Get Legal Advice for the Thorny Questions

Sandy Rowe, General Counsel for The Community Foundation Serving Richmond and Central Virginia, says that when it is no longer business as usual, clients should pick up the phone and call their lawyer. The concept sounds simple, and it is. But maintaining consistency of execution throughout a nonprofit's daily routine is difficult. After all, lawyers cost money and nonprofits are supposed to spend precious little.

Princeton University might have asked itself this question some time ago relative to its use of the Robinson endowment. For those who haven't been following this story, the family made a gift in the 1960's to start an endowment that is now worth over $600 million. It's purpose was to train civil servants to enhance the quality of our government, and with all these resources only one or two graduates per year from Princeton's Woodrow Wilson School actually pursue this line of work. Whether Princeton has been focused and intentional in its pursuit of this goal and whether its choices for using the funds have been appropriate are in question.

The Red Cross might have asked itself this question in handling massive inflows of funds in response to the tragedies of 9/11 and Hurricane Katrina. Who are all the stakeholders in their decisions to deploy these assets? What risks might be lurking, which staff may not be anticipating? Capable outside counsel can provide invaluable insight in unusual circumstances.

Our community foundation was recently asked by a donor to establish a fund to remember the victims of the tragedy at Virginia Tech, and we turned to the Oklahoma City Community Foundation as the outside experts who have previously learned lessons in their bombing a dozen years ago. We learned to be clear that the fund is not intended to compensate the victims, to employ outside experts to advise expenditures from the fund and to think long-term about the needs of the community in the broadest sense.

Finally, for those charitable organizations offering donor advised funds and scholarships in the post-PPA (Pension Protection Act of 2006) age, what constitutes a problematic donor benefit? If a scholarship can't benefit a family member, what does that mean? Is a great grand-niece family? What if such a distant relative to the donor family is unwittingly awarded a scholarship through a competitive process? What if a donor advised fund makes a grant to a nonprofit organization that either employs the donor or has a close working relationship?

The important conclusion here is not to guess at the answers or to make up the rules. Seek the advice of others who have experience, and call legal counsel if necessary to be sure you have the benefit of an outsider's perspective. My mother is fond of saying, "It's easier to stay out of trouble than to get out of trouble." With the approach of Mother's Day, maybe we should give a close listen to what Mom is telling us.

Robert Thalhimer

Posted at 6:57 AM, May 09, 2007 in High Net Worth Donors | Permalink | Comment