Resources on Donor Intent

Warren Buffett, Fortune,
March 19, 2007: 

“… when people see donor intent get ignored or twisted, it has to discourage philanthropy.”

An estimated 80 percent to 90 percent of charitable gifts to colleges and universities are now restricted in some fashion, according to the Council for Aid to Education. (Source:  Lawyers USA article, January 1, 2007)

That’s why upholding the principle of “donor intent” is essential to the future of higher education philanthropy. Donor intent, which has been in the spotlight in recent years, is the principle that when a gift is given to and accepted by a nonprofit organization for a specific purpose, the gift must be used for that purpose unless the donor or his or her legal heirs give the recipient institution permission to “repurpose” the gift, or a court finds that the original purpose is either “illegal, impossible or impracticable.”

The Center for Excellence in Higher Education, which works with donors on this issue, has compiled the following information on donor intent. We hope the information will help philanthropists and other interested parties better understand the purposes, limitations and obligations of “restricted” gifts.

 

The Donor Bill of Rights

– from the Donor Bill of Rights


All donors have the right “To be assured their gifts will be used for the purposes for which they were given.”

The “Donor Bill of Rights” is a statement of principle that helps govern nonprofit fundraising and management, created and adopted by the American Association of Fund Raising Counsel, Association for Healthcare Philanthropy, Association of Fundraising Professionals, and the Council for Advancement and Support of Education.

In higher education, many individual colleges and universities have publicly embraced the Donor Bill of Rights. The list includes the University of Alaska, Arizona State University, Auburn University, Austin Peay State University, Bowling Green State University, University of California at Los Angeles (UCLA), California State University – Northridge, Carnegie Mellon University, The Citadel, Colby College, DePaul University, East Tennessee State University, Eastern Washington University, Florida State University, Gettysburg College, University of Houston, Holy Cross, Indiana University, Iowa State University, Lehigh University, Lewis & Clark College, University of Maine, University of Massachusetts, University of Missouri, Michigan State University, University of Nebraska - Omaha, University of Nevada, New Mexico State University, State University of New York (SUNY) - Buffalo, Ohio State University, Purdue University, Rensselaer Polytechnic University, Southern Methodist University, Texas Southern University, Texas Tech University, University of Vermont, Wabash College and University of Wisconsin. (Note: Any college or university wishing to be added to this list should contact CEHE.)

 

Public Opinion and Donor Intent

The reason many philanthropists consider donor intent very important is because their gifts are motivated by deeply held personal interests and passions. According to a 2002 Citigroup Private Bank survey of charitable giving by affluent individuals, more than two-thirds of such donors (67 percent) give to charities and programs to which they have strong emotional ties and about which they care deeply. People who care deeply about the causes and organizations they support want their money used as specified.

But many Americans are disillusioned with the nonprofit sector. Of the people polled in an early 2008 survey by Contribute Magazine and Harris Interactive 56 percent say they are more concerned today than a decade ago about the misuse of funds by charitable organizations. Even more alarming is the fact that nearly half (46 percent) are concerned that charitable organization are guilty of fraud or theft of funds.

A related Harris Interactive survey in 2006 found that only 34 percent of respondents believe the nonprofit sector is “on the right track.”

In December 2005, plaintiffs in the Robertson v. Princeton University donor intent lawsuit commissioned a national survey on “donor intent.”  Conducted by Zogby International, a leading public opinion research firm, the survey found that the vast majority of Americans believe that when gifts are given to nonprofit organizations for a specific purpose they must be used for that purpose – and organizations that violate the donors’ trust should be penalized.

A 2004 public opinion survey conducted by Paul Light, Paulette Goddard Professor of Public Service at New York University’s Robert F. Wagner Graduate School of Public Service – a nonresident senior fellow at The Brookings Institution – found that “Americans continue to express serious doubts about the performance of charitable organizations in exercising their fiduciary responsibilities.”

 

Donor Intent Controversies in Higher Education

Many donor intent controversies never come to public light because nonprofits work quietly with donors to resolve their differences. The following disputes, however, were not resolved amicably and have resulted in legal action:

