Returning a Controversial Gift Is Harder Than It Looks. Just Ask Spelman College

In 1988, Bill Cosby and his wife, Camille, donated $20 million to Spelman College of Atlanta. The Cosby gift was used in part to build the Camille Olivia Hanks Cosby Academic Center and the remainder was used to establish an endowed professorship called the William and Camille Olivia Hanks Cosby Endowed Professorship.

In late 2014, the college announced that it “was suspending the professorship chair while the college reevaluates the relationship with Mr. Cosby.”  In a post I wrote last December, I noted that the college could not just stop complying with the terms of the gift or apply the money to other purposes.

Last week, the New York Times reported that the college has taken the next step and discontinued the endowed professorship and returned the money to the Clara Elizabeth Jackson Carter Foundation, a private foundation established by Camille Cosby. Apparently, the funds for the gift came from Mrs. Cosby’s private foundation, a common practice within the philanthropic community.

Returning the donated funds to the donor may be the right course to take once the college made the decision that it could no longer be associated with Bill Cosby. Presumably, the Academic Center building will remain as-is, since it carries only Camille’s name.

Once a charity decides that it can no longer honor the terms of the gift instrument, it cannot keep the gift funds. Not only should the college stop using the original portion of the $20 million donated for the endowed professorship, it must stop using whatever that fund has grown to—the current market value of that fund. This could be more than double the original value of the 37-year old gift.

So did Spelman follow proper procedure in returning this gift? Depending on the charitable gift laws in the state of Georgia, the college may have been obligated to obtain court approval to stop complying with the terms of the gift instrument and to return the funds to the private foundation.

In a piece he wrote in 2012, Michael Rosen, a certified fundraising professional, noted that contributed restricted funds are neither the property of the donor nor the recipient organization. They are funds that are owned by the public interest. Was Spelman’s return of the gift to the donor (also a charitable organization) a removal of the funds from the public interest? It's a good question, because nonprofit charitable organizations exist to benefit the public interest and the public interest may have taken a hit because of Spelman’s actions.

The charity regulators in Georgia may need to review Spellman’s actions, although I believe the college did the right thing. Hopefully, the Clara Elizabeth Jackson Carter Foundation will re-gift the funds back to Spelman College to establish an unnamed professorship.