When can donors ask for their money back?

I have been following the saga of the donation by Count Natale Labia to the Department of Public works and Iziko Museums of his father’s luxurious Venetian-style residence in Main Road, Muizenberg, which has been known to Cape Town as the Natale Labia Museum. This 20-room building, constructed in 1929-30, was the home of his parents (his father was Italy’s first minister plenipotentiary in South Africa) and is a splendid example of those twentieth century holiday homes built by the wealthy social set when Muizenberg was the premier venue for holidaying South African elites.

Count Labia donated this building and the plot next door, together with all the contents including furniture, art, chandeliers, mirrors and wall panels to the government in 1985. The condition of the donation was that the building would operate as a museum to serve the community and enrich the cultural life of the Southern Peninsula. The agreement was that if the museum closed during his lifetime, the movable items and the paintings would be returned to him.

So what happened? Besides the permanent collection of art that it housed, for a while the museum became a key venue for lectures, exhibitions, art classes, poetry and music recitals, and included its own restaurant. However, it was closed by the government in 2005 and has been allowed to deteriorate with damage from water seepage, mould, grime, stains and cigarette burns. In addition, the government sold and transferred the adjoining property without Labia’s knowledge or consent to someone for R50 000 and she later sold it for R900 000. It is Labia’s view that the government had not employed the required staff to maintain the museum and is in breach of the donation contract.

This has now gone to court and Count Labia wants his property back, compensation of R900 000 for the next door property, as well as R450 000 for a specific, valuable painting that was also sold. The government has denied any material breach of the donation deed and what is referred to as “gross ingratitude”. However, Iziko Museums has admitted that Labia is entitled to revoke the donation, but that it could not return the painting, although it agreed it was liable for damages. The case continues.
What do we learn from this? For donors it is a lesson that you do have rights and that if an organisation makes commitments to you, they should be kept. I am aware of a higher education institution that accepted donor funds for a multi-year project which it did not complete. The donor claimed not only the funds that were not expended, but the funding for the whole project as non-completion was a breach of the donor agreement.

For recipients of funds, this is a warning. Firstly, despite the attraction of funding, it is important not to take donations that do not fit with your organisation’s aims and objectives, or do not fit with your capacity to deliver. The philanthropic relationship works both ways – people or organisations do not have to accept donations that they do not want. Accepting funding (or in the case of Labia a donation “in kind”) for the sake of gathering assets and where there is no intention of implementing an agreement is dishonest. It is also a lesson that sometimes donations cost more in the long run to maintain and implement than the initial sum. There are hundreds of examples of wonderful capital campaigns that have raised money for new buildings when the organisation or institution is unable to maintain the building. Ten years later the beautiful building is an unpainted mess with broken windows and non-functioning lifts. How do the donors feel when they visit the building which may or may not have their names above the front door? When an organisation or institution plans, it has to plan with the long-term consequences in mind.

What other rights do donors have? Firstly, donors have the right to know the organisation that is the recipient of funds and donors have the right to ask questions and obtain answers. The donor should expect to have a serious and professional relationship with the recipient and there should be some form of transparency and accountability. At the same time there are things the donor should not do. The big one is not to involve themselves in the operations of the organisation. There is a point when the donor’s work/role ends and the recipient’s work begins. Donors have to accept that they take some risk when they hand over their money to another organisation. It is important that they have done their homework, have met and trust the organisation’s leadership and can feel confident that the funding will be well managed with good financial systems in place. Building this relationship of trust between the donor and recipient is an essential ingredient in an exciting process of philanthropy, partnership-building and social change.

Managing the relationship between a donor and recipient is not rocket science; it just involves basic good manners. I was involved in a workshop some years ago with about twenty organisations. I asked how many thanked their donors and only six put up their hands. Why do we think we can take the money and run? Why should any donor be happy with that kind of relationship? Why should we expect donors to return again and again with repeat funding when we don’t manage these relationships properly? Basics include thanking (again and again and as soon as the funding is received, not six months later); recognising the donor in some way that ranges from a certificate of thanks to naming a building – this can be in public or private, depending on the wishes of the donor; reporting on progress regularly, both narrative and financial if necessary; inviting the donor to attend activities associated with the donation; providing other documentation about the project or organisation such as annual reports and basically building and maintaining a strong relationship.

Donors show trust in the organisations they support. They are taking risks in handing their money or assets over. This should not be abused. At the same time, organisations should be seen as partners in philanthropy and have commitments to meet. If they can’t meet those commitments they should inform the donor and arrangements should be made to put things right before frustrations reach breaking point and the issue ends up in court. Most important is for organisations not to be tempted by money – focus on your own vision and you will attract the funding you require to advance your own objectives.

Organisations would benefit from an approach to grant-seeking that views donors as partner organisations or as investors – partners with whom an agreement is negotiated around the terms of the donation and the expected outcomes. If there are problems meeting commitments, it is essentially for the recipient to engage with the donor on the issue – be open and honest and explain how the organisation will fix the problem. The lesson learned from the example of the Natale Labia Museum is that donors can, and indeed might, seek compensation for breach of funding or donation agreements.