Doing Good AND Doing Right: Ethics in Fundraising

"Money often costs too much."

I think about this Ralph Waldo Emerson quote every time I hear another news report about an investigation into some shady corporate finance deal. It seems even more appropriate when the investigation targets a nonprofit organization. 

In recent years, financial scandals at major nonprofits like the United Way, compounded by the even worse scandals at for-profit organizations such as Enron and the banking industry, have seriously diminished the public trust.

In the aftermath of these abuses, new legislation is being enacted that puts organizations under even greater scrutiny. Under the glare of this spotlight, ethical leadership and ethical practices are more important than ever. Because of the large number of choruses with nonprofit status as 501 (c)(3) organizations and their visibility in their communities, choruses can raise the "ethical bar" and make a difference.

"Money often costs too much."

Fundraising can be particularly sensitive to ethical pitfalls. Luckily, there are readily available resources for information and guidance on these issues. One of the leaders in supporting ethical standards in fundraising is the Association of Fundraising Professionals, which works to advance philanthropy through advocacy, research, education, and certification programs. AFP is known for its comprehensive "Code of Ethical Principles and Standards of Professional Practice" and "Donors' Bill of Rights" (available online at www.afpnet.org).

Anyone who is responsible for the stewardship of contributions - board members, staff, and volunteers - can benefit from reviewing the guidelines and best practices detailed in AFP's guidelines.

You many be saying to yourself, "But our chorus budget is really small, and our contributed income even smaller - I bet this isn't relevant to our situation."

Or, "I hardly have enough time to read the Voice , so where will I find the time to think about this stuff?"

Then take a minute to consider how you would respond to these situations, which are all too common:

• The board of your chorus has decided to build its fundraising program by hiring a professional fundraiser on a contract basis. The budget is very tight and they are worried about the risk of investing this money. A board member suggests that one way to reduce potential losses is to pay the fundraiser based on a percentage of what is raised. Is that a legitimate form of compensation to offer a fundraiser?

• A grandfather of a child in your children's chorus has offered a $10,000 gift to fund your tour. However, he is asking that his grandchild, not one of your top singers, be moved into the select chamber choir. How do you respond?

• Over the years, your development director has become very close with one of your major donors, Mrs. B. When Mrs. B. dies, you learn that she has left the chorus a financial bequest in her will, and she also has left a substantial bequest to the development director. Is it ethical for the development officer to accept the bequest?

Ethics help from the Experts

AFP's Code can help you tackle these dilemmas. Professional fundraisers who are members of AFP are required to sign a pledge to abide by the Code - that's important to know when your group is hiring a fundraiser. Second, the Code reflects best practices in fundraising for any organization. For example, on the issue of compensation based on a percentage of dollars raised, the standards are quite clear: "Members shall not accept compensation that is based on a percentage of charitable contributions, nor shall they accept finder's fees."

On its website, AFP explains that the purpose of this standard is "to ensure that fundraising professionals are compensated for their experience, expertise, and the work they actually perform on behalf of the charitable organizations that employ their services, and not for work performed by others, or for funds obtained without effort by the fundraiser, or for funds obtained outside of the mission of their organization." For a more detailed explanation, AFP has made a position paper on the subject available on its website - click on the Ethics link.

On the issue of compensation based on a percentage of dollars raised, the standards are quite clear: "Members shall not accept compensation that is based on a percentage of charitable contributions, nor shall they accept finder's fees."

Other national organizations have released codes of ethics and/or models for ethical practices for the nonprofit sector, including the American Association of Fundraising Counsel (www.AAFRC.org), an association for fundraising consulting firms, and Independent Sector (www.IndependentSector.org), a coalition of foundations, nonprofit organizations, and corporate philanthropy programs.

Three Intuitive Tests

Of course, it takes more than laws, codes, and guidelines to ensure ethical fundraising. In her recent article, "The Ethical Leader: What Does It Mean?" (September/October issue of AFP's magazine, Advancing Philanthropy), fundraising consultant Barbara Levy also suggests that we use the "Three Intuitive Tests":

1. The Golden Rule: Are you treating others as you would want to be treated?
2. Publicity: Would you be comfortable if you/your group's decision appeared on the front page of the newspaper?
3. Kid On Your Shoulder: Act as though your children were observing you. Would you be comfortable? Are you living what you preach?

Finally, a tried-and-true method for ensuring that your organization is taking the "high road" in fundraising is to keep it donor-centered. This means that the donor's values and intent are kept at the forefront of any solicitation; communications have been clear, truthful, and accurate; and gift acknowledgement and recognition are given and used in accordance with the donor's wishes.

The more nonprofit leaders who know about best practices and ethical guidelines in fundraising, the better off our whole sector will be. Spread the word by sharing information about ethical practices at one of your board meetings. Adopt a gift acceptance policy and overall code of ethics. Let your donors know that your organization follows the highest standards of ethical practices in the solicitation and stewardship of their gifts.

And if none of these suggestions appeal to you, there's always Mark Twain's wry advice:

"Always do right—this will gratify some and astonish the rest."

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This article is adapted from the Voice, Winter 2004-05.