Donor's Intent Promises Made and Broken
Thursday, October 24, 2013 • 3:02pm
Trust is a critical issue these days for donors contributing to nonprofit organizations. As a result, The organizations’ leaders must work harder than ever to gain the support of major donors for their mission. Simply stated, donors must buy-in to the organization’s mission and beliefs before they will invest.
Donors are also more wary about how their contribution will be used by the organization. Before making a serious commitment they want to be assured that their intent for us of their funds is carried out. Wikipedia defines donor intent as the “purpose, publicly expressed or not, for which a philanthropist intends a charitable gift or bequest.” Donor intent is most often expressed in gift restrictions, terms, or agreements between a donor and donee, but it may also be expressed separately in the words, actions, beliefs, and giving practices of a philanthropist. In general, term donor intent is commonly used to refer to both the guiding principles of a grant making entity and the purposes of a specific gift.
Lately, there have been many controversies, including litigation, over donor intent at nonprofit organizations, private foundations, universities, and arts organizations and it continues to be a hot-button issue in the nonprofit community.
The Court Case
There is an interesting court case that addresses the importance of the donor’s intent when offering financial assistance to a nonprofit organization. In 2002, a charity held an event and solicited its top donors to support a plan to expand an animal shelter. The donors strongly supported the project and agreed to contribute $50,000 specifically toward creating new rooms for large dogs and older cats in return for the right to name them. This contribution represented a significant expansion of their financial support for the care of animals.
But in February 2006, the shelter announced that it was merging with another charitable group and plans to expand the shelter would be canceled. Instead of major construction as originally planned, shelter officials said they would build a new, smaller facility in another location. The donors requested that their money be returned. After several failed attempts to persuade the shelter to voluntarily issue a refund, they filed suit in 2007.
In early August 2013, a three-judge panel from the New Jersey state appellate court ruled in favor of a couple who wanted their $50,000 donation returned. It was stated that charities in New Jersey that solicit and accept donations earmarked for a specific purpose must return the money if they cannot or decide not to honor the donor’s request, according to this precedent-setting decision.
The trial court found the purpose of the donation was clearly understood, and that a different, smaller facility in another location would not satisfy the conditions of the gift. The appellate panel agreed, rejecting concerns the decision may adversely affect New Jersey charities. The appellate court relied on the basic principle of charitable giving: What was the donor’s intent?
The court’s ruling affects hundreds, if not thousands, of charitable organizations across the state of New Jersey, from nonprofits to small community sports associations. Nonetheless, the panel held that “absent the donor’s consent, the recipient of the gift is not a liberty to ignore or materially modify the expressed purpose underlying the donor’s decision to give.”
In those instances where the donors have left a significant bequeath to a charity in their will, if their intent is not carried out, there may not be anyone who objects. But this case is unique because the donors were alive and they were able to clearly testify to the purpose of their gift, requiring the court to force the charity to fulfill the conditions or return the money. Responsible charities will welcome this decision because it will assure prospective donors that the expressed conditions of their gift will be legally enforceable.
In conclusion, it seems wise that all nonprofit organizations need to be reminded: Donor Intent is King!
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