Report Finds Little Recourse for Donors

What recourse does a donor have if a university decides to break their gift agreement?

Not much, finds a new report from the nonprofit Philanthropy Roundtable, which reviewed 10 years of court rulings in cases where donors clashed with universities and other institutions over how their gifts were used. The report found that recipients can generally “disregard the purpose of a restricted gift while leaving donors with no legal recourse.” Oftentimes, only the state attorney general can bring the case to court, due to long-standing state laws governing charitable gifts, leaving donors and estates without legal standing to sue.

“Universities dominate the report’s caseload,” the organization stated in a news release.

Examples listed by Philanthropy Roundtable include the son of a donor who questioned how Ohio State University was using his late father’s $30 million donation but was unable to take the matter to court to enforce the gift agreement because the estate lacked legal standing to sue. In another case, a donor gave Dartmouth College $1.8 million to maintain its golf course. But when Dartmouth closed the golf course years later, it redirected the remaining funds. The estate objected and sought to claw back unused money and give it to a foundation, but lacked standing to do so.

While multimillion-dollar donations often seize the headlines, most gifts are smaller. Claudia Cummings, senior vice president of public affairs at Philanthropy Roundtable, argues that smaller donors are more vulnerable when universities disregard the intent of their gift.

“The people hurt most by a broken gift agreement aren’t billionaires,” she wrote. “They’re the family that endowed a $10,000 scholarship in a parent’s name and has no lawyer on retainer, and the students who were supposed to receive it. In most states, the family can’t even get a hearing. Only the attorney general can bring the case, and those offices have other priorities.”

The report comes at a time when many universities have changed or are seeking to change gift agreements on scholarships intended for minority students, due to concerns about running afoul of state or federal restrictions on diversity, equity and inclusion programs.

Philanthropic adviser Doug White told Inside Higher Ed that he generally agreed with the findings in the report, noting a considerable “gray area and interpretation and subjectivity” when donors differ with universities about whether the terms of a gift agreement have been followed.

Most of the higher education–related cases reviewed in the report are no longer active, except for ongoing naming fights at Middlebury College and the University of California College of the Law, San Francisco.

UC Law San Francisco has been locked in a legal battle with the descendants of Serranus Clinton Hastings since 2022 over the decision to rename the school he founded in 1878. While the law school has successfully fended off legal attempts at the state level to restore his name—which the school removed because of his alleged mistreatment of Native Americans—the plaintiffs have asked the U.S. Supreme Court to hear the case. That petition is currently pending.

Plaintiffs hit Middlebury with a similar lawsuit in 2023 over its decision to rename Mead Memorial Chapel, which was built using a donation from former Vermont Governor John Mead, who gave the college $75,000 in 1914. Middlebury renamed the chapel in 2021, citing Mead’s support of eugenics. So far, the college has won in the lower courts; the Vermont Supreme Court heard the case in March but has not yet issued a ruling in the renaming dispute.

UC Law SF declined to comment, and Middlebury did not respond to emailed questions.

The report concludes that states should pass laws to protect donor intent—namely Philanthropy Roundtable’s own model legislation, titled the Safeguarding Endowment Gifts Act. Versions of the law have already been passed in Georgia, Kansas, Kentucky and Montana.

But the legislation, which Philanthropy Roundtable says safeguards restrictions on charitable gifts and provides donors opportunities to address concerns about misuse, has drawn objections. The Kansas State University Foundation strongly opposed the bill in 2023, arguing that it would “cause substantial confusion and be a significant drain on charitable organizations’ focus and resources”; opponents also argued that it conflicted with existing state law. Legislators addressed some of the concerns raised by the foundation in the final bill.

Opponents in other states have also called the legislation duplicative and unnecessary, but Philanthropy Roundtable insists the bill is needed to protect donors.

“The model law in our report asks nothing of a school that keeps its word,” Cummings wrote by email. “It applies to written endowment agreements, gives the institution 90 days to fix a problem, and carries no damages and no clawback. When circumstances truly change, the law already offers a path: go back to the donor, or go to a court. What it ends is the quiet rewrite.”

White concurs with the need for legislation to protect donor intent. He believes a central provision of that legislation should be allowing donors to mount their own challenge over disagreements, rather than relying on a state attorney general to bring a case forward.

“I do believe some model legislation would be necessary where it says that the donor has standing,” White said. “I think that’s the concrete issue with regard to donor-intent issues.”