Trusts & Estates

PA Sues AFSC Over How It Spent $8 M

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Updated: A highly regarded Philadelphia-based national charity is being sued by the Pennsylvania attorney general because it allegedly didn’t comply with the wishes of a deceased donor when spending his money.

Leo Eloesser, a physician, directed that his bequest of $8 million (including investment growth and interest over more than 20 years) be used to educate medical students. But, although there is no suggestion that the money was misappropriated, the American Friends Service Committee apparently spent at least some of it for other purposes, reports the Philadelphia Inquirer.

The Quaker charity, whose focus is peace, justice, and human dignity, carefully invested the money to maximize its value and spent it “to train thousands of health personnel to meet the needs of some of the world’s most vulnerable communities,” says John Treat, AFSC’s director of external affairs, in an e-mail to Administrative fees to manage the money were about 1 percent, he says.

“We take our commitment to our donors very seriously,” he writes, saying that AFSC is cooperating with the accounting sought by the AG and is conducting a review to decide how best to meet Eloesser’s intentions. “If we need to make corrections, we will comply with what is asked of us,” he adds.

Regardless of how well money may have been spent, if a charity doesn’t comply with a donor’s instructions, that does raise a definite issue:

“A bedrock principle of well-managed nonprofit organizations is to honor the intentions of your donors,” Daniel Borochoff tells the Inquirer. He is president of the American Institute of Philanthropy, based in Chicago.

“These other programs may be completely noble, but if the donor wants it used for Purpose A, it cannot be used for Purpose B,” he says.

(Updated at 2:55 p.m., CDT, on Oct. 9, 2007.)

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