Dollar’s dollars: restricted gifts and abandoned projects

Televangelist Creflo Dollar recently came under fire for asking that 200,000 of his followers donate $300 each to buy a $60-million luxury jet for his use. In the wake of bad publicity associated with the request, it appears that he may have cancelled the campaign before reaching his goal.

The problem is: What happens to money already collected?

By Anthony P. Ashton

800px-Dollar_symbolSmallRight now, you’re probably thinking:

Can’t he simply use the money for some noble, charitable cause, like feeding famine victims or building an orphanage in a war-torn country?

Answer: No.

A charitable donation for a specific purpose is what the law calls a restricted gift. In contrast to unrestricted gifts, which can generally be used for any purposes a church deems are in furtherance of the church’s mission, normally, restricted gifts can be used only for their designated purpose.

Accordingly, when a church solicits donations for a building fund, scholarship fund, etc., the church can’t use the donations for other purposes. A simple rule of thumb is that a person can spend her money however she chooses and a church cannot overrule her specific choice. This is true even if the church did not solicit the funds for a particular purpose, yet the donor expressly gave funds for a restricted purpose. For example, if a congregant leaves money in his will to be used to purchase a pipe organ, even if the church bought a new pipe organ the week before the congregant’s death, the donated funds cannot be used for another purpose. In Dollar’s case, he apparently asked his congregants for donations “to purchase the G650 airplane.” Thus, he went so far as to specify the exact type of plane.

Can’t he just return the money to the donors?

Answer: Sure, but . . .

It is virtually unheard of for a church or any other charitable institution to return money legally donated to it. Fundraising 101 says that you do not give back funds.

Next, many donors give money because they want to do something selfless and giving feels good. Imagine the dejection a congregant would feel to learn that her monetary donation is not wanted. That dejection might be even greater in a congregant who believes “cast your bread upon the water and it will come back to you tenfold.” (Biblical scholars, you’re correct: that quote appears nowhere in the Bible.) To such a congregant, returning donated funds may be like a message saying, “God gave your money back, so there’ll be no prosperity for you.” Most churches are not in the habit of making their congregants feel bad about having given money to the church or discouraging future donations.

Can he ask the donors if he can use the already donated funds for other purposes?

Answer: Yes, but . . .

If a church prematurely ends a special fundraising drive, it needs to get the permission of each person who gave a restricted gift before the church can use that person’s donation for another purpose. Although time-consuming, this may not be that difficult to accomplish if a church has kept accurate records of donors and received funds via checks or in offering envelopes containing identifying information. It may, however, prove problematic with cash, or poorly recorded or anonymous donations. Poor record-keeping and anonymous donations also effectively may prevent a church from returning to donors funds collected as part of an abandoned fundraising effort.

Can he simply hold on to the money?

Answer: Yes.

Dollar may hold on to the funds until the originally contemplated monetary goal is reached. Because unrestricted funds are just that, they too may be used to reach the goal. The restricted funds ultimately may be combined with unrestricted funds to buy the luxury jet.

A similar, but far less controversial, result would follow for the average church engaging in a fundraising effort containing an articulated timeframe. For example, if a church holds a month-long fundraising drive to purchase a new furnace, but doesn’t collect enough during that month to cover the cost, the church may also use later or previously acquired unrestricted funds to make the purchase.

How can other churches avoid similar issues?

Answer: When possible, solicit only unrestricted funds.

It may be tempting to set up a special, segregated fund for a project. For example, there might be a certain amount of inspiration to congregants or prestige for a church to have a new building fund.

In addition, whether for a daycare center, church van, choir robes, etc., some donors just love the idea of contributing for particularized purposes.

Church leaders should feel free to inform congregants of a church’s specific needs; but before soliciting donations that can be used solely for a specific need, church leaders should remember that unrestricted gifts can be used for everything for which restricted gifts can be used. Unrestricted gifts, however, allow church leaders to have far more autonomy and discretion over how funds are used. This may prove particularly important if an emergency arises for which the church needs funds immediately.

As explained above, regardless of a more important urgent need, restricted gifts that are designated for another purpose generally would be off-limits. Having thousands of dollars that can be used only to purchase stained glass windows is of little solace when buckets of water are streaming through holes in the roof, and a church discovers it lacks the unrestricted funds to make repairs.

Anthony P. Ashton is a partner in DLA Piper’s Baltimore office. He represents individuals and local, national and multinational corporations in a variety of litigation matters, including actions involving fiduciary duties of officers and directors.


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