When donors to scholarship funds see the impact that their money can have on the life of a student, they are often inspired to contribute more. Sometimes they will add more to the principal of the fund so that future awardees can receive bigger scholarships or more scholarships can be awarded. Where investment losses have reduced the value of the scholarship fund and the amount available to pay out, donors may wish to round up the year’s grants. On occasion, they wish to increase the size of awards given to students who have already been selected or provide funds for additional scholarships so that students who did not make the cut can receive aid. The timing of the donor’s renewed generosity may determine whether these additional gifts should be accepted and applied.
There is never a problem when a donor adds to the principal of the fund so that there can be more awards or bigger grants in future years. Because the donor has no way of knowing who will apply or be selected in a future year, he or she is making a disinterested charitable gift by adding to the principal.
Similarly, there should be no problem with a donor adding funds to increase the number or size of awards when selections have not yet been made. A donor who hears that dozens of qualified students have applied for a scholarship award may want to make more aid available. So long as the donor does not know the identity of the students who are likely to be selected, there is no possibility that he or she is making the gift to route aid to a particular person.
When selections have already been made, however, donors should not generally tinker with the number or size of awards. When donors know the identities of the students who have been chosen, their gifts are arguably earmarked for these particular individuals. This knowledge undercuts the disinterested, charitable nature of the gift and transforms it into a gift to a preselected individual.
There are additional, non-legal reasons not to alter the terms of a scholarship after selections have been made. Such changes can make the community fund appear to be arbitrary or unfair. One can imagine students saying resentfully, “Gee, if I’d known they were going to give out X more dollars or Y more awards, I would have applied!” It would be even worse for the community foundation’s reputation for fairness and honesty if the public were to learn that a donor had increased assistance to one awardee and not others.
Of course, no community foundation manager wants to discourage donors’ generosity. When a donor is proposing to increase assistance to a particularly deserving individual, turning the aid down can he particularly painful. Community foundation managers who suspect that a donor might be willing to increase the number or amount of scholarship awards would be wise to contact that donor before selections are made. After selections are made, the best options available to a donor who wants to make additional gifts are to make a contribution to the principal of the fund or to make a non-charitable gift directly to the student or students he or she seeks to benefit.
Excerpt from Grants to Individuals by Community Foundations