Important Risks Schools Should Consider When Fundraising

Independent schools engage in fundraising for two main reasons: to fill the tuition gap and to foster a philanthropic environment. The latter feeds into the former, but it also opens the door to larger, institution-altering gifts that can advance the school forward in exciting ways.

The act of fundraising, however, does not come without its risks. When money is exchanged in any environment, unless there is a clear protocol and understanding of what that money will be used (and not used) for, the school can find itself facing some tricky legal and reputational risks.

There are several risks independent schools face when fundraising. Here are three of the most common to consider.

Careless (or Non) Use of Funds

The Advancement Department typically fundraises for the Annual Fund. Some schools run capital campaigns in parallel, but the Annual Fund is a yearly occurrence. Within the Annual Fund, departments define projects. For example, this year your school is raising $20,000 in Athletics for a new scoreboard. That scoreboard has already been budgeted for in the Athletics budget and the $20,000 that Advancement raises will offset those costs.

When departments need to trim their budgets either due to economic conditions or the need to prioritize projects, conversations may not include all relevant school personnel. But if Advancement has already partially raised funds for the scoreboard and the scoreboard is later deemed non-essential, what will you tell your donors?

This can create reputational issues. Even if the amounts are small, future fundraising efforts can be jeopardized once your community hears the administration has fundraised for something they are not going to go through with.

Bribery

The common definition of bribery is offering an item of value with the intent of influencing the actions of the receiving party. This can occur in several ways. First, a member of your Board or executive leadership team could receive a financial gift where the donor asks for something in return. The most frequent cases are:

• Preferential admission treatment
• Overlooking or excusing disciplinary issues
• Grade alterations
• Shaping class, team, or extra-curricular placements

These are unfortunately more frequent than we’d like to imagine. If any of the above should occur, the legal and reputational consequences can be severe.

On a parallel note, it is even more common for a donor to donate and then attempt to sway the administration toward preferential treatment. It is the responsibility of staff, faculty, and the Board to make it clear that a “quid pro quo” relationship does not exist with donations to the school.

Naming

Universities have well-established naming opportunities as part of their major gifts departments. In general, these are large gifts where a building or something similar is then named after the donor, his or her family, or a company. Independent, K-12 schools engage in the same practice, but there is generally more sensitivity surrounding names on campus with children as opposed to adults (18 and over).

As such, your K-12 School Board and all relevant executive leadership members should be involved in conversations surrounding the naming of something on your campus. This is not to say that a vote is required. The Smith Family might have had some issues with the middle-school principal in the past, but there are larger issues to consider:

• The public image of the Smith Family
• The transparency and origin of their donation
• The amount of time accorded to the naming right

There are few schools where the public naming of something will not result in criticism. Everyone must understand the policy and guidelines—communication with your community must be ongoing and clear.

Schools, no matter the size, have lots of moving parts and departments. Folks in the Finance department might not even know the names of their colleagues in Admissions, while division principals are endlessly mired in the affairs of their areas. Layered on top of this are the committees, comprised of staff, board members, and sometimes external consultants or even parent volunteers. As you can imagine, miscommunication (or no communication) is a constant issue.

Fundraising is not the sole responsibility of the Advancement Department. The strategy and tactics are formed in Advancement, but successful fundraising efforts require everyone to promote and foster campaigns. Well-functioning schools make an effort to bring together the executive leadership (relevant Heads of every area of the school) regularly, review active fundraising efforts, and maintain an open line of communication. Legal and reputational risks will never be completely mitigated, but by proceeding with caution, you can effectively maintain control while supporting your fundraising goals.