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Why Would a College Say No to Free Money?

There's a long list of reasons schools might turn away generous donations.

That Florida time share you’re trying to unload? Think twice about donating it to your alma mater. The school may not want it. And if you got rich through a Ponzi scheme, just stop writing that check right now.

If you want to make a donation to a U.S. university, you should know the rules at some of the wealthiest private schools. They don’t favor gifts that are hard to value or sell, such as vacation timeshares. Avoid making the donation contingent on a favorable admissions decision—such as getting your kid in. If your gift doesn’t fall within the scope of the school’s mission, you’ll likely get a big fat rejection.

“These things happen more than you hear about,” said Don Fellows, chief executive of the fundraising consulting firm Marts & Lundy. “It’s kind of a development officer’s worst nightmare.”

These stipulations were gleaned from recent responses to an inquiry by two congressional committees of how endowments operate at the richest 56 private U.S. schools. Endowment values rise through both fundraising and investments. Lawmakers are interested in university fundraising, since donors who give to nonprofits receive tax deductions. Those endowments, too, aren’t taxed on their investment earnings. School responses show that the dance between donors and universities isn’t always easy, even as colleges raised a record $40 billion in the most recent fiscal year.

Of the 56 schools, 48 provided their responses to Bloomberg. One set of questions asked if gifts were turned down because they were restricted to a certain purpose and to describe specific scenarios when they were rejected.

Middlebury College in Vermont turned down art because it didn’t meet "criteria” and its museum collection “is a teaching collection and the space for storing artwork is at a premium.” The college declined to provide examples. "Pieces that do not specifically complement the academic program teaching objectives are declined,'' the school wrote.

Berea College in Kentucky said it declined a time share. Saint Louis University turned away a donor who restricted a gift to that person’s niece, according to its response.

New York University has declined gifts of land. One included a “large and valuable parcel of New Jersey wetland” because the donor wanted the property to be used as an environmental research station, the school wrote. It also declined two separate residences in Massachusetts, because the donors required that NYU use the properties as academic retreats.

“All of these gifts were declined because the university did not perceive the required uses to be within the scope of the university’s immediate and long-term needs,” according to the school, which has a fund of $3.6 billion.

Schools still felt compelled to state the obvious: They won't accept illegal gifts. They also can't impose "an undue financial or administrative burden," Massachusetts Institute of Technology wrote.
 
Schools have to protect their reputations, too. Stanford University said it wouldn’t take a gift if it came from “an individual whose wealth came from running a Ponzi scheme.” Stanford also said it doesn’t accept gifts from individuals whose children or grandchildren are currently applying for admission “when the university learns that gift would be made with the expectation that it will influence the admissions process.” The rule applies to alumni as well.

Harvard University, the richest school at $37.6 billion, has declined gifts that would “suggest an endorsement of a commercial entity or that would permit the inappropriate use of Harvard’s trademarks.” The school has also turned down money for disease-based research that would be better performed at a hospital or other institution. (Harvard doesn’t own a hospital.)

Turndowns can be difficult.

The University of Tulsa said it received a $7 million pledge for the naming of a college. After half had been received, the school "realized that the donor intended to have a significant role in operating the college,'' according to the response. "After much discussion, the university returned the funds to the donor, and in doing so, eliminated the gift.''

The University of Southern California said it doesn't accept gifts for purposes "that don't further'' its mission, according to its response. For that reason, USC turned down a proposed donation from Charles Munger, vice chairman of Berkshire Hathaway Inc., according to the school, which didn't detail the turndown on its response.

Munger was interested in funding new housing for graduate students, a cause he funded at the University of Michigan. But the university's president, C. L. "Max'' Nikias, rejected it because the school's priority at the time, about three years ago, was to build undergraduate housing. Munger didn't end up giving a gift to USC, according to the school. Munger didn't respond to a request for comment e-mailed to an assistant.

One area where a donor can really lock in his or her gift-naming opportunities: The cost to fund a professorship can range from $2.5 million at Swarthmore College in Pennsylvania to $2.5 million to $4 million at MIT.

Funding a deanship at Dartmouth College is $10 million and half as much at the University of Rochester and Tufts University.

With contributions from Michael McDonald, Noah Buhayar and John Lauerman.

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