Wealthy benefactors are interested in the effective use of their donations to college and university building projects for several reasons, not solely because they are economical by nature, though frugality may play a role for some.
- Impact and Legacy: Wealthy donors often want their contributions to make a tangible, lasting impact. Funding buildings—such as libraries, research centers, or student facilities—ensures their name is associated with a prestigious institution and a physical structure that benefits future generations. They seek assurance that funds are used efficiently to maximize this legacy.
- Strategic Philanthropy: Many benefactors approach philanthropy like an investment. They want their donations to yield measurable outcomes, such as improved educational facilities, cutting-edge research, or enhanced student experiences. Ensuring effective use aligns with their goal of driving meaningful change rather than wasting resources on mismanaged or low-priority projects.
- Tax and Financial Incentives: Donations to universities often come with tax benefits. Donors are motivated to ensure funds are used effectively to justify the financial strategy behind their giving, aligning with their broader wealth management goals. Efficient use also minimizes scrutiny from tax authorities or public perception.
- Personal Connection: Many donors are alumni or have personal ties to the institution. They want to give back but expect their contributions to be respected and allocated wisely, reflecting their trust in the university’s stewardship.
- Reputation and Influence: High-profile donors often gain social capital and influence through their gifts. A well-executed project enhances their reputation, while a poorly managed one could lead to public criticism. They prioritize effectiveness to protect their image.
- Economic Mindset: While not all wealthy individuals are inherently economical, many amassed their wealth through disciplined financial decisions, business acumen, or strategic resource allocation. This mindset carries over to philanthropy, where they apply similar principles to ensure their donations aren’t squandered.
We limit our attention to this topic because de-facto standards do exist and we’ve made it our business to research, understand and convey to others what we have learned in over thirty years of doing this.
College and university endowments that finance building projects are governed by an interlocking network of legal standards, financial regulations, accounting principles, and institutional best practices. Today at the usual hour we review the broad principles and one or two projects in process and explain how our work can make those projects safer, simpler, lower-cost and longer-lasting. Use the login credentials at the upper right of our home page.
Uniform Prudent Management of Institutional Funds Act provides a legal framework adopted by 49 U.S. states (except Pennsylvania) that governs the management, investment, and expenditure of endowment funds for nonprofit institutions, including colleges and universities. It defines an endowment fund as one that, under the terms of a gift instrument, is not wholly expendable on a current basis.
Financial/Government Accounting Standards Board Guidelines. FASB/GASB establishes accounting standards for nonprofit organizations, including colleges and universities, under standards like ASU 2016-14 (Topic 958), which addresses the reporting of endowment management fees and financial performance.
NACUBO-Commonfund Study of Endowments
Council for Advancement and Support of Education
Plenty for one session. We cover this topic lightly at other times of the year; typically ahead of quarterly financial reports and school bond elections. See our CALENDAR.
