Ohio State University is undergoing criticism from Jeffrey Moritz for drawing endowment fees out of his father’s $30 million endowment gift and failing to fulfill the gift’s intentions.

“Hidden fees” typically conjures up images of a used car lot or a credit card company—not the endowment policies of a prestigious university. Yet few donors are aware that every university with an endowment greater than $500 million assesses an annual fee on endowed gifts.

Endowment fees are common, legal, and in many ways, defensible. Failing to inform donors about them, however, is indefensible. Though institutions have no legal obligation to disclose endowment fees, they certainly have a moral one. More than this, time and again we see that it is in the university’s best interest to be transparent and to steward the donor’s gift honestly.

“Development fees,” “endowment management fees,” or “advancement fees” vary in scale but usually hover around 1%. If the costs incurred are “reasonable and feasible,” these fees are permissible by law to support an institution’s work to manage and grow its endowments.

Undisclosed endowment fees have landed The Ohio State University (OSU) in a public dispute with a significant contributor. In 2001, alumnus Michael Moritz gave a $30 million gift to OSU’s law school. His gift agreement with the university contained a detailed budget for how his gift should be spent, including 30 annual Moritz Scholarships for deserving law students. In recognition of his generosity, OSU renamed its law school in Michael Moritz’s honor.

Michael Moritz passed away in a car accident in 2002 on his way home from an OSU event. Years later, his son Jeffrey Moritz began looking into the scholarships his father had supported. He discovered that the value of the endowment had fallen to less than $22 million by 2017 and that OSU had awarded only 12 to 16 scholarships annually.

The culprit? In addition to poor investment choices, the university had been extracting an annual “development fee” of up to 1.25%. Jeffrey Moritz calculates that the university withdrew about $3 million in fees from his father’s gift from 2001 to 2015, which, if invested, would have a present value of $6 million.

From 1994 until 2004, the university extracted this fee from all restricted endowments without disclosing the policy to donors.

Jeffrey Moritz has petitioned the Ohio courts to reopen his late father’s estate so that he can enforce its charitable gift agreement with OSU. (My employer, the American Council of Trustees and Alumni, filed an amicus brief in support of Jeffrey Moritz’s petition.)

OSU argues that because Michael Moritz served on the board of the University Foundation, he fully understood the policy on development fees. Jeffrey Moritz argues that his father’s agreement stipulates 30 scholarships annually and that the allocation of his $30 million endowment gift leaves no room for extraneous fees.

In addition to a court petition to reopen the Michael Moritz estate, the Moritz family has created a campaign called the Honor Bound Initiative to shine a light on OSU’s fundraising practices and demand greater transparency.

I do not envy OSU’s public relations team.

In an interview with Columbus’s NBC station, Jeffrey Moritz said that his father wanted to give “deserving students who couldn’t afford law school the opportunity to go to Ohio State.” Law school is notoriously expensive. Had Mr. Moritz’s wishes been honored, nearly 300 students could have had the opportunity of a lifetime.

I have worked in development for the better part of my career, and for many years, my salary depended on the generosity of donors willing to invest in my organization’s fundraising work. Full disclosure of operational costs goes a long way toward building a relationship of trust between the donor and an organization. While not every donor will support these costs, many—especially when adequately cultivated and trust is built—will understand this organizational need.

No donor, however, will look kindly on a surprise fee charged after a gift agreement is signed.

Until universities disclose endowment costs universally, donors must ask an essential question before entering a gift agreement: What fees will the university apply to my gift?

Having this conversation early in the giving process provides donors the opportunity to negotiate. Some institutions will waive or reduce the fees if donors insist. Understanding development fees can also clarify which giving vehicle a donor should choose. For some, the simplicity of an endowment gift is worth the annual fee assessed on their restricted endowment. Other donors may choose to direct their giving through a donor-advised fund, after comparing the endowment fee to a donor-advised fund’s annual management fee.

The Moritz family—and Ohio State law students—deserve better than excuses from OSU about the universality of development fees. To quote my favorite philosopher, my mother: “just because everyone is doing it doesn’t make it right.” Instead of following the same misguided path, other universities should learn from this dispute and position themselves as trustworthy, transparent stewards of donors’ gifts.


Emily Koons Jae is Associate Director of the Fund for Academic Renewal, a project of the American Council of Trustees and Alumni.