Blessed are the benefactors
Canada's universities are relying more on private fundraising to help them grow, at a time when governments are prepared to do less
At Hamilton's McMaster University, construction workers are putting the finishing touches on the blue and yellow glass façade of the Michael G. DeGroote Centre for Learning & Discovery, the glass panels arranged to evoke the twin helix of DNA. When the new health-sciences building opens this summer, it will house 300,000 square feet of state-of-the-art classrooms, lecture halls and research labs.
But this is just a portion of what the unprecedented $105-million donation from Michael DeGroote will allow McMaster to do. The gift, the largest cash donation in Canadian history, will also fund three new research centres, one for cancer, another for infectious diseases and a third for pain; create two endowed chairs and up to 30 tenure-tracked positions; and still leave $25 million for unspecified priorities in the future.
Now 70 years old, Mr. DeGroote has ties to McMaster going back many years. The retired industrialist (who dropped out of school in Grade 9 and picked tobacco to help support his family before making his fortune in trucking, waste management and bus lines) has supported epilepsy research, literary criticism, the student centre, the business school and the McMaster Museum of Art, at times offering the money without being asked and other times declining offers to have buildings named after him. This time round, with events like SARS and West Nile Virus still fresh in people's minds, he opted to give the entire amount to health sciences. But beyond that, the money came with no strings attached - the kind of donation every school longs for.
"It was a remarkable act of generosity," says McMaster President Peter George. What motivated Mr. DeGroote was an understanding that his gift would give McMaster the potential to transform its medical school into the ranks of the world's best and the wherewithal to attract top-notch researchers. "This resonated with him," Dr. George adds.
But more than that, he says, Mr. DeGroote wanted to set an example for others. In appreciation, McMaster renamed its medical school the Michael G. DeGroote School of Medicine, the first in the country to bear the name of a benefactor.
For John Kelton, McMaster's vice-president and dean of health sciences, the donation was a dream come true. Ultimately, it will lead to important health care discoveries, maybe even a Nobel Prize, says Dr. Kelton, his voice brimming with excitement: "It would be exceptionally difficult to overestimate what this is going to do."
While Mr. DeGroote's donation was envied by medical schools and cheered by advancement officers across the country, not everyone supported it with equal enthusiasm. An opinion piece in McMaster's student newspaper asked why the money was dedicated solely to health sciences. Another student criticized the university's decision to rename its medical school after Mr. DeGroote. Other students - even some deans, acknowledges Dr. Kelton - have expressed similar concerns.
Of course, McMaster isn't the only Canadian university to have landed a large donation, and it isn't the first to recognize the generosity of its patrons. Some recent gifts have been truly impressive. The University of Toronto raised an unparalleled $1 billion in its just-completed fundraising campaign, a year ahead of schedule and more than 10 times the amount it raised in the last campaign in the late 1980s. Mutual-fund company executive Michael Lee-Chin - like Mr. DeGroote, a self-made man - gave $10 million to establish a new institute for business leadership, while media mogul Ted Rogers and his wife gave $25 million in support of student scholarships. The University of Manitoba attracted $22 million for AIDS prevention in India from the Bill & Melinda Gates Foundation, as well as $13 million from the late Izzy Asper, another media empire-builder. In 1998, Stewart Blusson, a geologist and mining prospector, gave his alma mater, the University of British Columbia, $50 million for research, at the time the largest donation to a public institution. And the University of Western Ontario just announced a $26-million gift for scholarships and research chairs in medicine, renaming its faculty the Schulich School of Medicine after the benefactor, Seymour Schulich.
Changing charity scene
Private gift-giving in Canada has increased every year over the past two decades, according to the Canadian Centre for Philanthropy, and universities have benefited from the trend. The Canadian Association of University Business Officers calculates that endowment fund assets totaled $6.43 billion in 2002, the most recent year for which figures are available, more than double the level in 1995. U of T had the largest fund, at $1.21 billion.
Despite their success, Canadian universities raise far less than some U.S. schools. U of T estimates that on a per-student basis its endowment fund totals just under $20,000 US, compared with more than $80,000 at the University of Michigan. Still, U of T's endowment now approaches The University of California's average endowment, at $22,000 per student. UBC's at $13,600 US, is similar to Michigan State's, at $14,000. (See accompanying article at bottom.)
Like their U.S. counterparts, Canadian universities say they have little choice but to seek out private donations so they can provide a quality education to an ever-growing student body - especially at a time when government purse strings are drawn tight and tuition fees highly regulated.
"Governments have not been willing to provide the kinds of resources that are necessary," says U of T President Robert Birgeneau, adding that U of T wants to increase its support for student aid. "We want to be able to guarantee a world class education to anybody that meets our standard." To achieve these goals, U of T needs significant private support, he says.
