8.33 University Development Fund Policy and Procedure

Policy Information

Purpose and Summary

To provide guidance for contributing to the University Development Fund when gifts greater than $5,000 are received. The financing of fundraising is a shared enterprise requiring a significant amount of University and University of Arizona Foundation resources for appropriate alumni and development activities and oversight.

Scope

This policy applies University-wide, including Main Campus, the Arizona Health Sciences Campus, the Phoenix Biomedical Campus, and University of Arizona – South. In addition, this policy applies to all extension off-site campus units, both domestic and international.  

Definitions

1. University Development Fund: A repository of funds to support fundraising activities undertaken by and on behalf of the University.
2. Gifts: A voluntary transfer of items of value from a person or organization where no material amount of goods or services are expected, implied or provided to the donor. Further information is located in policy 8.12 Gifts in the Financial Services Manual.
3. Gift Charge: A six percent charge that is assessed on applicable gifts in support of the University Development Fund.
4. Affiliated Organization: A not-for-profit corporation, exempt from federal income tax, with Internal Revenue Code section 501(c)(3) status, which raises funds or carries out other activities primarily in support of the teaching, research and public service missions of the University. Further information is located in policy 6.15 University Relations with Affiliated Organizations in the Financial Services Manual.
5. The University of Arizona Foundation (UA Foundation): An affiliated organization that provides assistance to the University in three areas: fundraising, asset management, and facilitation.

Policy

1. This policy applies to all cash or cash-equivalent contributions, pledges, gift commitments, additions to endowments or capital accounts, sponsorships, some grants, and all other gifts in excess of $5,000 without exception.
    
2. A six percent gift charge is taken out of the principal amount of all non-endowed and endowed gifts. If necessary, arrangements can be made to use funds from other sources to contribute to the gift charge (e.g., an equivalent contribution could be made from other unrestricted departmental funds on hand).
   1. For non-cash gifts in excess of $5,000 (pledges, securities, property, etc.), the six percent gift charge will be applied after the pledge is received and the gift is converted to cash. In addition, the direct costs involved for asset disposal (including appraisal fees, surveys, attorney's fees, etc.) will be charged against the proceeds for all real property transactions.
   2. Of the six percent gift charge, four percent will be immediately distributed to fund development activities, one percent will be immediately distributed to fund the University President's development activities, and the remaining one percent will be distributed as unrestricted support for the respective college’s development activities.
       
3. For any transactions involving transfers of gift funds, accounts, or assets between the University and UA Foundation or another affiliated organization, the gift charge will be applied only once and be applied by the initial recipient.
    
4. All affiliated organizations (except the Arizona 4H Youth Foundation, the Law College Association, UAF Technologies and Research LLC, UA Alumni Association, and Boyce Thompson Arboretum) will be subject to these requirements and will pay to the University or UA Foundation the six percent gift charge. Alternatively, with advanced written approval by the President of the University, the affiliated organization can expend an equal amount of the gift charge directly on fundraising-related expenses.
    
5. Exemptions:
   1. This policy does not apply to the income produced by endowment or quasi-endowment accounts that are invested by the University or UA Foundation. See 8.13 Endowment and Investment Policy.
   2. As noted in policy 8.12 Gifts, conference, symposia or event sponsorships typically contain a gift element. The portion of the payment relating to the gift element is subject to the six percent gift charge.
   3. Scholarships and fellowships that will be fully expended within 12 months of receipt (i.e., pass-through scholarships) are exempt from the six percent gift charge.
   4. Gifts to purchase specified equipment (a gift from a single donor), will be treated as equivalent to a gift of the equipment itself, if it meets the following requirements:
      1. is earmarked by the donor for purchase of a specified piece of equipment that will be used by a department or program in its educational mission,
      2. covers the entire acquisition cost of the specified equipment, and
      3. is discounted if purchased through the University rather than by the donor.
          
6. The six percent gift charge only applies to the first $3.5 million of any single major gift.
    
7. A donor(s) concurrence should be sought early in the solicitation process to avoid any and all misunderstandings as to the application of the entire amount of the gift and the six percent reduction to support fundraising.
    
8. Donors should not be encouraged to make a series of gifts of less than $5,000 in order to avoid the gift charge. If such practice is detected, the series of gifts will be aggregated and assessed the six percent gift charge.
9. The UA Foundation will review all written solicitations to ensure that appropriate disclosures and acknowledgments are made.

Procedures

See Policy 8.12 Gifts for a list of gift terms/definitions and procedures for soliciting, reporting, processing, and acknowledging/reporting gifts.

Frequently Asked Questions

1. What happens if a gift is erroneously deposited at the University or UA Foundation?
   a. The six percent gift charge will be reversed.
   b. The entire gift will be transferred to the correct area and the gift charge will be assessed as per policy.
    
2. What happens if a department believes a gift charge has been assessed erroneously?
   Contact the Central Gifts Office for approval for the reversal of the gift charge.
    
3. How do I make alternative arrangements to the six percent gift charge?
   ABC Foundation makes a $50,000 gift to support Professor Susan Smith's research project in the College of Agriculture. The agreement from ABC Foundation requires the funds to be spent within 12 months for the project, but there is no product or service commensurate in value to the foundation, and the foundation pays no indirect costs. After discussing the six percent gift charge rule, ABC Foundation does not want to pay an equivalent contribution out of the gift. Professor Smith agrees to pay six percent ($3,000) out of discretionary funds held at the UA Foundation for her research.
    
4. What is an example of a non-cash gift exemption?
   Big Computer Company makes a gift of $200,000 in computer equipment to the Eller College for use in undergraduate computer labs. There is no intent to sell or otherwise dispose of the equipment in the near future. This gift is exempt as it is a non-cash gift which will not be converted to cash.
    
5. What is an example of a gift not subject to the six percent gift charge?
   Bigger Drug Company (BDC) makes a grant of $500,000 to support the research of Chip Jones in the College of Pharmacy, including full payment of indirect costs. The data derived from the research along with any and all patentable products will be accessible to BDC upon completion of the research. This is a sponsored project that is not subject to the six percent gift charge.

Related Information

The University of Arizona Foundation
Policy 8.12 Gifts
Policy 6.15 University Relations with Affiliated Organizations
Policy 8.13 Endowment and Investment Policies