Ethics in Fundraising: Doing the Right Thing, Right Now!

Presented by: Gary L. Bukowski, MA, CFRE

Associate Vice President of Development Sarah A. Reed Children’s Center

Nonprofit Day 2016 Tuesday, October 25, 2016

Roundtable Session 8:30 – 9:00 a.m.

Bayfront Convention Center 1 Sassafras Street

Erie, PA

www.SarahReed.org

GBukowski@SarahReed.org

Ethics in Fundraising: Doing the Right Thing, Right Now!

Table of Contents:

1. AFP Code of Ethical Standards

2. A Donor Bill of Rights

3. Values Promoted by the AFP Code of Ethics

4. All Well and Good: A Case for the Ethics of Philanthropic Fundraising

5. Seven Ethical “Dilemmas” in Philanthropic Fundraising

6. Can Familiarity Cause Ethical Dilemmas?

7. “Ethics and the Fundraiser” Case Studies (2 pages)

Recommended Resources:

1. www.AFPNet.org (Association of Fundraising Professionals)

2. www.CharitableGiftPlanners.org (National Association of Charitable Gift Planners)

3. AFP – Cases for Ethics Education

4. Doing Well by Doing Right: A Fundraiser’s Guide to Ethical Decision-Making by Michael Rosen

5. www.BoardSource.org (Board Source)

Gary L. Bukowski, MA, CFRE October 25, 2016

ETHICAL STANDARDS (Adopted 1964; amended Oct 2014)The Association of Fundraising Professionals believes that ethical behavior fosters the development and growth of fundraising professionals and the fundraising profession and enhances philanthropy and volunteerism. AFP Members recognize their responsibility to ethically generate or support ethical generation of philanthropic support. Violation of the standards may subject the member to disciplinary sanctions as provided in the AFP Ethics Enforcement Procedures. AFP members, both individual and business, agree to abide (and ensure, to the best of their ability, that all members of their staff abide) by the AFP standards.

PUBLIC TRUST, TRANSPARENCY& CONFLICTS OF INTEREST

Members shall: not engage in activities that harm the members’

organizations, clients or profession or knowingly bring the profession into disrepute.

not engage in activities that conflict with their fiduciary, ethical and legal obligations to their organizations, clients or profession.

effectively disclose all potential and actual conflicts of interest; such disclosure does not preclude or imply ethical impropriety.

not exploit any relationship with a donor, prospect, volunteer, client or employee for the benefit of the members or the members’ organizations.

comply with all applicable local, state, provincial and federal civil and criminal laws.

recognize their individual boundaries of professional competence.

present and supply products and/or services honestly and without misrepresentation.

establish the nature and purpose of any contractual relationship at the outset and be responsive and available to parties before, during and after any sale of materials and/or services.

never knowingly infringe the intellectual property rights of other parties.

protect the confidentiality of all privileged information relating to the provider/client relationships.

never disparage competitors untruthfully.

SOLICITATION & STEWARDSHIPOF PHILANTHROPIC FUNDS

Members shall: ensure that all solicitation and communication

materials are accurate and correctly reflect their organization’s mission and use of solicited funds.

ensure that donors receive informed, accurate and ethical advice about the value and tax implications of contributions.

ensure that contributions are used in accordance with donors’ intentions.

ensure proper stewardship of all revenue sources, including timely reports on the use and management of such funds.

obtain explicit consent by donors before altering the conditions of financial transactions.

TREATMENT OF CONFIDENTIAL& PROPRIETARY INFORMATION

Members shall: not disclose privileged or confidential information to

unauthorized parties. adhere to the principle that all donor and prospect

information created by, or on behalf of, an organization or a client is the property of that organization or client.

give donors and clients the opportunity to have their names removed from lists that are sold to, rented to or exchanged with other organizations.

when stating fundraising results, use accurate and consistent accounting methods that conform to the relevant guidelines adopted by the appropriate authority.

COMPENSATION, BONUSES & FINDER’S FEES

Members shall: not accept compensation or enter into a contract that

is based on a percentage of contributions; nor shall members accept finder’s fees or contingent fees.

be permitted to accept performance-based compensation, such as bonuses, only if such bonuses are in accord with prevailing practices within the members’ own organizations and are not based on a percentage of contributions.

neither offer nor accept payments or special considerations for the purpose of influencing the selection of products or services.

not pay finder’s fees, commissions or percentage compensation based on contributions.

meet the legal requirements for the disbursement of funds if they receive funds on behalf of a donor or client.

