In 2023, following passage of the Donor Intent Protection Act in Kansas, Philanthropy Roundtable launched a monthly series on donor intent developments and controversies nationwide to better inform people about this important topic. The Donor Intent Protection Act is now law in Kentucky, Georgia and Montana as well. Our proposed legislation is now titled The Safeguarding Endowment Gifts Act (SEGA), and efforts to extend this legislation to other states will continue in 2026 and 2027.
We encourage donors to contact us with questions about featured items and consult additional resources on donor intent at the Roundtable’s Donor Intent Hub. We also welcome news about donor intent we may have missed.
This month’s Donor Intent Watch begins with an excerpt from Philanthropy Roundtable’s scholarly report on donor intent and the need for legislation to ensure donor standing and closes with the final segment of a two-part series on protecting donor intent within your philanthropy.
The Critical Importance of Enforcing Donor Standing
Philanthropy Roundtable recently published an extensive study of the legal landscape of donor intent: “The Safeguarding Endowment Gifts Act: The Tao of Enforcing Donor Intent.” The document’s author is Judge Daniel Kelly of Wisconsin. The report includes a summary of 21 cases, an explanation of why current law is insufficient to enforce donor intent and the argument for the Roundtable’s proposed SEGA legislation. We encourage readers to access this report and we provide one of the cases discussed below.
Kars 4 Kids, Inc. Bruce Puterbaugh donated his used Volvo to Kars 4 Kids, Inc., a charitable organization benefiting needy children. He was under the impression that the charity worked equally on behalf of all needy children across the nation. As it turns out, Kars 4 Kids concentrates its efforts in New York and New Jersey. Puterbaugh filed a lawsuit in California’s Orange County Superior Court, claiming the charity breached the fiduciary duty that arises between donors and the charities who solicit their contributions, as codified by California Business and Professions Code Section 17510.8.
The defendant removed the case to the United States District Court for the Central District, Southern Division. Puterbaugh moved to remand the matter back to state court. In the process of granting the motion, the court noted that the provisions of section 17510.8 impose a charitable trust on any donations a soliciting charity receives. It then observed that Puterbaugh could not bring an enforcement action under that provision because “a charitable trust may only be enforced by an action brought by the attorney general or an authorized relator.”
Protecting Donor Intent in Your Philanthropy: Establishing Grantmaking Principles and Practices for Grant Compliance
Grant compliance is an important concern for all donors, but particularly for those with well-defined values and mission statements. Wise donors and their designated representatives understand the principles and utilize the practices that provide the necessary oversight. The goal isn’t to create a culture of fear among applicants and grantees, but rather to ensure shared values and genuine care for a donor’s intent.
- Know your recipients.
Investigate each potential grant recipient. Familiarize yourself with its mission, leadership, financials and programs. Make site visits. Depending on your level of commitment to the organization, get involved in the life of the organization by attending programs and functions. Trust your instincts. Do you feel comfortable placing your charitable dollars with this organization? Is it the one that will make the best use of your money? Or is there a similar organization accomplishing its mission more effectively? “Grant compliance happens best when you’ve done the work upfront to make sure you’re partnering with an organization that really believes in what you’re trying to do and isn’t just trying to game your system in order to get money,” says Keith Whitaker of Wise Counsel Research. “The best compliance is the investigatory work, the due diligence, the time commitment needed to get to know a grantee.”
- Make short-term commitments (or long-term ones in short segments).
All nonprofits experience change over time. People come and go. Mission statements shift and drift. Organizations may even close altogether. That’s why making shorter-term commitments—rather than long-term endowments—in your grantmaking is one of the best steps you can take. If you’d like to make a long-term commitment to an organization, try periodic grants that will be based on recent performance to give you leverage in grant compliance.
- Create a suitably detailed grant agreement.
Depending on the nature of your gift, put a grant agreement in place – on bearing the signature of both parties. There are many examples of such agreements, some more complicated than others. Avoid micromanaging, but ensure that both parties have a clear understanding of expectations, restrictions, and reporting requirements. Consider including a reversion clause or an alternate use for your funds if the original purpose becomes impossible to fulfill. Grant agreements can also outline in advance a means of resolving disputes.
- Consider an intermediary organization.
You may consider making your gift through an intermediary organization that will serve to enforce your intentions over time. A third-party organization can ensure compliance standards in your absence, prior to disbursing funds. Likewise, you may consider naming organizations as contingent beneficiaries if the original grant recipient fails to live up to the terms of the grant agreement.
- Realize the limitations of grant compliance.
Even with a grant agreement in place, once you make the gift, the money is no longer yours. It’s far easier to create a good working relationship with an organization before making a gift than to try, after the fact, to force it to comply. It takes time, even years, to understand what you can realistically achieve through your grantmaking within a given field or with a particular organization or group of organizations. Many donors make large gifts early on that they later come to regret. Take time to learn about the field where you are working, the people and institutions doing the work, and try to formulate realistic expectations grounded in experience.
Note: Higher Ed donors may also wish to consult Top Ten Tips for Higher Education Funders on Philanthropy Roundtable’s website.
