Drakes Bay Fundraising
A Next Generation Fundraising Company

When is a Donation a Contract?

Posted by Christopher Dann
Thursday August 15, 2013
Categories: Fundraising

This from The Star-Ledger’s nj.com, August 5, updated August 6:

Trenton — People who cut checks to charities in New Jersey to help pay for everything from a new university building to an expansion of a local dog shelter are entitled to a refund if the organization does not use the money as intended, a state appeals court ruled today.

In a precedent-setting decision that affects hundreds of organizations across the state, a three-judge panel said nonprofit groups cannot ask for money for a specific purpose and then pull a bait-and-switch, spending it on something completely different.

The news article quotes the plaintiff’s attorney: “In the end, the appellate decision relied on a very, very most basic principle of charitable giving: what was the donor’s intent?”

Ask any seasoned major gift fundraiser when a gift is a contract and the response is likely to be “always!”  In this case the gift was $50,000 and given to a community animal welfare organization. It was a major gift, and its donating couple was certainly treated as if it was.

Does the amount matter? My guess is that the three-judge panel would say it does not, even though they might not have considered hearing the case were the amount much less than $50,000.

I have been expecting this to happen for decades. In fact, I have been expecting a class action suit to emerge and am sure that is now inevitable.  Here’s why:

  • The donor marketplace is getting more and more demanding about accountability for giving, especially giving in response to broad direct response fundraising.
  • Auditors have gotten tougher and tougher about scrutinizing fundraising messages to ensure money goes to the purposes for which it has been solicited.
  • Watchdog competition has intensified and most seem to relish headlines.
  • The press, albeit not much smarter, has become more aggressive.
  • Litigation seems to be replacing baseball as the national pastime.

The New Jersey story is one of those dumb and dumber stories. First, the organization was dumb in its treatment of the donating couple. Then it proved itself dumber by not keeping the matter from going all the way to that three-judge panel.

This is a precedent that is good for the nonprofit sector.

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Next Generation Fundraising and Drakes Bay Fundraising merged in the fall of 2013, bringing the longstanding professional acquaintances of their four principals – Tim Oleary, Carol Leister, Cindy Germain, and Christopher Dann – into a single company and combining the special resources and experiences of each to provide clients greater breadth and depth of service.

For more information about Next Generation Fundraising, click here.