There is a sad history in the U.S. of people making large donations to colleges and universities with specific uses for the money stipulated, only to later discover that school officials were using the money for other purposes.
As we read in today’s Martin Center article, however, one state, Kansas, has enacted legislation designed to prevent that. In it, Jack Salmon of the Philanthropy Roundtable explains the problem. “First,” he writes, “donor-intent protections help ensure that donors’ wishes are carried out. When donors make a gift, they are entrusting their money to a charitable organization with the expectation that it will be used for the purpose they intended. Donor-intent protections help to guarantee that this trust is not betrayed.”
Salmon recounts a number of instances where school officials have disregarded the clear intent of donors, including one involving Ohio State:
One example of disregarded donor intent concerns the Moritz family and Ohio State University (OSU). In 2001, Michael Moritz, an alumnus of the Ohio State law school, generously donated $30.3 million to the university. The purpose of Moritz’s donation was to establish a permanent endowment that would be utilized for specific objectives, including the support of four chaired professorships and the provision of 30 annual law-school scholarships, along with stipends.
After a span of 15 years, Jeff Moritz, Michael’s son, examined a financial report concerning his father’s endowment fund, provided by OSU. To his astonishment, Jeff discovered that OSU had awarded only 12–16 scholarships per year, falling far short of the agreed-upon number of 30. Furthermore, the endowment fund presently held a total of $21.9 million, and approximately $3 million had been withdrawn to support OSU’s development operations.
The Kansas legislation “will help to build trust between donors and beneficiaries, on campus and elsewhere,” writes Salmon. Other states should follow Kansas’s lead.