In case you missed it, a recent article in the “Wall Street Journal” (and a subsequent piece in the “Chronicle of Philanthropy”) told the story of a very generous couple who established a $135 million endowment at a local hospital near their home. The endowment was “to be held in perpetuity” (as expressed in their wills in the 1990s). Today, less than 20 years later, it is gone!
“How did that happen?” you ask. It happened because the hospital, facing serious financial challenges, sought and received court approval to use the fund as collateral for loans Later the hospital sought the court’s approval to tap the principal by invoking “cy pres.” There were more “laters,” but suffice it to say that all the money is now gone and no longer helping meet the health care needs of area residents.
Who was minding the couple’s interests in insuring better healthcare for the people of their community? Hmmm…good question! I can’t help but believe that had the couple been aware of and used a designated fund at their local community foundation this story would have a different ending. Actually, it would be never ending.
There was a time I thought designated funds in a community foundation were best suited for small organizations that were not geared up to manage investments, but rather to deliver services in the community. The larger and more sophisticated enterprises, I reasoned, were perfectly capable of managing the money. But the lesson in this story tells us that what they may not be so good at is protecting and preserving the donor’s charitable intent for community benefit. That is where a community foundation’s inherent careful exercise of stewardship responsibility plays such a critical role.
By the way, this was one of nearly 20 endowments this couple established to support various community benefits and charitable purposes. It makes me wonder, how many of those may be at risk of disappearing?
Helmer Ekstrom
“How did that happen?” you ask. It happened because the hospital, facing serious financial challenges, sought and received court approval to use the fund as collateral for loans Later the hospital sought the court’s approval to tap the principal by invoking “cy pres.” There were more “laters,” but suffice it to say that all the money is now gone and no longer helping meet the health care needs of area residents.
Who was minding the couple’s interests in insuring better healthcare for the people of their community? Hmmm…good question! I can’t help but believe that had the couple been aware of and used a designated fund at their local community foundation this story would have a different ending. Actually, it would be never ending.
There was a time I thought designated funds in a community foundation were best suited for small organizations that were not geared up to manage investments, but rather to deliver services in the community. The larger and more sophisticated enterprises, I reasoned, were perfectly capable of managing the money. But the lesson in this story tells us that what they may not be so good at is protecting and preserving the donor’s charitable intent for community benefit. That is where a community foundation’s inherent careful exercise of stewardship responsibility plays such a critical role.
By the way, this was one of nearly 20 endowments this couple established to support various community benefits and charitable purposes. It makes me wonder, how many of those may be at risk of disappearing?
Helmer Ekstrom
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