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Can restricted gifts be used for general operating expenses?

Your Legal Questions Answered

Can restricted gifts be used for general operating expenses?

Are there laws that preclude a private (religious) association from diverting funds given by its members for a specific project (for, say, the publishing of a book, or for scholarships for students) into its general operating funds? Who should one talk to if one knows such a thing is going on?

The general rule is that funds given for a specific charitable purpose must be used for the purpose given, and cannot be used for general operating purposes of the charity. The CEO of a hospital system in Philadelphia was sentenced to prison for using funds given for scholarship and research purposes for the general operations of the hospitals before they went bankrupt.
 
If you cannot get attention from the officers, the Board, or from the full membership if it is a membership organization, you can report to the District Attorney or the state Attorney General. The Attorney General may be very interested. (For a list of state charity regulators, visit the National Association of State Charity Officials website.)
Wednesday, February 7, 2007
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I enjoy reading your answers to questions which are pertinent to most of our actiivities. Thank you

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