Donor Intent: What It Is and Why It Matters
Years ago, Charles Francis “Chuck” Feeney, a successful Irish-American capitalist, philanthropist and the founder of The Atlantic Philanthropies decided to contribute a gift of $350 million to Cornell University. It was one of the many gifts he and The Atlantic Philanthropies were making while he was alive.
The contribution was considered a success for Michael Bloomberg, who at the time was the Mayor of New York City and was looking to build a technology hub at the university in the city.
Feeney is a very smart donor, and his approach to philanthropy is “giving while living.” In other words, he didn’t want The Atlantic Philanthropies to give money in perpetuity. Many times when philanthropists set up foundations, they have the mistaken notion that their organization, the board of directors and their heirs will always honor their causes or the way they gave to charity during their lifetimes.
Feeney wasn’t going to make that mistake, and he was intent on ensuring that he gave away the money just as he intended. And then, to make sure that everything occurred according to his wishes, he would give it all away while he was alive.
The Atlantic Philanthropies, which originally operated as a grant-making foundation, decided in 2002 to become a limited-life foundation and made its final gifts in 2016 and is scheduled to permanently close its doors in 2020, after having given away $8 billion. What Feeney has accomplished is nothing short of astounding, because he’s given billions to charity all around the world and was able to do it all in his lifetime, ensuring that his philosophy and intent were always honored.
The Age of Transparency
The digital era has helped usher in an era of transparency. Today, even those who are donating smaller gifts, including young donors, are much more sophisticated about their contributions to charity than in the past due to the resources available online. There was a time in the not so distant past when nonprofit organizations were able just to tell their donors and the public what they were doing through their content and words. Nonprofits would accept charitable gifts, thank their donors and then return to ask their donors for more money the following year.
Additionally, from a legal perspective, the courts stated that donors had no standing to sue if they tried, because once the gift was made, donors did not have a property interest in the donation.
Tools, such as Charity Navigator and Guidestar, then started to become commonplace, and as information and communication became infinitely more accessible, as well as with the rise of social media, nonprofits had to become much more transparent about their work. With that, downward forces began to take place and mistrust increased. The courts started to reconsider their approach concerning the standing of donors to sue an institution for disregard of donor intent.
In today’s world, it’s essential that nonprofits remain in good standing, and one of the best ways to accomplish this goal is by understanding donor intent and, more importantly, honoring it above all else.
What is Donor Intent?
Donor intent is the purpose a gift. When major donors, such as Feeney, give significant contributions to charity, they often make restrictions and set terms for their donations. Typically, these are laid out in writing, so there is no misunderstanding. Some institutions put this in the form of a contract with the donor.
But the reality is that donor intent is not only limited to the gifts made by major donors, it is also essential for any donation received by a nonprofit or charitable organization. For instance, when donors give to charity, they do not expect their money is going for anything illegal or purposes other than what is designated by the cause. As an example, if someone makes a gift of even $5 to a school, there’s expectation and belief that those $5 will never be used to fund a vacation for the principal. The donor expects that those $5 will go to the general fund toward the education of the students at that school.
Make no mistake about it, American law does, in fact, protect donor intent. Sure, there are many federal and state laws that protect donor money, but organizations must be careful to always honor the letter and spirit of donors’ intent in their gifts to philanthropy, and if they are unclear about something, they should seek counsel.
Why Does It Matter?
Feeney was correct in determining that he was going to give his money away on his terms and in his lifetime. Unfortunately, there are plenty of examples of foundations and charitable organizations that have not honored the wishes and, more specifically, the intent of the donor. Monies of donors have gone to causes, programs or efforts that the donor would never have approved of if they were living or is discovered to be inappropriate by the still living donor who then files a lawsuit. In fact, several lawsuits have been filed to enforce donor intent in states such as New York, Texas and California.
The reality is that groups and organizations that ignore donor intent are
doing so at their peril. As the public and the law begin to evolve on the issue of
donor intent, nonprofits must focus on their gift policies and procedures, including their gift agreements, especially the long-term ones.
Stay tuned to this space to learn more about donor rights and intent, so you can ensure that your nonprofit organization stays on the right side of your brand and perhaps, even the law.
Paul D'Alessandro, JD, CFRE, is founder and chairman of D'Alessandro, Inc., a fundraising and strategic management consulting company. He is also a lawyer and a tax law specialist for nonprofits.