Under the Charitable Purposes Preservation Act, funds received by a charity should not be used to pay for operational costs of the charity unless the donor explicitly allows the charity to do so. The rationale is that funds received by a charity are given on the condition that the charity hold the funds in trust, to be used only to fulfill its charitable purposes (for example, the advancement of religion, education, etc.). Without explicit language in the agreement between the donor and the charity to use the funds in any other manner, such as the payment of salary, to do so is likely a breach of trust. Operational costs and overhead are not generally considered to be advancing a charitable purpose.
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Wills & Estates
Our museum received a large bequest with no direction as to how to use the money; how can we use it?
The Charitable Purposes Preservation Act indicates that this money should not be used for the everyday operational costs of the museum. Can you expand on this for me? Part of the Board of the museum wants to use this money for wages and operational expenses, and part of the Board wants the money to be used for protection of artifacts and to increase the collection of the museum.
Reviewed October 2017