The association gave the money back to the Stone-Mallabar Charitable Foundation after it insisted the donation was spent on a specific project the association said was "not consistent with its strategic objectives".
Stone-Mallabar expected the money to be spent on research through the new Sheffield Institute Foundation for Motor Neurone Disease. But the association told Stone-Mallabar that the project was outside its priorities.
A spokeswoman for the association said it was a difficult situation. "The Stone-Mallabar Foundation made a donation of £100,000 to the association," she said. "It subsequently indicated that it wanted the money to be spent on a specific project that was outside the association's work programme."
Jonathan Stone, founding trustee of the Stone-Mallabar Foundation, said: "There was a failure of communication, but that was yesterday, and we are getting on with our lives."
The donated money was still going to be spent on research into motor neurone disease, Stone added.