What is Donor Intention and how to Honor it

You have donated $1000 to a charity towards building an animal shelter in memory of your pet. But later, you come to know that your fund has been utilized towards a different cause of which you are unaware. Wouldn’t you be angry that the charity has played with your emotions and did not seek your approval for diverting the funds? Not honoring donor intent is the biggest mistake a charity or nonprofit can make and it can have long-term consequences on its financial future and reputation.

When charities ask for donations in their fundraising campaign, donors seek transparency. The digital era has helped usher in accountability through online fundraising platforms. They have features and tools available online to make fund management easy for charities while ensuring transparency hence honoring donor intent.

What is donor intention?

In philanthropy, donor intent is the purpose or guiding principles for which a potential donor expresses to gift in cash or kind. Though not expressed implicitly, it is taken as an agreement between the donor and the charity and must be honored. Donor intent is protected in America through federal and state laws and it is the obligation of the fund recipient to carry out the donor’s wishes.     

Reasons for not honoring donor intent

Many charities move away from the cause for which they collect donations. They divert the funds for other causes that the donor is totally unaware of or does not agree to. This happens mostly with endowed funds. Let’s see some of the reasons why the donor’s intent is not honored.

• The donor does not state clearly their charitable intentions. It is the case with donations that have to be followed after their death. The donor does not provide instructions in writing on fund utilization after their death or if the original cause is no longer valid or has been fulfilled.  
• A donor entrusts the responsibility of their funds to a trust that oversees the donations to charities. But then, the members of the trust change and they decide that there are other worthwhile causes that can be funded while supporting the donor’s wish ostensibly.
• Sometimes the future generations of the donor make a decision on what is best for the funds and where they can be donated.
• The cause for which the funds are allotted by the donor becomes obsolete or closed. The funds, in such cases, are diverted to other noble causes.     

What’s the impact of failing to honor the donor’s intent?

When your charity doesn’t honor the donor intent, many things go wrong. Apart from legal and financial implications, your organization may have to face the wrath of the public and demonstrate accountability for its actions. Let’s see the implications of failing to honor donor intent.

1. Legal implications

There are several federal and state laws to support donor intent and if anything goes wrong, the donor can sue organizations for not using their donations for the intended purpose. For instance, country singer Garth Brooks had donated $500,000 towards the construction of a women’s center on the campus of an Oklahoma hospital. He was promised, in oral, that the center will be named after his mother. But the hospital didn’t honor the agreement. He filed a lawsuit against the hospital. The court found that the hospital violated the donor’s intent and was ordered to return the donation. It had to pay Brooks an additional $500,000 in disciplinary damages.  

But the laws vary from state and state and also the reasons for suing. From a legal perspective, many courts even state that once the donation is made, the donors have no standing or property interest in the donation. Nevertheless, several lawsuits have been filed on dishonoring donor intent in states such as Texas, New York, and California.   

2. Intent betrayal

A survey by Washington State University has found that donors felt a sense of betrayal when their funds to organizations for a particular cause or project were redirected to another cause. The implications were that they were less likely to donate to that organization in the future. They were more likely to speak negatively about the charity.    

To avoid situations like these, charities and nonprofits accepting restricting and endowed funds should always ensure that they get a written agreement with the donor. The donor has to clearly specify the future relevancy of the funds.

How do charities ensure they honor donor intent?

When a donor makes a restricted gift or endowed gift, you’re legally bound to follow the donor’s intent. To avoid any unnecessary legal implications or bad repute to your charity, it is better to follow some guidelines to ensure you honor donor intent.

 1. Educate donors

Charities need to educate donors, especially if they want to continue the funds after their death, about the cause, the expenses, and its time period. The donors have to give rights to the charities to use the funds for other charitable purposes if it’s not possible to fund the originally intended purpose.

 2. Written agreement

A written agreement regarding fund utilization makes it clear for the charities and the future generations without any reason for tiffs. Donors have to include points regarding

• If the gift is irrevocable or not. If yes, under what circumstances.
• Expectations of fund utilization
• Any specific restrictions
• Time-period of funds, if any.
• Authorized person to make changes to the fund purpose and the amount
• Changes that can be made without the approval of a court or the donor
• If the fund utilization has no restrictions or can be used at the charity’s discretion.

The charities even should actively participate in drafting the written agreement so that there will not be any challenges in the future.

 3. Accounting system

Charities have to ensure there is a good accounting system in place to track expenditures. Also, the internal policies and procedures for control of expenses have to be kept in check to ensure fair fund utilization.

 4. Discussion with the donor

If the charities feel the donor funds and their cause needs a revision, it is better to sit and discuss it with the living donor than procrastinate and struggle with the donor’s heirs over the intent. Do not wait for any other day. Seek an appointment with the donor and go prepared to make them realize how their funds can be utilized for some other good cause.

 5. Donor family & trust involvement

When charities feel that the funds allocated by the donor towards a cause can be spent in a better way elsewhere or when the gift’s purpose no longer supports the cause, they have to get the donor’s family and the trust involved and put in a proposal for fund allocation to a different worthwhile cause. The trust and the family will be willing to negotiate the terms of the gifts and adapt to the changing needs.

 6. Setting up a campaign on a reliable online fundraising platform

Online fundraising platforms have many features to ensure transparency in your campaigns. Moreover, it is an easy and hassle-free way to set up a fundraising campaign for charities. You can complete it in minutes, share them on your social media channels, and expect funds to start coming within a few hours. Let’s see how online fundraising platforms help charities to honor donor intent.   

  a. Expense breakdown

When you set up the donation page on the fundraising platform online, explain the math behind your fundraising goal. Potential donors would be inquisitive to know why you need those funds and how will you utilize them. Mention the expenses of the cause and how much you intend to raise to fulfill it. Even after the donations are collected, update them regarding the funds collected and their utilization with a complete breakdown of expenses in figures.    

  b. Donation updates

Charities can post regular updates regarding the progress of the fundraising campaign. Images and videos showing their work and updates on the cause assure donors that their funds are being utilized properly.  

  c. Visual donation thermometer

The donation thermometers help donors visualize the success towards achieving the fundraising goal. It gets updated in real-time as and when donations pour in thus indicating the success of the fundraising campaign.

When you update donors and maintain transparency, they are most likely to contribute more in the future towards other causes for your charity. Transparency increases trust and confidence in your donors and you have every opportunity to turn the gifts into recurring donations or lifetime memberships.

Conclusion

Organizations have to ensure that they honor donors intent to win over their love and avoid any legal entanglements that may damage their reputation and financial planning.

Fundraising platforms are best when it comes to maintaining transparency and showing the donors where their funds are being utilized. Charities can set their fundraising campaign on platforms such as givingx which helps donors to manage their funds easily and also has features to help charities ensure transparency.

Set up your fundraising campaign on givingx. It is the best way to show your accountability to the donor’s intent.