  • Robertson v. Princeton University, Princeton, NJ (filed 2002):  One of the largest donor intent cases in U.S. history, this closely-followed case involves the future of the $900 million Robertson Foundation endowment, now controlled by Princeton University.  Charles and Marie Robertson anonymously established and endowed the Foundation in 1961 for the specific purpose of using the graduate program of Princeton’s Woodrow Wilson School of Public and International Affairs to increase the flow of dedicated men and women “into careers in government service, with particular emphasis on those areas of the federal government concerned with international relations and affairs.”  The children of the donors, two of whom serve as Family Trustees of the Robertson Foundation, have sued to sever Princeton’s connection to the Robertson Foundation and its endowment, claiming the university has ignored the Donors’ Intent, diverted more than $200 million of Foundation funds to other purposes, and has been dishonest and duplicitous in its dealings with the Foundation Board and the Family Trustees.
  • University of South Dakota Foundation v. Larry Long and Lucy Buhler, Vermillion, SD (filed 2007): The University of South Dakota’s student newspaper, Volante, describes a controversy involving the university Foundation and the wife of a major donor, who alleges that the school reneged on its promise to name the business school and its programs after her late husband, alumnus Walter Buhler.
  • Howard v. Tulane University, New Orleans, LA (filed 2006): In 2006, Tulane University dissolved its highly regarded coordinate women’s college, Newcomb College, subsumed the college’s $45 million endowment, and created in the college’s place an “institute” with no academic standing, degrees, campus or student body. Descendants of Josephine Louise Newcomb, who endowed the college with donations exceeding $3 million more than a century ago, are challenging Tulane’s actions. Dismissed by the lower courts, the case has been appealed to the Louisiana Supreme Court.
  • Association of Alumni of Dartmouth College v. Trustees of Dartmouth College, Hanover, NH (filed 2007):  In 2007, a group of Dartmouth College alumni filed a lawsuit to stop the college from altering an 1891 agreement with donors that mandated that half of the College’s Board of Trustees be openly and democratically elected by alumni.  Dartmouth filed a motion to dismiss the lawsuit, but their motion was recently denied by the court. 
  • Jenna Dodge, et. al. v. The Trustees of Randolph-Macon Woman’s College, Lynchburg, VA (filed 2006): After successfully completing a $100 million capital campaign in 2006, the trustees of Randolph-Macon Woman’s College voted to make the 115-year-old college coeducational. A group of students and donors brought suit under charitable trust law maintaining that the college’s $142 million endowment, $100 million-plus art collection, and other charitable assets were donated to support the college’s original mission and could not be used for a coeducational college unless the college could prove that it was impossible to continue operating as a women’s college. The case will be heard by the Virginia Supreme Court this spring.

Other controversies currently in the news include the following:

  • Charles Storch, philanthropy columnist for the Chicago Tribune, writes on a controversy between the University of Notre Dame and the family of donor Robert Hayes Gore Sr. over the destruction of a “dining club” built with money donated by the family in 1967 and used to house a historic collection of beer steins, also donated to the university by the Gores.
  • The Associated Press reports on the latest court decision in the ongoing controversy over Fisk University’s attempts to sell artwork donated to the school by famed artist Georgia O’Keefe. The funds raised by the sale would be used for general operating purposes.

Past Controversies Involving Higher Education

Among many previous donor intent controversies involving higher education, some of which were resolved quietly, and others of which made headline news, were the following:

  • Okaloosa-Walton Community College (2006):  The Florida courts and the First District Court of Appeal in Florida rejected a claim by the family of the late Mattie M. Kelly that Okaloosa-Walton Community College Foundation’s decision to sell her homestead to a development consortium violated the terms of her will.  Ms. Kelly had donated her 13-acre estate and a $500,000 endowment to the community college in 1992, stipulating that a cultural and environmental institute named after her be established on the property.
  • University of California, Los Angeles (2005): The California Court of Appeals ruled that a donor has standing to sue UCLA for misuse of its donation. The donor alleged that UCLA failed to employ a professor in Cardiothoracic Surgery, as required by the terms of the $1 million gift. The donor requested that, pursuant to the gift agreement, the gift should be withdrawn from UCLA and transferred to another university.
  • University of Southern California, Los Angeles (2004): The university settled a $1.6 million lawsuit initiated by donor Paul F Glenn, who alleged that his donation, which was to be spent funding a professorship in Cellular and Molecular Gerontology, was not being used as directed and that USC had concealed how it was spent.
  • Harvard University Graduate School of Education, Cambridge, MA (2003): The University agreed to return a $12.5 million donation to actress Jane Fonda after she protested the university’s sluggishness in hiring professors for the gender studies program she sought to establish.
  • Boston University (2002): The university returned a $3 million donation to build a library from alumnus David Mugar after Mugar questioned how fast the money was being used.
  • Yale University, New Haven, CT (1995): The university returned a $20 million gift from Lee Bass because administrators refused to allow Bass to approve the nomination of professors being hired with money from the donation.

 

Other Resources on Donor Intent

Now in its third edition, historian and Capital Research Center visiting fellow Martin Morse Wooster offers a fascinating overview of the founding fathers of American philanthropy in his book The Great Philanthropists and the Problem of Donor Intent. Wooster describes how and explains why the donor intent of some of the nation’s most famous philanthropists has been disregarded or brazenly violated.