Vanderbilt Law Review

Article Title

Donor Standing to Enforce Charitable Gifts: Civil Society vs. Donor Empowerment


Iris J. Goodwin


The cat is out of the bag: Donors are fast discovering what was once a well-kept secret in the philanthropic sector-that a gift to public charity donated for a specific purpose and restricted to that purpose is often used by the charity for its general operations or applied to other uses not intended by the donor. In most states, the Attorney General is the agent for enforcement of such gifts (an arrangement that recognizes the public's role as the ultimate beneficiary of any public charity). But Attorney General offices are beset with difficulties that make it virtually impossible to monitor how each charity administers its restricted gifts, leaving the charities, for the most part, on the honor system. Donors-whose restricted gifts play a vital role in the charitable sector as a source not only of funding but also mission-are increasingly aware that their restrictions are ignored. Frustrated by lax enforcement mechanisms, donors (and their families) are pursuing standing to enforce their restrictions. In Smithers v. St. Luke's/Roosevelt Hospital, the donor's widow succeeded in obtaining standing, even after the Attorney General had entered into a settlement agreement with the Hospital. Donors with their restricted gifts (often representing their personal beliefs and social agenda) keep the charitable sector vital and ensure its diversity. Such restrictions exist in perpetuity, however, and can result in an effective privatization of a charity's mission, especially if the charity is not free to interpret a restriction in response to change. Even though such restrictions are legally binding on the charity, the Attorney General in the exercise of her prosecutorial discretion can effectively allow certain restrictions to lapse, thus preserving the autonomy of the charity. Thus, Smithers has enormous implications for the autonomy of charitable organizations and their capacity to respond independently to change.

Not only is the cat out of the bag, but the genie is also out of the bottle. To appreciate the significance of the holding in Smithers, we must see it in the context of a larger movement by donors who are seeking not only standing, but all sorts of empowerment with respect to recipient organizations. The 1990s saw the advent of venture philanthropy. A new breed of philanthropist aimed to apply the practices of venture capitalism to charitable giving, with the idea being that the donor would "invest" in a charitable project that promised a high "social return." The object of the venture philanthropist was not simply to write a check, however. This new type of donor wanted to stick around, offering strategic advice to make certain the project came to fruition. Charities were to be accountable to the donor for delivering measured results (although the rigorous metrics necessary to gauge success in this area were never forthcoming). Organizations or projects that did not measure up were to be disqualified for grants in the future. Some have called this "engaged grant-making;" others, sheer hubris, noting that charities need money, not advice from people with little experience in the charitable arena or with a particular type of program.