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What do we do when donor says it will, but doesn’t, specify use of funds?

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What do we do when donor says it will, but doesn’t, specify use of funds?

A foundation that has supported us for many years gave us a grant with a statement that they would advise us how they wanted us to use the funds. It has been over a year and we still have not received any direction. I have called and left messages on the foundation answering machine and on a director's voicemail, twice on each. I recently filed a report by e-mail to all foundation directors, and mailed a hard copy. In the report, I proposed two suggested uses for the funds.  Is there a time limit on this type of restriction? And what must we do if we never hear from the foundation?

Interesting question.  There is generally no time limit on legitimate charitable restrictions, but since the foundation hasn’t specified the restrictions, this rule may not apply.  Without researching this question, I don’t recall ever seeing a case in which it was raised.

I think you are doing the prudent thing in trying to work with the foundation to understand how they would like the money to be used. I am sure you would like to be able to ask them for more at a later date.  But if they don’t respond to your latest request, I think I would send another letter (by a method that provides a clear receipt) saying that if you don’t hear within 90 (or some other reasonable number of) days, you will use it for general operations or for some specific purpose where you can spend it all productively. I would talk first with the state attorney general and copy that office on the letter. If the first letter doesn’t work, and you want to be particularly careful, you could try a second one.

Assuming you are in a state that has adopted the Uniform Prudent Management of Institutional Fund Act (which is every state except Pennsylvania), there is a specific procedure available to obtain court approval to modify restrictions if they become impracticable or wasteful. (See Ready Reference Page: “New UPMIFA Sets Rules for Management of Charitable Funds”) I think a court would be impressed with the argument that this lack of specificity is wasteful and would not think it reflects well on the foundation.

Depending on the size of the grant, you may decide not to bother to go to court, particularly if the AG does not require it and if you have enough reserves to cover the grant if the foundation ever comes back and says you spent it improperly. But it is hard to believe that it is likely to come to litigation if you give them a deadline and politely indicate the possible consequences.

Tuesday, January 14, 2020

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Comments

I wouldn't cause trouble. The foundation has supported this charity for years. I would continue to do the same things in the future that I had reported back to the foundation in the past. I would absolutely not spend the grant on general operations. I wouldn't wait for 1.25 years before spending the money. Do take the suggestion to mail a certified letter to the foundation, but rather than asking for guidance that isn't forthcoming, simply list the types of expenditures that the foundation has supported in the past and state that the current grant will comply with past guidance. At the end of each fiscal year, until the grant is exhausted, send the foundation the same type of scoring rubrics that were previously reported. Continue to seek future grants. Express your gratitude for past grants.

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