The American public donates a staggering amount of money to nonprofit charities. These charities routinely solicit and receive money from donors for specific, earmarked purposes. Often, however, charities ignore their obligations to use money for these designated uses. In many circumstances, even a seemingly benign redirection of earmarked gifts for other charitable purposes could constitute fraud and misrepresentation.
Breaking the implicit or explicit promise to use money in a designated manner harms donors, charities, and the public. Prospective donors assess the value of charitable donations in a manner similar to the way they value consumer goods and services and can be swayed by false claims. Accordingly, allowing distortions of perceived value misleads donors when they are directing their charity.
In light of detailed examinations of charitable-organization spending practices, this Article will propose that charities should adhere to a new, higher level of candor in their public communications. Maintaining a renewed, scrupulous approach to disclosure would, in Chief Justice John Marshall’s parlance in Trustees of Dartmouth College v. Woodward, ensure “that the charity will flow . . . in the channel” that the donors expressly choose.
78 Md. L. Rev. 709 (2019)