More Donors Assume Watchdog Role When Dealing With Nonprofit Recipients

Donors to nonprofit organizations are keeping closer tabs on how those organizations spend their contributions, with some donors even taking back gifts when they feel their intentions haven't been honored, the New York Times reports.

Recently, for example, Boston University, the Art Students League of New York, the United States Olympic Committee, and the Pittsburgh public school system have all had gifts withdrawn because donors were unhappy with how their contributions were being used. "There have been so many instances recently of disputes between donors and recipients over the issue of the donations, which almost never happened before," said William Josephson, the assistant attorney general overseeing tax-exempt organizations in New York. "One has to conclude that either donors are much less happy than they used to be or recipients are much less responsible — or both."

In the past, only state attorneys general had the authority to hold charities accountable in court, but that has changed as the number of nonprofit organizations has mushroomed. With less money for oversight available in state budgets, government officials are finding it harder to prosecute mismanagement and fraud at charities within their jurisdiction. As a result, says Michael W. Peregrine, a lawyer who specializes in nonprofit affairs, "Donors are all of a sudden realizing they may have the ability to make their case because attorneys general are more willing to let them take the reins and courts are more willing to hear them out."