In 2023, following the passage of the Donor Intent Protection Act in Kansas, Philanthropy Roundtable launched a monthly series on donor intent controversies around the country to better inform those who care about this important topic. This month’s Donor Intent Watch includes an update on last month’s story about a current dispute at Webster University in Missouri, information about a “donor bill of rights” and a reminder that protecting donor intent requires not only external, but also internal safeguards.
We encourage donors to contact us with any questions they have about our featured items and consult additional resources on donor intent at the Roundtable’s Donor Intent Hub. We also welcome any news about donor intent we may have missed.
Court Allows Reclassification of Restricted Funds and Protects Donor Intent
Last month’s Donor Intent Watch reported on a lawsuit filed by Webster University donors to stop the reclassification of restricted endowment funds as “unrestricted” to meet the liquidity requirement of the cash-strapped university’s loan obligations. The donors feared reclassification would ultimately lead to the use of restricted funds for purposes other than those specified.
The plaintiffs dropped their lawsuit in late February. In the judicial proceedings that followed, St. Louis County Circuit Court Judge Stanley J. Wallach ruled Webster University can reclassify $34.4 million in restricted funds to reach the obligatory assets-to-debt ratio.
Although Webster has attempted to assure its donors their restricted gifts would be used for their intended purposes, the university’s messaging—as noted in last month’s account—was confusing. As part of his ruling, Wallach ordered Webster to honor donor intent and demanded the reclassified funds be sequestered in a separate account to avoid any errors.
Read more here.
How the Fundraising Community Honors Donor Intent
In our discussions of protecting donor intent—especially at colleges and universities—readers may wonder what role an institution’s development officers can and should play. In our Top Ten Tips for Higher Education Funders, we warn about gift officers who steer donors toward unrestricted gifts and caution against automatically accepting an institution’s grant agreement. We also note, “There are outstanding university development officers who are careful to tease out a donor’s ultimate intentions.”
Thoughtful fundraisers have goals well beyond a successful financial transaction. They are careful to engage donors in ways that recognize their values and philanthropic aspirations and transform a “prospect” into a partner. This approach manifests itself in a “Donor Bill of Rights” created by the Association of Fundraising Professionals (AFP), the Association for Healthcare Philanthropy (AHP), the Council for Advancement and Support of Education (CASE) and the Giving Institute: Leading Consultants to Non-Profits. Those organizations adopted this document in 1993 and many other nonprofit organizations have also endorsed this pledge to provide donors with necessary and accurate knowledge, to protect donor intent and to honor donor privacy.
We strongly suggest donors read this document and reference it in their conversations with development officers.
Read more here.
Donor Neglect Can Undermine Donor Intent
The failed actions of colleges and universities in the wake of the Hamas attack on Israel last October has caused donors to be wary about their grantmaking practices and policies, especially regarding institutions of higher education. In our Top Ten Tips for Higher Education Funders, we counsel donors to adopt safeguards in their relationships with grantees to ensure their intentions are understood and respected.
Unfortunately, donors frequently fail to consider the internal safeguards also necessary to keep their values at the heart of their grantmaking. Here are the all-too-common donor mistakes undermining donor intent from within:
- Writing a vague and easily misinterpreted mission statement.
- Failing to include an explanation of your underlying values and principles in your mission statement.
- Ignoring the weaknesses of your chosen philanthropic vehicle.
- Failing to establish a governance structure that supports donor intent, and, for living donors, not clarifying what role you will play in decision making.
- Bringing on board members and staff who don’t respect your values and principles and/or view the resources of your charitable vehicle as their own.
- Failing to work closely with your board members to help them understand not only your giving preferences, but also your philosophical outlook and your preferred grantmaking strategies and charitable targets.
- Establishing a foundation in perpetuity without policies and procedures to protect donor intent. Opening a donor-advised fund without naming successor advisers who share your values and principles and without adding a sunset provision.
- Failing to establish a review process for board members and a removal process for those who are not faithful to your intent.
- Creating a family foundation or family donor-advised fund without acknowledging that radical differences and few shared values among family members are a common occurrence.
- Making endowment gifts to charities without establishing clear guidelines on their use. These errors and omissions can undermine your donor intent in the present and future.
Philanthropy Roundtable can help you protect donor intent within your philanthropy and grantmaking activity through personal advisory services and a wealth of resources.
Read more here.