Other factors play a role in spurring charitable donations. Ken Wyman, professor of fundraising and volunteer management at Toronto's Humber College Institute of Technology and Advanced Learning, says governments have encouraged private gift-giving through incentives like tax changes. The federal government increased the deductible limit for charitable donations and lowered the rate of capital-gains tax applied to gifts of appreciated securities. New provincial programs such as the New Brunswick University Opportunities Fund, the Ontario Student Opportunity Trust Fund and Quebec's Subvention de contrepartie all offer matching grants for funds raised privately by universities.
Whether it's the tax changes or the notion that graduates owe their success to their alma maters, individual donors are contributing a larger share than they did a decade ago. Tim Griffin, who heads an investment firm in Toronto, has given more than one gift to his alma mater, Bishop's University, including the $150,000 endowed bursary fund that he and his siblings recently established. "We wanted to make sure other people weren't deprived of the opportunity because of financial pressures," he says.
In the University of Toronto's billion-dollar campaign, 60 percent came from individuals and 40 per cent from corporations and foundations. In the previous campaign the figures were split about 50-50. Not only are more individuals giving but they are giving more, adds Jon Dellandrea, U of T vice-president and chief development officer. Ten years ago, a $1-million gift from an individual was rare. In the latest campaign, 209 gifts totaled $1 million or more and 29 gifts totaled $5 million or more.
But as endowments continue to swell, universities are facing some uneasy questions about the impact that private funding is having on postsecondary education.
For one thing, as donations have increased, so too have donor expectations, perhaps naturally so, says Dr. Dellandrea - donors who invest $1 million or more want to know where their money is going and how it will be used.
To avoid potential conflicts, U of T adopted guidelines that spell out what donors can expect from the university, and introduced the use of "gift agreements" - binding contracts between the university and its donors. Both measures aim to protect U of T's autonomy and academic freedom while encouraging donor participation, Dr. Dellandrea says.
Big winner is student aid
The bulk of the money raised by U of T in its most recent campaign will go to faculty recruitment and student aid; the latter is the most efficient way to leverage gifts because the Ontario Student Opportunity Trust Fund matches these donations. The university's endowment for student aid has risen to about $500 million from $68.7 million at the start of the campaign. The number of endowed chairs jumped from 15 to 175, with another 80 held jointly with its teaching hospitals.
Still, says Dr. Birgeneau, more needs to be done. So U of T will aim to raise another $1 billion over the next 10 years, although it isn't certain yet whether it will launch another campaign or adopt the kind of fundraising approach that the University of British Columbia uses.
UBC's last major campaign ended in 1993 and since then the university has moved to a sustained fundraising approach, principally to avoid the peaks and valleys associated with campaign giving, says Clark Warren, UBC's associate vice-president of development. UBC has also decentralized its fundraising activities. Each faculty has its own fundraising team that complements the work of a central office.
The university pays close attention to donor wishes because so much of its fundraising success depends on building long-term ties with its benefactors. "We don't want them feeling like the only time they hear from us is when we're asking for money," observes Mr. Warren.
UBC's advancement office has a donor relations and stewardship unit, whose main focus is to build long-term relationships with the university's patrons. In most cases, it's just a matter of informing donors about the benefits their gifts bring to the university, says Mr. Warren. The university does this by arranging meetings between the donors and the recipients of their scholarships and by telling donors how an endowment fund is performing.
But as universities begin to pay closer attention to the wishes of major contributors, some people worry that this kind of caretaking encourages inappropriate demands by donors; increases inequities that already exist between various institutions; and may even unintentionally encourage governments to underfund universities.
"Any time there's an effort to raise money privately," says Ian Boyko, national chairperson of the Canadian Federation of Students, "we have concerns about strings attached to those donations." The strings could be something as minor as naming a building after a benefactor, he says, to more worrisome practices that could compromise a university's mandate.
University officials acknowledge that some donors step over the boundary, although it happens rarely. Some donors have insisted on meeting candidates for a faculty position that they've offered to fund, and made their opinion known on who should or shouldn't get the job. The University of Manitoba once rejected a major gift, says Elaine Goldie, vice-president, external, because the donor wanted to create a program that wasn't a priority for the university. Other universities say they've turned down similar gifts.
"Everybody in the development field is concerned about donors driving the agenda of our institutions," says Mark Hazlett, president of the Canadian Council for the Advancement of Education and executive director of associated alumni at the University of New Brunswick.
Donors' passions for certain causes can influence a university to shift its priorities to areas that patrons are more likely to support. Mr. Hazlett notes that as universities go through their academic planning process, questions about fundraising potential come up more frequently today than a decade ago. Donor interest doesn't necessarily determine policy, he adds, but "it is being discussed more than it used to be."
The demands of benefactors can complicate fundraising in other ways. Nowadays most donors would rather pay for specific projects than add to a general fund, so most universities allow them to allocate their gifts. Of $237 million the University of Manitoba raised in its last campaign, only $1.4 million is unrestricted. While it would be far easier to run a campaign where the money went to a general fund, observes Ms. Goldie, "you would raise less money."
