Donor Involvement
Something for a donor to think about before making a gift is the extent to which they would like to be involved in the managing the gift. While it is fairly straightforward to determine when and how much to gift, managing how the gift is subsequently utilised is more difficult.
What makes it complicated?
A relationship between somebody who has something - for example, money to donate, and someone who wants it, starts on an unequal footing. If the donor wishes ongoing involvement in the management of their donation, they may have little formal control but considerable informal influence over the recipient. The donor may or may not have expertise related to the application of the gift, but the donee may feel unable to raise any concerns as the donor has given the money - and may give more in future.
Making it work
Active engagement needs to be built on a strong and open relationship between the donor and recipient. Expectations from both parties need to be very clear from the start and may require renegotiation as the project progresses. Is the donor's involvement welcome, and if so to what extent? How are differences of opinion to be resolved? It is helpful if the donor can initiate such discussions, and approach them with openness and sensitivity.
Why do donors want to be involved?
There are a variety of reasons for being actively involved in the utilisation of the gift, including:
- A long held interest and expertise in an area being gifted to, and a desire to use these skills in a practical sense - the expertise is seen as part of the gift
- A desire to ensure the anticipated outcome is achieved
- A wish by the donor to be more closely involved in the work being done
- A need to maintain the donor's reputation (particularly if there is an acknowledgement of the donor and then an adverse event occurs)
Degrees of involvement
Donors can be involved to varying degrees; anything more than a low level should be discussed with the donee first. Usually the greater the management, the more time it will take.
Little or no management
A person may choose to make the gift and exercise no management at all, although this may result in little accountability for the outcome. If the amount of the gift is not large, this is the most practical option. The donor could indicate a general outline of their wishes when they make the donation, and then withdraw.
Using an intermediary
The donor is often able to rely on the donee organisation to have adequate systems in place to identify and manage any possible risks. Alternatively, the donation could be made to an organisation that has good management systems, and applies these skills for the benefit of the end recipient.
Active management
The donor could become directly involved in the utilisation of the gift - see below.
Options for managing the gift
Attaching conditions to the gift
The donor may specify how they want a gift to be used. For donations (as opposed to contracts) such conditions may not be legally enforceable, but it is likely that the majority of organisations would honour them, unless they are unclear, inappropriate or excessively onerous. It is probably better for a donor to view attached conditions as a request rather than an order.
Reserving title in an asset
Rather than transferring an asset to the donee, the donor can instead assign the income from the asset for a period. If at the end of that period the donor is comfortable with the use of funds, a further assignment can be undertaken.
Gifting through a discretionary family trust
As a variation to the assignment of income, the donor can hold the asset in a family trust, nominating the donee as a discretionary beneficiary. In this way the trustees can allocate income to the donee as they see fit each year.
Active management
The donor can set up a structure to undertake the charitable work (such as a charitable trust or foundation) and become one of the trustees making appropriate decisions. Alternatively the donor could become actively involved in the donee organisation, either as a trustee or decision-maker in that organisation, or as a worker who undertakes the charitable work; clearly negotiation would be required to achieve a mutually satisfactory arrangement.
In conclusion
Ongoing involvement by a donor has potential advantages and disadvantages for both parties. Donors can be involved to various degrees. What is clear is the need for an open and trusting relationship if the donor's involvement is going to succeed in adding value to the gift.