Donor Intent Done Right
In late 2019 Washington State University published the results of a study to determine the response of donors who learned that gifts made for a specific project had been redirected to another cause. The findings were striking. Donors expressed feelings of betrayal, were less likely to donate to the charity or volunteer again and were more likely to speak negatively about the organization to others.
Maybe you’re not surprised by this. Would you be surprised if you knew that the donation made by each participant was $1.00? That there was neither fraud nor embezzlement involved? And that the money was still used for a good cause among specific projects in rural areas of India and Peru?
The simple truth is that donors value the opportunity to direct their gifts. We see this every day when individuals respond enthusiastically to appeals on platforms like DonorsChoose, GoFundMe, Kiva, and Kickstarter. We see it too in the extraordinary growth of donor-advised funds which enable donors to build a charitable savings account and then recommend gifts from it to the charities of their choice.
Donors also expect their value judgments to be honored. The Washington State study also revealed that for thoughtful donors, one worthwhile project doesn’t necessarily equal another worthwhile project. Donors who had chosen to make gifts they deemed “life-saving”—in this case, for a drinking-water project—were the most dissatisfied when they learned their funds had been used for a library instead.
Finally, the research directors noted, it is precisely because donors see charities as “moral actors” that failure to honor donor intent results in feelings of betrayal. We are likely safe in assuming that the higher the esteem in which a donor holds a charity, or the closer the emotional relationship between the two, the stronger will be a donor’s disappointment and anger. The gifts-gone-wrong stories about donors and their alma maters abound—the Robertson family at Princeton, Lee Bass at Yale and recently, the Moritz family at Ohio State University. Is it any wonder that nonprofit staff members recoil from any mention of “restricted gifts?”
In June 2020, the Philanthropy Roundtable released a new guidebook on donor intent which I co-authored. It is, admittedly, donor-centric because…well, because it was written for donors. But a careful reading makes clear that it takes two to tango through a successful gift negotiation that honors both the donor’s vision and the recipient’s reality.
Donor intent, rightly understood, is not “the dead hand” exerting control from the grave. Nor is it a demand for rigid adherence to minute details. Honoring donor intent means committing to maintain the integrity of a donor’s philanthropy over time by respecting his or her values and principles.
Ideally, a restricted gift begins with an honest conversation between nonprofit leadership and donor (including foundation and corporate donors) about the pros/cons of the proposed gift. The gift terms should be formalized in a written gift agreement that clearly defines the restrictions, the expectations of both parties, alternative acceptable uses (if any) and the process to be followed if the gift cannot be used for its intended purpose(s). As we remind donors in both our guidebook and our donor intent hub, “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 them to comply with your wishes.”
Some restricted gifts arrive unexpectedly, however, and if ill-timed or focused on a low priority, leave the recipient frustrated. My advice is simple. In the case of an estate gift that comes with unmanageable restrictions, consult an attorney about your options. If the gift comes from a living donor, request a conversation to clarify or alter the restriction. Nonprofits are often hesitant to make the first move in these situations and even more uncomfortable about revealing gaps in capacity or expertise. Don’t punt. Honesty about what can—and cannot—be accomplished is the only way to avoid trouble. In some cases you may have to refuse the gift. As painful as it will be to lose funding, it will be far worse to face a disgruntled donor, dutiful regulators and the front page.
It’s worth noting that in response to the pandemic, individual and foundation donors were encouraged to change many of their grantmaking practices. Many donors did just that, dispensing with burdensome grant applications, canceling or lessening reporting requirements, making new and increased gifts for general operating support and yes, removing restrictions from existing grants. In dire situations it never hurts to ask. In fact, it’s frequently the lack of clear and honest communication—whether deliberate or by chance—that characterizes my collection of donor intent “horror stories.”
Charitable organizations that partner well with donors to abide by gift restrictions understand that both parties—and the nonprofit sector as a whole—benefit from their success in four important ways:
- Maintaining fiscal integrity—Your communication to staff, board members and donors about restricted gifts and the obligation to honor donors’ requests sets a high standard for fiscal and development operations not only at your organization but for other nonprofits as well.
- Promoting healthy and respectful recipient/benefactor relationships—Your honest assessment of what you can and cannot do—even if it means the loss of a gift—provides a critical perspective that donors may otherwise fail to consider and helps build trust between the parties.
- Encouraging philanthropy—Donors whose wishes are honored are more likely to give again and to solicit others to give as well.
- Strengthening the social fabric—In a pluralistic democracy, honoring donor intent means recognizing the value of individual differences and choices to sustain a diverse and vibrant civil society.
Donor intent done right—it’s well worth the effort.