Rising Donor-Charity Tensions

As donors grow more inclined to specify how they want their contributions to be used, cash-strapped nonprofit groups will struggle to honor those wishes. Organizations probably will continue to explore ways to use restricted endowments for more-general purposes.

“Donor-intent skirmishes are busting out all over,” says Neal B. Freeman, chairman of the Foundation Management Institute, which advises donors. One of the reasons, he says, is that “the economic downturn has tipped the balance of power back toward donors and away from grantees. In the tradeoff between prestige and resource, the leverage is now shifting to resource.”

BEHIND THE TREND:

Clashes with family members. Prolonged economic stress means charities can expect conflicts similar to those that arose at Brandeis University this year over plans to close its Rose Art Museum to the public and sell some of the museum’s artwork. The move, designed to ease financial problems, drew an angry rebuke from the family of the original benefactors. The university has since backed away from the idea.

Taking battles to court. One of the highest-profile challenges to a donor’s will is expected to be decided in 2010, as animal-rights groups wage a battle against Leona Helmsley’s foundation — worth more than $5-billion. They say it has violated the hotel mogul’s intentions. The bad economy is likely to cause other charities to go to court. For example, an Ohio probate judge said in October that the Cleveland Museum of Art could use the investment income from four endowments to pay its construction bills, even though the funds were originally established to purchase art.

Pleas for general support. More charities will push grant makers and philanthropists to offer financial support that recipients are free to spend on administrative expenses and other costs, instead of solely for specific charitable programs.