Faculty fear new fee may scare donors

The fee will cover administrative costs previously paid for by high interest rates.

by Brian Edwards

Low interest rates are forcing the University of Minnesota Foundation to find new ways to cover overhead costs.
Faculty members raised concerns earlier this month that a new 3-percent UMF administrative fee could scare away some smaller donors. But administrators say the fee can be implemented in a way that could ease any donor concerns.
The fee will be attached to “current-use or demand” funds — gifts that donors prefer to be used soon after giving, said Sarah Youngerman, spokeswoman for UMF.
Administrative overhead for the foundation used to be covered by the interest gained on endowed gifts, she said, but low interest rates on investments means the foundation needs other ways to raise funds.
The change might not go over well with newer small donors, said Faculty Consultative Committee member Scott Lanyon, who is also a professor and head of the ecology, evolution and behavior department. 
“The real value of small donors is that some of them will [become] big donors,” he said. “[We want to avoid] anything that will discourage people at the early stage.”
Almost no one becomes a big donor right away, he said, and making sure contributors are comfortable with how their money is being handled is important.
Gary Gardner, professor in the horticultural sciences department, said at an April 7 FCC meeting that the University needs to build strong relationships to cultivate smaller donations.
Many donations support faculty research and work, he said, and the fee could hinder those connections. 
Still, most faculty members said they felt big donors wouldn’t be fazed by the additional fee.
“Individuals or foundations that give large sums know there is a cost,” Lanyon said. “They will understand.”
More donors are making current-use donations at the University, mirroring a nationwide trend. Youngerman said these donations make up about 60 percent of the gifts the school receives. People want to see the results of their donations in their lifetime, she said.
And UMF doesn’t necessarily share all of the faculty’s concerns about scaring donors away with the new fee, Youngerman said.
Individual academic units receiving donations can handle the fee as they choose, she said, and they can be transparent with donors about the use of their money.
She said other universities around the country already have administrative fees in place, and they tend to be higher. Fees across the industry are usually between 5 and 10 percent, Youngerman said.
At Johns Hopkins University, the school has a 20-percent fee on current-use gifts.
“People are surprised that there wasn’t this sort of administrative cost recovery,” Youngerman said. “You have to set up the fund and process the gifts.”