What Can FAMU’s Philanthropic Setback Teach Us About Donor Due Diligence?

What Can FAMU’s Philanthropic Setback Teach Us About Donor Due Diligence?

On May 4, 2024, Florida A&M University (FAMU) announced a historic donation of $237.75 million to the institution from the Isaac Batterson Family 7th Trust and Batterson Farms CEO Gregory Gerami. Messages came rolling in from across the larger Historically Black College and University (HBCU) community and beyond, with a great deal of excitement in the air. However, it did not take long before things fell apart with many questions surfacing about the legitimacy of the gift and the donor.

In the past, the donor promised gifts to two other institutions of higher education (Coastal Carolina University and Miles College), and did not follow through. The Batterson Farms’ website had very little information on it and some content that didn’t make sense, such as a co-CEO with no connection to the organization.1 Questions surfaced as to the value of the stocks gifted — with skeptics wondering how the small Hemp-focused company could carry enough value to support the donation.

FAMU “paused” the gift, the Vice President of Institutional Advancement Shawnta Friday-Stroud resigned, the FAMU board of trustees has launched an investigation into the gift process, and FAMU president Larry Robinson took responsibility for letting his excitement get ahead of doing the due diligence needed for a gift of this size. Specifically, Robinson told the FAMU board of trustees, “I take full responsibility for this matter and the ensuing fallout.” He added, “I saw in this unprecedented gift the potential to serve our students and our athletic programs in ways unimaginable at that time. It would truly be transformational, I believed. I wanted it to be real and ignored the warning signs along the way. There was no personal gain, but the impact on our students and our university would have been extraordinary,”

The situation at FAMU provides ample lessons for institutions of higher education, presidents, fundraising professionals, and members of boards of trustees. I talked with experts on leadership and fundraising to garner their thoughts on the various aspects of the situation.

From the perspective of Walter Kimbrough, former president of both historically Black Dillard University and Philander Smith College, “The major issue I find in the FAMU situation based on reports is that the general counsel was not involved in the gift negotiations. If you have counsel, use them! Lawyers are going to be somewhat risk averse, so a gift like this would have raised lots of questions, which would have prevented this mishap. In addition, any kind of contract or agreement that is signed should have a place for legal to sign off. The gift agreement shared via the media does not appear to indicate any legal review. Every gift does not require this kind of scrutiny but one of this magnitude really needed it.” Kimbrough added, “The [general counsel] at FAMU was our [general counsel] at Dillard for a number of years when I was president. She is very detail oriented, thorough, and conservative. None of the reports indicated she was involved in the review of this gift, and based on personal experience, there was no way she would have signed off. She would have saved them their current heartburn and embarrassment.”

Tyrone Freeman, an expert on philanthropy and a faculty member in the Lilly Family School of Philanthropy at Indiana University Indianapolis, offered advice for managing large gifts for colleges and universities more generally. He shared that institutions need:

  • A board-approved and adopted strategic plan to help with vetting a gift’s alignment with institutional values and priorities;
  • Board-approved and adopted gift acceptance policies and procedures outlining what gifts will/will not be accepted and the processes involved in implementing, including involved parties (e.g., president, board of trustees, legal counsel, finance, advancement, acceptance/naming committees, etc.);
  • Open communication and proper vetting of the gift and the donor; and
  • An assessment of the donor relationship.

Freeman added, “That non-disclosure agreement (NDA) should have been a big red flag. Anonymity is one thing (but not at play [in this situation] because the donor wanted to speak at commencement) and there are processes for managing that, but even still all proper parties within the institution would be aware.” He wondered, “Why is the donor so secretive regarding what can or cannot be known regarding the basics of the gift’s origins, sources, and scale? If a donor has a problem with engaging board leaders, finance, legal, etc., institutions have to push back and explain their protocols. And they must be willing to say no, even in the face of tempting transformational gifts!”

Freeman also put forth some very important questions for consideration that are essential for engaging with any donors. Specifically, he asked:

  • Has proper time been invested to truly understand the donor, motivations/interests, connections?
  • Did anyone visit the company?2
  • Did university prospect researchers or legal counsel look into the company/person?
  • Did they contact the other universit[ies] whose gift[s] [were] rescinded?”

William Broussard, an expert on HBCU fundraising and the Vice President of University Advancement at the University of Wisconsin-Stevens Point Foundation, focused his comments on the stressors that public, regional universities face, and in particular, those that public HBCUs face due to lack of resources. He stated, “Limited resources means limited staff expertise, so more complicated giving methods must necessarily draw in the expertise of volunteer foundation or university board members. It appears possible that very few board members knew about the gift, which means that the university relied on staff expertise only, or primarily, which can lead to big mistakes if current staff lacks the necessary expertise. Private universities with large endowments have entire staffs of individuals who handle such complicated procedures…and those positions are highly compensated.”

Broussard also pointed out that the Dean of the Business School was serving as the Vice President of Advancement — two highly intensive jobs within a university setting. He shared, “While many advancement professionals come to the field from various educational and professional backgrounds and can train very quickly to be effective fundraisers and engagement staff, at the executive level, there is a specific body of knowledge and expertise that takes many decades to learn and become experts at executing. Placing individuals without proper experience and credentials into executive positions in fundraising can have disastrous results that can harm an institution’s reputation and run afoul of state and federal law, leading to fines and indictments of unsuspecting staff.”

Fundraising positions have highly detailed job descriptions and expertise requirements. Broussard expressed concern that FAMU appointed someone with little fundraising experience to the chief fundraising position at the institution. He advised, “The field of university advancement must be taken every bit as seriously as academic affairs, student life, athletics, and business and finance, and people in those positions must bring in a certain level of expertise AND commit to growing their knowledge through continuing education and professional development. By design, a full-time employee asked to take on another full-time job with completely different professional requirements and expectations is being set up to fail, as this simply cannot be done … in one area or the other, the work, and the institution, ultimately, will suffer.” Of note, Friday-Stroud, the Vice President of Advancement, has ample prior experience but fundraising [beyond her role as dean] is not addressed in her institutional bio.

Brandy Jackson, an expert on African American fundraising, agrees with Broussard, stating “Although this issue may be viewed as a fail to FAMU, this crisis should be looked at as an opportunity for FAMU to revamp and transform its fundraising practices and specific gift agreements operations. The goal moving forward should be dedicated to hiring an elite advancement professional who is experienced in closings gifts and has a passion [for] taking FAMU to the next level.”

As these experts have emphasized, comprehensive legal and financial reviews, clear communication, and adherence to established gift acceptance policies are crucial to safeguarding the integrity and future of educational institutions. FAMU’s experience underscores the necessity for rigorous scrutiny and transparency in managing large donations, offering a valuable opportunity for the university and others to strengthen their fundraising practices and ensure they are prepared to handle such transformative gifts responsibly. According to Freeman, “We all want [gifts to be real], especially for an HBCU given their fraught history of underfunding by state governments and paternalistic funding from private philanthropy. But skepticism and protocols should come long before exuberance.”

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