The fourth tenet of the Donor’s Bill of Rights:
“…to be assured their gifts will
be used for the purposes for
which they were given”

(other tenets here…)

A spicy title perhaps, but it’s intended to signal something about the scope of this post. Donor intent is a very large, and much debated subject. There is much to be said about how far honoring a donor’s wishes should go.

Should a donor’s foundation continue to honor that person’s wishes in perpetuity long after he or she is dead? Or, should there be a principle of “sun setting” that allows a foundation to be more responsive to changing social circumstances? What of the donor who wishes to place unreasonable restrictions on a gift, or the donor who would use conspicuous giving as a means of manipulating an organization’s core values?

Indeed, volumes have been written on the subject, and by persons far wiser than I. Rather than try to cover every subtlety and nuance here, I want to look at the matter from a practical perspective and suggest some concrete steps for honoring donor intent.

There are some very good reasons to respect a donor’s wishes, not the least of which is that, most of the time, it is simply the right thing to do. (More on that in a moment.) Also, it fosters trust, which is the foundation on which the relationship between you and your donor rests. Think of it as a marriage. Once the trust is gone, there is nothing left. Plus, it’s an investment in the future. A donor who sees his or her gift go to work as expected is far more likely to give again. It’s just good business.

Those are the carrots; now here is the stick…

Courts can and do impose heavy sanctions on organizations that blithely kiss off a donor’s intentions. Charity watchdog websites are brimming with stories, but one that has always fascinated me is a 2012 decision by an Oklahoma jury that awarded Garth Brooks $1 million because the hospital foundation that accepted his $500,000 gift to build a women’s health center in honor of his late mother never built the building! In that case, the organization had to pay back the original $500,000 gift, plus an additional $500,000 in punitive damages. Playing it fast and loose with donor intent is a dangerous game.

Still, the questions above remain. What are the limits of donor intent, and how long must an organization commit to using a gift for its original purpose, such as a building on a university campus, when the needs of the institution are certain to change over time? As noted, questions like these are beyond the scope of this post, but there are a few general principles that can be very helpful in sorting out the answers.

1. Never accept a gift if you cannot steward both the gift and the donor properly.
This one is very important, as it can stop issues with donor intent before they ever start. Just because a donor wishes to make a gift, does not mean you have to accept it. While your executive director might scream “HERESY!!” and stage an apoplectic nutty, it is nonetheless worth the time to consider whether a particular gift is right for the organization.

I work at an institution that values diversity and inclusion, and although we have never had a donor offer us $2 million for an endowed faculty chair in white supremacy studies, I have no doubt that we would turn down such an odious offer, as it is at odds with our mission.

Sometimes, the gift might be “nice” yet still a bad idea. Years ago, I once knew of a donor who offered an organization his collection of ceramic doodads and gewgaws. Though it was a kind gesture, they had no use for them and could not think of how they would display them in a meaningful way. Plus, no one had the time to shepherd such a project – a project that had no hope of moving the proverbial needle. They had to politely decline. Message: it’s okay to say “no.”

2. Help donors understand the pros and cons of both restricted and unrestricted gifts.
Many donors want their gifts to go towards something specific, and that can be a good thing, especially if the gift passes the stewardship test above. There are, however, some pitfalls to avoid. Some donors want to impose so many restrictions that it can make the gift nearly impossible to steward. For instance, a scholarship to help students who major in science is indeed restricted, but in a way that allows many students to benefit. On the other hand, a scholarship to help students majoring in molecular biology, from single-parent families in southeastern Minnesota whose hobbies include naked fly-fishing is so restricted as to be virtually useless. It is doubtful such a scholarship could ever be awarded, which means the institution would end up not using the funds for what was intended. Can’t steward that gift? See number 1 above.

3. Work with donors in carefully crafting gift agreements.
This is probably a blog post all its own, but it bears mentioning. A well written gift agreement should specify what the gift is for, what it is not for, and how much latitude the organization will have to repurpose the gift if circumstances arise that make it unusable for its original purpose. This will be important documentation if a dispute arises as to whether or not the gift is being used properly.

This was precisely the problem in the Brooks case above. The hospital argued that Brooks offered the funds as unrestricted verbally, and only later requested the health center. Because the agreement was verbal and there was no written gift agreement, there was no documentation. Hence the problem. Whether the hospital was telling the truth or not is irrelevant, they screwed up by not working with Brooks to draft a written agreement.

4. Involve the donor or donor’s heirs in any discussions of changing the use of a gift.
This is related to number 3. Should circumstances arise that make the original intent of the gift impossible to honor, always involve the donor or, if deceased, the donor’s heirs in the decision-making process. Ideally, you should already have a clear gift agreement in place that specifies the leeway the organization has to change the gift’s use, but always involve the donor if you can. It will build trust.

5. Have a plan in place for how you can demonstrate that a gift is being used properly.
This is both good stewardship, as it shows impact, and it is also good documentation. If one is ever called on to prove that a gift is being used properly, one will have the means at hand.

6. Educate up.
If you work for an organization or department where the sole purpose is fundraising, then it is likely that the leadership is already familiar with and values fundraising ethics. If, however, your fundraising arm is part of a larger institution with a broader mission, the leadership may not necessarily be familiar with these principles. Always be looking for creative ways to respectfully, but clearly, educate the leadership about the importance of donor intent, and what violations could mean for the organization.

All of this must seem like common sense to the seasoned professional, but as the hospital story above shows, common sense is not as common as it once was. The number of 501c3 organizations on the IRS watch list is astounding, to say nothing of those who have lost their tax-exempt status altogether over donor fraud. Honoring donor intent, by working with donors to shape, clarify, and document their wishes, can be a painstaking process. When one considers the stakes involved, however, it really is in an organization’s best long-term interest. Plus, it’s the law.

Question: Have you ever encountered a donor intent issue, and were you able to resolve it?

Posted by Mark Zobel, Ph.D., C.F.R.M.

Executive Director for Philanthropy and Stewardship, and Adjunct Professor of Philanthropy at Blackburn College in Carlinville, Illinois

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