When I was a boy growing up in Illinois, one of my grandmothers always gave me underwear and socks for Christmas. As I got older and constantly grew, the size she sent was often wrong, so she started writing a check instead, with “socks and underwear” written on the memo line. My mom had always kept me pretty well supplied in socks and underwear, so I asked if I could spend the money on something I really wanted, and she said I could, but I would have to let my grandmother know when I sent the mandatory thank you note. I spent the money on a toy, comic books, or something else a ten year old boy might spend his money on, and then let her know how I spent the money. The next year, my brother and sister got their checks, but I didn’t. Apparently, my decision to use her gift of money in a way she had not intended had upset her, and this was her way of letting me know.
There are too many stories in the nonprofit sector where a donor gave a recipient a financial gift to be used in a specific manner, but the organization did not live up to the agreement. Some examples are:
- The popular entertainer who gave half a million dollars to a healthcare nonprofit to build a women’s care center in his hometown and name it after his mother. They never built it and they didn’t return the gift. He sued for the return of his donation and won, not only getting his gift back, but he also received an additional $500,000 awarded by the court.
- A couple donated $50,000 to an animal aid group so they could build a larger no kill shelter to house homeless animals. The organization spent their money elsewhere and did not build the shelter. The couple sued the organization and the court forced the organization to return their gift.
- A couple gave a prestigious university a eight figure endowment to fund a program to increase the number of people going into government service professionally. As the endowment grew, the university took proceeds of the endowment and used it for other departments of the school. The couple’s heirs found out and sued the university, and after years of expensive legal wrangling, the university had to pay back a large sum of money to the heirs, as well as the legal costs incurred over the years.
These are just a handful of stories that can be found by using the search term “donor intent cases.”
Many donors, especially major donors, place conditions on how their gifts are to be used by the recipients. Charities and universities are morally and ethically required to use those gifts as instructed, and if they are unable to do so, they should get written permission from the donor or the donor’s heirs before using the gift for something else, or they should return the gift. According the Association of Fundraising Professionals Code of Ethical Principles and Standards, “Members shall take care to ensure that contributions are used in accordance with donors’ intentions” and “Members shall obtain explicit consent by donors before altering the conditions of financial transactions.”
Nonprofits need to think very carefully before they consider using a gift for a purpose other than it was intended. If they think they must do so, then they must seek permission from the donor before acting. Unfortunately, there are many who believe it is easier to apologize for their actions after the fact instead of seeking permission and receiving a potential negative response. The examples mentioned earlier illustrate that there are major repercussions for those who take that path.
Had I asked my grandmother if I could use her gift to buy something other than socks and underwear, she may have approved and let me purchase what I wanted or she may have told me to use the money as she intended, but because I didn’t ask her first, I learned a lesson.