Unrestricted gifts are gifts that may be spent by the Institute in support of any aspect of MIT’s education and research mission. Restricted gifts are gifts where the principal of the gift must be preserved and only the earnings on the gift may be spent and/or gifts that must be spent for a particular category of need. For example, a donor making a restrictive gift requiring her contribution be used to support scholarships, or a professorship, or a particular program.
Many gifts are typically accompanied by a gift agreement. The gift agreement is a binding contract between MIT and the donor setting forth terms to ensure MIT and the donor have a common understanding as to the nature of the gift and the donor’s intentions for the use of the gift. Applying funds in a way that is not consistent with the gift agreement could subject MIT to significant financial exposure. The Massachusetts Attorney General summarized the current state of the law when it noted that “Donor restrictions are generally binding upon the institution and cannot be removed without either the consent of the donor, the approval of the court, or, in certain instances, with the consent of the attorney general.” http://www.mass.gov/ago/docs/nonprofit/ch180a-faq.pdf
In addition to the law, MIT is guided by the Donor Bill of Rights promulgated by the Council for Advancement and Support of Education which makes clear that donors have the right to “be assured their gifts will be used for the purposes for which they were given.” http://www.case.org/Samples_Research_and_Tools/Principles_of_Practice/Donor_Bill_of_Rights.html
In rare circumstances, it may no longer be possible or reasonably practicable to apply gift proceeds as a donor originally intended. In these instances, MIT reaches out to the donor and explores an alternative application of the gift. If the donor has died, MIT files a “cy pres petition” with the Probate Court, asking for the right to apply the gift in a manner that most closely aligns with the donor’s originally stated purpose.
The importance of adhering to the stated wishes of our donors cannot be overstated. As an example of what can occur is the Princeton – Robertson Family litigation. In 1961, Charles and Marie Robertson, an heiress of the A&P supermarket fortune, made a $35 million gift to Princeton in order to expand the graduate programs at its Woodrow Wilson School of Public and International Affairs. The gift, which eventually grew in value to $900 million, was intended to prepare graduates of the Wilson School for service in the federal government, particularly in foreign relations.
The Robertson family sued Princeton asserting that Princeton spent the gift on training students for a broader range of careers and, as such, did not properly adhere to the donors’ stated wishes. Princeton maintained that its spending had been appropriate, and that it used the gift to build one of the most highly regarded schools for preparing students for government and public-policy work.
Princeton and the Robertson family settled the case in 2009, after six years of litigation. It has been reported that the settlement called for Princeton to pay the Robertson family $40 million in legal fees, and another $50 million to a new foundation for the support of education for government service. It was agreed the remainder of the gift could be used as Princeton chooses to support the Wilson School.