More givers asking not-for-profits to meet goals before getting donations

December 18, 2006

Frank and Katrina Basile are known in the local arts community for their generosity. But they also have a strong business background.

So when Dean Valerie Eickmeier approached the couple about a donation to IUPUI's Herron School of Art and Design, she tried to address both interests.

The result was a $600,000 gift from the Basiles to beef up the Center of Art, Design and Public Life--a portion of which is contingent on the school's meeting certain performance goals.

Restricted gifts have long been common among foundations and corporate funders, but now individuals are getting into the act, too. Experts say more donors are attaching conditions to their contributions to encourage the recipient to push itself to achieve.

"It kind of puts the board of the organization on notice," said Rob MacPherson, vice president for development for the Central Indiana Community Foundation. "They say, 'We're going to leave money on the table if we don't meet the goals.'"

The most common kind of strings-attached gift is one tied to a not-for-profit's ability to raise additional funds.

"As a fund-raiser, we love that incentive or leverage," MacPherson said.

Tying a donation to specific performance goals, as the Basiles' gift does, is less common. It can be traced back to the late 1990s, when the tech boom sparked a wave of "venture philanthropy."

Venture capitalists used to asking companies to meet performance standards to get funding began asking the same of not-for-profits, said Eugene Tempel, executive director of the Center on Philanthropy at Indiana University.

The practice is still fairly young, Tempel said, and there aren't large-scale studies to measure its prevalence.

But observers said the conditional gifts can be a good motivator for organizations--and keep the donors involved.

It likely will mean more work for not-for-profits, to be sure, as donors ask for routine reports on how they're doing.

"All of this suggests that life could get much more demanding for people in the nonprofit sector," said fund-raising consultant Ted Grossnickle of Greenwood-based Johnson Grossnickle and Associates.

But that more-intense relationship could have a payoff of its own.

"Keeping the donor engaged that deeply makes sure they're invested," MacPherson asserted.

Setting goals

The Basiles have invested plenty in the Indianapolis arts community already. They set up a fellowship program at Storytelling Arts of Indiana, underwrote a theater festival at Phoenix Theatre, and gave $1 million to the Indiana Historical Society, which named a theater at its Indiana History Center after them.

Frank is a senior vice president at Gene B. Glick Co., a local real estate investment firm, and Katrina is a real estate agent with F.C. Tucker Co.

Their involvement in the arts and business made them a natural prospect when Herron officials wanted funds to develop the school's master's degree programs and expand the public-life center, which matches art students with companies wanting to commission work.

Through the center--now named for the Basiles--the companies get a steep discount on quality artwork and the students get free materials, experience and exposure.

Under the terms of the gift, the school will get $500,000 over five years. But it will get the remaining $100,000 only if it meets specific goals by 2011:

Half of all graduate students admitted must be from out of state.

The center must receive 50 commission contracts worth at least $100,000.

The center must gain national recognition through write-ups in higher education journals and faculty presentations at professional conferences.

Frank Basile said though he's talked informally with groups he supports before about their goals, he's never set strict benchmarks in writing. But he liked the proposal Eickmeier brought him.

"It's almost like a business investment," Basile said. "You expect a return on it and certain standards to be met. It will help them make sure that the money is well used."

Though Eickmeier came up with the goals, Basile said they're not a walk in the park for the school. The center averages about five contracts a year and collected $35,000 in commission payments for 2006, for example.

Eickmeier said part of the challenge in writing the criteria was getting beyond broad goals--such as reaching a level of national recognition--and identifying objectives the school could measure.

Basile wants to see Herron succeed.

"I fully intend for the last $100,000 to be given and if they're not tracking toward reaching the goals, I want to help work it out," he said.

But Tempel cautions that not-for-profits need to be careful when going after or accepting money with restrictions.

"I would be cautious about these kinds of arrangements unless I have an opportunity to help set the goals," he said. And organizations still need unrestricted gifts to cover the less sexy aspects of their work, such as staff time to compile the performance reports many donors are demanding.

Proceed with caution

And despite the promise such arrangements offer, not all restricted gifts have had the intended effect. Conditions intended to be met over a long time, for example, can be problematic.

Take a court case pending in New Jersey, where the family of Princeton University benefactors Charles S. and Marie Robertson is suing the school, saying it didn't meet the terms of the couple's donation.

The Robertsons, now deceased, gave Princeton $35 million in 1961 with the understanding that the money would be used only to train graduate students for work as diplomats. The heirs say the school hasn't met the obligation and they want a portion of the donation, which has grown to $750 million, back to give to another school.

Experts said to ward off good intentions gone awry, not-for-profits should make sure any such stipulations meet several criteria. Donors and recipients should develop goals together and stay true to the organization's mission.

"For the donor [to set stipulations] in isolation would make it seem that the organization has to jump through hoops" for the money, MacPherson said. "That might be distracting and counterproductive."

Both Herron and the Basiles are happy with the benchmarks tied to the art center donation and likely will use the model again. Eickmeier said her main rule is that any restrictions would have to respect the faculty's right to teach and set curriculum.

Basile said he's glad the benchmarks came from the school, but he likes the goal-setting exercise.

"I think it's going to be the wave of the future," he said. "I'll probably be doing this going forward."

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