Op-Ed: Unrestricted Giving To Nonprofits Seems Dodgy

Mark Zuckerberg
Owned by Facebook founder Mark Zuckerberg and his wife Priscilla Chan, The Chan Zuckerberg Initiative has been deemed to likely be “one of the most well-funded philanthropies in human history.” File photo: Frederic Legrand – COMEO, Shutter Stock, licensed.

PORTSMOUTH, OH –  In 2021, Mark Zuckerberg and his wife Priscilla Chan decided to become more involved in Judaism, so they donated  $1.3 million to 11 Jewish organizations according to an article in Jewish Insider. The personal funding is from the Chan Zuckerberg Initiative (CZI). However, the donation was given as ‘unrestricted,’ a current trend among the wealthy.  

Kudos to anyone of charitable giving, but that’s not the point of my article. Whenever the wealthy elites change the way they manage, control, or give away money, my ears perk up and my brain starts formulating questions.  

What is the purpose of unrestricted donations?  

Another wealthy person is using this method of giving as well. “MacKenzie Scott, the ex-wife of Amazon founder Jeff Bezos, is one of the highest-profile proponents of gifts that are not project-specific, but instead empower the recipient to decide how they should be used. In the Jewish community, the Jewish Funders Network (JFN), a service organization for philanthropists, and UpStart, an incubator and advisor of early stage nonprofits, have launched “GrantED,” an initiative that educates funders about the need for unrestricted grants,” according to an article at eJewishPhilanthropy.

So, I researched this trendy method of donating. And the responses from multiple websites sang the praises of unrestricted giving and bashed restricted giving as outdated. My investigative and curious mind (and the part of my brain that is suspicious) wondered about the motives of this method.  

What is the difference between unrestricted and restricted funds? The Foundation Group gives the following answers? 

Unrestricted Funds:  As the name suggests, unrestricted funds don’t have strings attached and may be used by the nonprofit for whatever purpose it deems necessary.  

Restricted Funds: These are funds that are set aside for a particular purpose. Donors can take legal action against a nonprofit that it believes is misusing restricted donations. 

Why and how did unrestricted donating catch on? 

According to a 2021 op-ed article by Nicholas Turner in The Chronicle of Philanthropyat the outset of the Covid-19 pandemic, more than 800 grant makers signed a pledge to loosen or eliminate grant restrictions. And calls for unrestricted giving grew as “the global health crisis converged with a national racial reckoning.” 

So, the speedy push for unrestricted giving started with the coronavirus crisis.  

Turner continued, “Philanthropists, critics argued, should no longer dictate how nonprofits, especially those led by people of color, spend their funds. Instead, foundations should give freely to those who know best how to achieve equity and justice in their communities.” 

So, the crux of unrestricted giving for some nonprofits is tied to racism, equality, and justice.  

Turner, the Director of the nonprofit Vera Institute for Justice stated, “Following the police killings of Eric Garner and Michael Brown in 2014, this lack of spending freedom meant we couldn’t shift our work with the necessary speed and effectiveness to address police brutality and systemic racism in law enforcement. Almost all our resources were tied up by donors’ other intentions — not the crisis of American policing and its impact on Black people…Since then, unrestricted investments from Blue Meridian Partners, the Ballmer Group, the Charles and Lynn Schusterman Family Philanthropies, the Ford Foundation, Open Society Foundations, and the Tow Foundation have allowed us to confront systemic racism on our own terms.” 

My takeaway is that unrestricted funding is heading to the extreme end of the Bell Curve and becoming overly political.  

For example, in 2021, The New York Post reported that “As protests broke out across the country in the name of Black Lives Matter, the group’s co-founder went on a real estate buying binge, snagging four high-end homes for $3.2 million in the US alone, according to property records.” Patrisse Khan-Cullors, the self-described Marxist also purchased a $1.4 million home a short drive from Malibu in Los Angeles. Fellow activists were taken aback by the real estate revelations.  

In response, Hawk Newsome, the head of Black Lives Matter Greater New York City, which is not affiliated with Khan-Cullors’ Black Lives Matter Global Network Foundation, called for “an independent investigation” to find out how the global network spends its money.  

At the same time Khan-Cullors incorporated the BLM nonprofit, she also set up the similarly named BLM Global Network, a for-profit that is not required to disclose how much it spends or pays its executives.  

The following quote from Scott sums up unrestricted donations: “Because we believe that teams with experience on the front line of challenges will know best how to put the money to good use, we encouraged them to spend it however they choose,” proclaims MacKenzie Scott. 

Proponents of unrestricted donations want the givers to just trust organizations. Really? Give us your hard-earned dollars and then just go away. If anything, these are the days when nonprofit organizations need to show even more transparency to overseers and donors.  

Does unrestricted donating make embezzlement easier?  

I did not find any studies on whether unrestricted donations increase embezzlement versus restricted. Perhaps, nonprofits need to address the potential of fraud before they champion the concept of full-force unrestricted giving.  

According to a 2020 Report to the Nations (88 pages), the top three causes of nonprofit embezzlement are a lack of internal controls, lack of oversight of existing internal controls, and overrides of existing internal controls.

More than 1,100 nonprofits told the IRS they suffered a significant, unauthorized diversion of assets – usually employee theft or embezzlement – between 2011 and 2017. 

Unrestricted donating sounds more like willy-nilly giving to me. When I donate to a nonprofit, I want to know what my money is being used for. Nonprofit organizations need to be held accountable for money they receive and where the money goes. Donors want to know if their money is making an impact on the specific causes they believe in. Therefore, I am leery of unrestricted giving to nonprofits.  

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