As universities step up fundraising efforts, some worry this trend will concentrate wealth in the hands of a few privileged institutions and deepen disparities among universities. Some schools, particularly smaller ones, can lose out.
Fred Gilbert, president of Lakehead University in Thunder Bay, Ontario, says it's true that a small university in a small city can find it difficult to raise funds, especially for a comparatively young institution like Lakehead without a large alumni base.
"It's just now that some of our early graduates are getting into positions of influence and capacity for philanthropy," Dr. Gilbert says. But, echoing the sentiments of his counterparts at larger institutions, he says that without private support, all universities - including small ones - would suffer because governments can't be counted on to provide the necessary funds.
Francophone universities, too, haven't raised as much money traditionally as their English counterparts, and they are still more dependent on corporate donations than on individual donors. Université de Montréal, for example, Canada's second largest university by several measures, raised $218 million in its fundraising campaign.
Guy Berthiaume, Université de Montréal's vice-rector, public affairs and development, says that until recently few francophones had the resources to make large donations. "In order to do fundraising you have to have rich alumni," he observes, "and we haven't had that many because business opportunities for the French didn't exist before the 1970s."
He says that McGill University and Bishop's University do well in fundraising, in part because they rely on out-of-province alumni. Indeed, Bishop's is one of several universities that have established satellite offices in Toronto to tap into that alumni pool.
But even for large universities in small cities, fundraising can be tough. "We have to go to Toronto, Montreal and Calgary to try to raise funds," says Ted Garrard, vice-president, external, at the University of Western Ontario in London. "[It] is hard when there are other universities in those communities."
What's more, government matching programs tend to favour universities with greater fundraising abilities, as well as limit universities' discretion over the use of the funds. "Often times when I'm dealing with donors they want to fund something that is of interest to them and not necessarily what's of interest to government," says Mr. Garrard. "It takes away some of our latitude."
Fundraising can create disparities within a university, too, because high-profile departments such as medicine and business attract dollars more easily than others. Mr. Garrard notes that a business leader recently gave Western a million dollars to support scholarships in the faculty of arts because he understood that the university was having a tough time raising money for that faculty.
Despite all the potential pitfalls, universities say the benefits of fundraising far outweigh the risks. That's why officials are apt to cheer when a gift like Mr. DeGroote's goes to a neighbouring university. "It plants a seed," says Amanda Gellman, vice-president, university advancement, at the University of Windsor, and it may prompt other philanthropists to follow suit.
So universities will continue to boost their fundraising and look for new ways to tap into the donor pool. They're turning their attention to bequests and estate planning, sensing a new opportunity as a large portion of their faculty members and former graduates begins to retire. And they're trying to foster ties with students and young graduates, hoping to start a relationship that will lead to a donation some 10 or 20 years down the road. The advancement office is one place at the university that continues to add staff. UBC has 90 employees devoted to fundraising compared with 35 a decade ago, and it plans to hire more.
How much longer the trend can continue, no one knows. Michael Hall, interim president of the Canadian Centre for Philanthropy, observes that although charitable donations have increased each year over the past 20 years, the number of donors has remained more or less steady. At the same time, demand for private funds has increased. "How long is that sustainable?" he asks. "We don't know. [But] there has to be some saturation point."
Our richer American cousins (related article)
Canada's philanthropic support for universities, although growing, is still much less than what some U.S. public and private universities and colleges raise. In a 2003 survey, 1.5 percent of public universities and colleges and 3.9 percent of private ones had endowment assets worth more than $1 billion US, according to the National Association of College and University Business Officers. Harvard has the largest, at $18.8 billion US - close to four times the total endowment funds for most universities and university-colleges in Canada.
Philanthropic culture is better entrenched in the U.S., for a host of reasons. That's always going to make it tough for Canadian universities to compete for high-priced faculty, says Ted Garrard, vice-president, external, at the University of Western Ontario.
But American universities, so reliant on donations, have faced their own challenges in recent years, with depressed financial markets and the collapse of formerly generous benefactors like failed energy giant, Enron.
Such developments, acknowledge fundraisers, could happen here too. Pam McPhail, director of alumni and development at Bishop's University, says the Canadian mining company Bre-X donated securities to several universities before it collapsed in the late 1990s, when the company's fraudulent claims were exposed. Although Bishop's wasn't among the recipients, it quickly instituted a policy requiring it to immediately sell gifts of securities, Ms. McPhail says.
Certainly, fundraising can be a risky venture, says U of T President Robert Birgeneau. But he counters that the past decade in Canada has shown the dangers in relying exclusively on government funding. For a university, the collapse of Enron isn't fundamentally different, he says, from drastic reductions in government funding, such as the 15-percent cut imposed by Ontario's previous Conservative government. Fundraising hasn't made U of T more vulnerable, he adds; if anything it has made the institution "less vulnerable to the ups and downs of government funding.