Ever had a VIP donor who didn't honor a gift pledge? How about a $3.5 million pledge?
I really tried to not pay attention to the civil trial involving former spouses Johnny Depp and Amber Heard. I was doing a pretty good job of knowing as little as possible, until I saw this: The ACLU says Amber Heard has paid less than half of her $3.5 million donation pledge!
OK, they got my attention. Anyone who has been involved with nonprofits has experience with that one donor who promises but never actually makes a gift. Hopefully it didn't involve a number with six digits after it.
As background, this is a defamation trial. Depp is suing his Ex for $50 million and Heard is counter suing him for $100 million. It started over a 2018 essay she wrote for The Washington Post which indirectly referred to abuse allegations she made during their divorce proceedings. The courtroom antics have been weirder than an old-time traveling sideshow and as well-mannered as a greased pig contest.
Back to the donation...when the two divorced in 2016, Heard was awarded a $7 million dollar settlement. She announced she would donate the money between the ACLU and the Children’s Hospital Los Angeles. However, the ACLU only received $1.3 million of its $3.5 million share. And nearly half of that may have actually come from Elon Musk. Of course, Elon is involved. He's involved in everything isn't he?
It is unclear how much, if anything, was given to the children's hospital, but for some reason only the ACLU wound up having to testify about the gift. You have to feel sorry for the ACLU's COO Terence Dougherty as he is stuck in the witness stand:
Let's shift gears now, away from the wreckage of the Depp/Heard marriage. Let's look at the very serious problem of donors who back out of commitments, because it is one of the trickiest problems nonprofits face.
A pledge is a contract. Yes, a gift is a present, but, as Frank Monti points out in Inside Philanthropy, a pledge is "a contract between a donor and a charity in which the donor promises to make a contribution in the future." The written or oral pledge may be legally binding. Having it in writing makes for a stronger case. Note that contract law is different from state-to-state. Also note that this in no way constitutes legal advice.
Nonprofit boards can't ignore uncollected pledges. Pledges can be considered as assets for the nonprofits and, as a part of their fiduciary responsibilities, board members have a responsibility to protect those assets. According to one financial expert, "failure to enforce pledge collection could result in personal liability for the trustees of a non-profit." While this is extreme, it is important to remember and is one more reason why board members may need to get personally involved in collecting on promised gifts.
Use common sense! In reality, nonprofits almost never go to court over pledges. Johnny and Amber may not realize it, but their trial is proof that there are usually no winners in court. The nonprofit's reputation can suffer, and it is hard to justify big legal bills on the financials. When the donor is a recognized member of society, a public stink can close a lot of doors on fundraisers. So when a donor backs out, but you know you are not taking legal action, here are a few tips:
Be clear on expectations. In my own experience, one of the main times that donors fail to honor pledges is when they say they will buy tables or sponsor events. The "donor" may not understand that they have made a commitment. Clearer communications (and a form) is the best way to prevent that from happening. If it is a larger gift, especially a multi-year commitment, it may be worth scheduling a second meeting to go over details. People who can make transformational gifts have enough business experience to understand the importance of written agreements.
Keep the champaign on ice until the details are settled. Development professionals love to share good news. Know anyone who has ever rushed back from a donor meeting and breathlessly announced a big gift that fails to materialize?
Understand that situations change. This is especially true for multi-year commitments. The donor is not always able to live up to the commitment. This article from the Wall Street Journal has good advice on addressing those types of problems.
Have a grown-up conversation. The donor wanted to support your cause and you want them to. Meet. Bring your board chair. Have a nonconfrontational discussion about what the gift would accomplish, how communications broke down, and if there is an easy resolution.
Let it go. Sometimes you just need to move on. Do it quickly, quietly, and gracefully.
Are you listening Johnny and Amber? Move on!