ‘business-as-usual’ mediocrity.’”

Or, as the center's literature puts it: “[The group] is not designed to help donors who believe higher education is on track and want more of the same. Such donors can continue to give on the basis of trust in the institution."

John Lippincott, the president of the Council for Advancement and Support of Education, the association that represents fund raisers in academe, said the majority of donors do trust colleges. “The fact that giving to American higher education has been doubling every decade is a sign of professional and solid relations between donors and universities," he said. "There’s an enormous track record of success. Have there been a few high-profile instances of disputes? Yes. Are they in any way indicative of a widespread problem? I see absolutely no evidence of that.”

Colleges -- and fund raisers in general -- understand the importance of maintaining a donor's trust and will do everything possible not to jeopardize that, he said. Ninety percent of donations made to colleges come in some restricted form, he added.

"When you're talking about hundreds of thousands of gifts with those restrictions, it's remarkable that we don't hear more stories to suggest those wishes haven't been honored."

Julian M. Bivins Jr., CASE's chairman of the board and assistant vice president for advancement in the University of Virginia’s Office of Development and Public Affairs, said he sees the center's entry into the marketplace as a sign that major donors want more of a say in where their money goes and that colleges need to pay attention to their interests. The center's start comes at a time when several donors and colleges -- including Princeton University and Randolph College -- are at odds about terms of past gifts.

Based in Indianapolis, the Center for Excellence is being funded by private gifts and received $5 million in seed money from groups that have been skeptical of giving to colleges. They include the Marcus Foundation (headed by the co-founder of Home Depot), Templeton Foundation and John William Pope Foundation, which has provided grants to universities for the study of Western thought and also for some athletics programs. The idea grew out of meetings of the Philanthropy Roundtable, an association of individual donors, foundation trustees and staff that held meetings (organized by Fransen) to discuss higher education philanthropy. The center is operating on an annual budget of roughly $1 million.

In its early stage, the group is focusing on three initiatives. The first involves providing assistance to donors. That could be reviewing a grant agreement, editing program proposals, fleshing out gift ideas or setting up meetings with faculty or administrators.

One example Fransen cited is helping philanthropists understand the proper bounds of academic freedom and how to include provisions in their gifts that will ensure money is directed in a way they want. The center has mentioned the idea of directing money to a particular professor rather than endowing a chair. (Such an approach might be tricky at some institutions. Colleges typically encourage donors to provide funds for general areas of study, or even specific areas of study, but not for individual work, believing that having donors directly decide on the research or other budgets of professors may give up too much control.)

Fransen said the center is already working on several projects, ranging from $1 to $10 million. (Its consulting services are free for now, but the group says it plans to eventually take a 1 or 2 percent cut from a gift.)

The second project involves developing grant competitions in which the center creates pools of funds from donors who are interested in supporting similar causes. Colleges would then submit proposals, and the center would develop the criteria and help administer the fund. The concept, Fransen said, is that donors often have an idea of how they want to spend their money but don't have a particular recipient in mind. This way, rather than blindly passing it to the alma mater, philanthropists can cast a wider net and determine who can best use the support.

Lippincott said most gifts are a result of a relationship between a college and donor built over decades. Donors, he said, typically want to give directly to the university and have less interest in going through other organizations.

Finally, the center wants to address some of the major issues in higher education -- accountability, governance, oversight and college rankings -- by planning scholarly meetings and supporting other groups.

Fransen is quick to note that the group isn’t a think tank and won’t conduct original research, but rather bring together groups who do. He added that the center is different from other organizations focused on higher education reform because it doesn't promote a particular political agenda -- though it's happy to help donors find ways to promote their own.

The Center for Excellence isn't trying to replace the job of lawyers and financial advisers who help donors with their transactions, Fransen noted. Those advisers might tell them how much to give or how to structure their gift for tax purposes, but they typically won't say who should be considered for the gift and how to monitor the use of the money. In other words, he said, the value of the center is its contacts within colleges.

But Darrow Zeidenstein, vice president for resource development at Rice University, said he's dubious that one can promote sweeping governance and accountability changes throughout higher education by educating donors to exercise more due diligence.

"One could, for example, look at faculty recruitment, promotion, and tenure as more salient processes that drive higher education quality," he said in an e-mail.

Donors are becoming increasingly business-minded, and changes in the culture of philanthropy are already forcing colleges to be more transparent, accountable and results-oriented in how they negotiate and execute gift agreements, he added.

And the idea of another hand in the philanthropy process has some colleges concerned, Fransen admits. They see the center as complicating their efforts to reach donors. But he said many have come around to the idea, in part because the group can bring donors into the mix that wouldn't have otherwise been on colleges' lists

“We aren’t the bad guy coming into the room and taking away their easy hit,” Fransen said. “A great university should relish the challenge of a donor who expects accountability and demands results."

Anne D. Neal, president of the American Council of Trustees and Alumni , said her group shares the Center for Excellence's belief that donors who direct their gifts wisely are true benefactors. Colleges should welcome outside help that strengthens academic programs, she added.

Bivins, the CASE chairman, said that while people might want to rush to say this is one more intruder in the system, the group could help to create a new way of collaboration.

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