A new bill in Kansas provides legal pathways to protect donor intent when written agreements are in place.
This month, Kansas Governor Laura Kelly signed into law the Donor Intent Protection Act (S Sub for HB 2170) with notable bipartisan support. The act sends a signal to charitable donors that their gifts will be used as agreed. By providing a legal pathway for the enforcement of written endowment agreements, the Act encourages giving and will benefit donors, charities, and the many individuals served by nonprofit organizations in the Sunflower State.
This landmark move ensures that donating to nonprofits remains a trusted and impactful way to support our communities and sets an example for other states of one way to protect donor intent.
Kansas is home to over 18,000 nonprofit organizations, with generous Kansans contributing more than $1.8 billion to charities each year. Charities play a critical role in supporting vulnerable communities, and donors generously contribute to these organizations with specific objectives in mind.
Donors often give to charities with clear intent: a specific purpose and expectation for how their donations will be used or invested for long-term support goals. But we know donor intent can be disregarded or manipulated over time, leading to a loss of trust between donors and charities
To maintain that trust, it is crucial for state policymakers to provide a legal option for donors to enforce written endowment agreements, and passing the Donor Intent Protection Act is a huge step in the right direction. This legislation protects the intent of Kansas donors and gives them the assurance their gifts will be used as they intended, while also providing a way to correct course in case of violations.
This move will likely boost charitable giving in Kansas, providing much-needed resources to address pressing issues and improve the lives of those in need across the state. It’s a win-win for donors and communities alike.
Why the need for such laws? There have been unfortunate instances where donor intent has been violated, resulting in complicated legal battles.
In 2016, Westminster College in Fulton, Missouri, violated donors’ wishes for grants when it tried to get $12.6 million from an endowment to fund its general operating budget. In fact, the college president had already withdrawn funds and was asking for more money to repay what was already spent without authorization. In the end, Westminster was subjected to annual independent audit statements to the state attorney general’s office through the end of the 2019 fiscal year.
Another recent example is the case of Michael Moritz and The Ohio State University (OSU). Moritz donated $30.3 million to OSU in 2001 to establish a permanent endowment supporting law school scholarships. However, years later, it was discovered that the endowment held less than the agreed-upon amount, and the number of scholarships provided was significantly less than what was originally intended. This resulted in law graduates having to pay full price for their education, which should have been covered by the Moritz Merit Scholarship.
These two examples show how a breakdown of trust between donors and charities can have far-reaching impacts. These bad actors can undermine the foundation of philanthropy, generosity, and a thriving civil society. Donors need to have confidence their gifts will be used the way they intended.
Thankfully, the Donor Intent Protection Act safeguards the intentions of Kansas donors, but also has far-reaching implications for the state's communities. The Greater Kansas City Community Foundation and Central Kansas Community Foundation are just two of the charitable organizations that play a critical role in addressing challenges faced by Kansans. Our communities benefit from a variety of organizations that provide support to vulnerable populations and are funded by generous donors. Children’s Mercy, for example, announced in 2017 they had established a $10 million endowment to address pediatric cancer.
Protecting donor intent is essential to foster a culture of trust and accountability in philanthropy. Donors should be able to give freely and generously, knowing their intentions will be respected and their gifts will make a meaningful impact. Charitable organizations, in turn, must uphold the trust placed in them by honoring donor intent and using donated funds in accordance with mutually agreed-upon instructions.
With the enactment of the Donor Intent Protection Act in Kansas, donors can give with confidence, and charities can continue to provide essential support to those in need. Other states should follow suit and prioritize the protection of donor intent as a cornerstone of philanthropy, ensuring that charitable giving remains a trusted and impactful avenue for supporting our communities.
Megan Schmidt is director of Government Affairs at Philanthropy Roundtable and lives in Kansas City, Kansas.
Jack Salmon is director of Policy Research at Philanthropy Roundtable.