Posts Tagged ‘AFP Code of Ethics’

Do your gifts pass the tainted money quiz?

“A colleague once expressed a rule to use when considering whether a proposed decision or action meets the highest ethical standards. Ask if you would want your mother to read about it in the newspaper the next day. While there are no easy answers when questions arise about honesty and full disclosure, this approach might lead one to an ethical outcome,” says Janice Gow Pettey, editor of Ethical Fundraising: A Guide for Nonprofit Boards and Fundraisers.

Learn from others

Ethics has become a vital issue for nonprofits, especially in light of recent events last year when we learned that more than 1,000 nonprofits including organizations like Georgetown University, AARP, New York University, Legal Aid Bureau, Youth Service America, Columbia University and Alliance for Excellent Education reported to have experienced significant diversions from their bottom line due to lack of executive oversight. More specifically, these instances included embezzled funds, fraudulent payments, unsubstantiated spending, drained accounts and stolen funds acquired by fake identities.

With scrutiny of nonprofits from the government, the media and the public at an all-time high, it is critical that charities not only abide by the highest ethical standards, but that they also avoid any appearance of impropriety. Fundraising, in particular, is a discipline where these ethical standards can be upheld and honored. Ethical Fundraising discusses the importance of ethics to the fundraising profession and addresses the key issues that all nonprofit leaders, fundraisers and donors need to be aware of when confronted with ethical dilemmas.

Why should we care about ethics?

Nonprofits depend on public trust to survive. Without it, they can’t fundraise. Simply put, if people don’t believe that an organization will use their money appropriately, they won’t give. High-profile scandals in both the for-profit and nonprofit sectors have made the public more wary of giving—and have caused nonprofit leaders to recognize that when others misbehave, all suffer the consequences. In this cautious environment, ethical behavior is critical. An organization’s reputation—including that of its leaders and staff—is its most valuable asset and its highest risk. Once that reputation has been sullied, it is difficult if not impossible to regain the trust and confidence of others.

It’s good business

According to Ethical Fundraising contributor Dianne Lister, there is a direct correlation between scandals affecting charities and the ability to maintain donor confidence and recruit and retain leadership volunteers. Clearly, aspiring to ethical standards isn’t just the right thing to do,  it makes good business sense.

There are a number of questions that fundraisers can ask to help clarify tainted-money issues:

Will taking the money from a donor provide short-term benefits to our clients but risk long-term damage to the reputation of our organization and decrease services to our clients in the long run?

If we turn down the money, what will be the short-term impact? What services will we not be able to offer?

What are the various ways in which accepting a potentially tainted gift can affect the organization?

Would the gift offend key stakeholders and damage long-term relationships with other donors? Would it have an impact on our ability to deliver services in which our clients would have confidence?

Tainted money

Now that you’ve taken the short quiz, let’s explore tainted money more closely. Tainted money refers to funds contributed to an organization that may raise questions of propriety among the organization’s constituents and stakeholders because of the source of funds or circumstances surrounding the contribution. The most obvious type of tainted money is illegal money, though it’s generally not the most common. Most cases of tainted money involve value conflicts and are less easily defined and more difficult to resolve. The values conflict is further complicated by the fact that money given by a particular donor to one organization might be considered tainted by that organization, but not if given to another.

This is one area where the Association of Fundraising Professionals (AFP) Code of Ethics provides solid guidance. The following are the AFP standards on how to handle issues of tainted money:

Standard No. 1: If fundraisers can clearly see that a gift conflicts directly with their organization’s mission or its values, their obligation is to turn it down. If they know that the contribution might do the organization harm, that it might have a negative impact on the reputation of the organization, it is their professional obligation not to solicit the gift, not to accept the gift on the organization’s behalf, and to counsel the organization not to accept the gift.

Standard No. 2: Fundraisers have an obligation to make certain that third-party organizations that are assigned to help carry out fiduciary responsibilities do not have values that conflict with their organization or have relationships with donors that could create conflicts that would be less apparent than if a gift were made directly to the organization.

Standard No. 3: This standard applies to conflicts of interest fundraisers have in relation to a gift that is being solicited or in other transactions that the organization is pursuing; for example, a potential contract with a relative. Situations in which the donor expects to influence the mission ofthe organization are conflicts of interest that create tainted-money issues. Fundraisers should counsel their organization and potential donors about the impact the gift may have on the reputation of the donor and the organization.

Standard No. 5: Gifts that are overvalued and for which a tax savings scheme is the primary motivation have the potential to violate the tax code and are tainted by the violation.

Standard No. 8: This standard deals directly with the fundraiser’s responsibility to provide donors with accurate and ethical advice. Fundraisers must make certain that they do not damage their organization’s reputation by creating the perception that they overvalue non-cash gifts or create legal issues by failing to report non-cash gifts as required by the IRS.

My hope is the principles I’ve touched on from Ethical Fundraising reinforce what you’re already doing. If not, I hope they compel you to set up your own internal policies for handling philanthropy. After all, it’s our duty to be informed and uphold the integrity of the social sector so that all organizations experience a climate more conducive to raising funds.

Janice Gow Pettey says it best: “The charge now becomes imperative. The task before us is to take responsibility, to construct a leadership role in the promulgation, and support the promotion of ethical work. The price to be paid, if no one will take the reins, is greater chaos, escalation in unethical practice, and the ultimate destruction of the third sector.”

See also:

Charity on Trial

Fundraising Series–Volume One: Selling Impact, Storytelling, Planned Gift Marketing and Legacy Gifts

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