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CODE OF ETHICAL STANDARDS

PHILANTHROPY is based on voluntary action for the common good. It is a tradition of giving and

sharing that is primary to the quality of life. To assure that philanthropy merits the respect and trust of

the general public, and that donors and prospective donors can have full confidence in the not-for-profit

organizations and causes they are asked to support, we declare that all donors have these rights:

A DONOR BILL OF RIGHTS

ITo be informed of the organization’s mission,

of the way the organization intends to use

donated resources, and of its capacity

to use donations effectively for their

intended purposes.

IITo be informed of the identity of those serving

on the organization’s governing board,

and to expect the board to exercise prudent

judgment in its stewardship responsibilities.

IIITo have access to the organization’s

most recent financial statements.

IVTo be assured their gifts will be used for

the purposes for which they were given.

VTo receive appropriate acknowledgement

and recognition.

VITo be assured that information about their

donations is handled with respect and with

confidentiality to the extent provided by law.

VIITo expect that all relationships with

individuals representing organizations of interest

to the donor will be professional in nature.

VIIITo be informed whether those seeking

donations are volunteers, employees of the

organization or hired solicitors.

IXTo have the opportunity for their

names to be deleted from mailing lists that

an organization may intend to share.

XTo feel free to ask questions when making

a donation and to receive prompt, truthful and

forthright answers.

ADOPTED IN 1993 • COPYRIGHT AFP, AHP, CASE, GIVING INSTITUTE 2015 • ALL RIGHTS RESERVED

DEVELOPED BY:

Association of Fundraising Professionals (AFP)

Association for Healthcare Philanthropy (AHP)

Council for Advancement and Support of Education (CASE)

Giving Institute: Leading Consultants to Non-Profits

VALUES PROMOTED BY THE AFP CODE OF ETHICS

The Association of Fundraising Professionals (AFP) serves the public trust by promoting

ethical and effective fundraising. AFP members are guided in their ethical decision-

making by the AFP Code of Ethical Principles and Standards, which is grounded in a set

of values that fundraisers aspire to honor in their lives and work. When these values are

evident in our fundraising practice, we believe that our work leads to integrity in our

personal, professional, organizational and public lives.

An ethical fundraiser aspires to:

* Observe and adhere to the AFP Code and all relevant laws and regulations;

* Build personal confidence and public support by being trustworthy in all circumstances;

* Practice honesty in relationships;

* Be accountable for professional, organizational and public behavior;

* Be transparent and forthcoming in all dealings; and,

* Be courageous in serving the public trust.

We strive to live out these values, which are at the heart of our public character as

philanthropic fundraisers, and to grow in our ethical understanding and practice.

ADOPTED BY THE AFP ETHICS COMMITTEE, 9/7/12

ALL WELL AND GOOD: A Case for the Ethics of Philanthropic Fundraising

Paul C. Pribbenow, Ph.D., CFRE, AFP Ethics Committee, June 2014

The premise

Society’s most deeply held values are expressed in the work of nonprofit organizations.

Philanthropic support for these organizations thus is critical to a vital nonprofit sector and healthy society.

Those charged with raising this support – both professional fundraisers and other paid and volunteer organizational leaders – thus have dual obligations: to effective fundraising to support mission-based organizations and to ethical practices consistent with mission-based values and the demands of serving the public trust.

The Association of Fundraising Professionals (AFP) has long stated its commitment to ethical and effective fundraising.

It now is vital that this dual claim - that we must simultaneously do well and be good – be proclaimed as central to the work of philanthropic fundraising on behalf of the public goods we serve and support.

The logic

The AFP mission statement aspires to promote fundraising practice that is both ethical and effective in service to the public trust and a healthy democracy

The obstacles to the mission are many: from messy scandals that taint us all to public perceptions that fundraisers are used car salespeople or pickpockets.

Beyond scandals and misperceptions, there also is the reality that the work of philanthropic fundraisers often involves matters of personal relationships, intimate knowledge and financial resources – all sources of potential trespass – and that the work of fundraising also extends to other organizational leaders (both paid and volunteer) who may not be aware of the links between effective and ethical practices.

The claim that we can do well and be good at the same time first requires a reframing of the work of philanthropic fundraising.

Philanthropic fundraisers (and other nonprofit leaders) serve the public good – they are, in that way, public servants. The work they do serves causes that reflect society’s most deeply-held values – education, health, justice, environmental well-being, vital arts and culture, and so on.

The organizational missions fundraisers help promote and support thus are critical to our ability as a society to achieve our highest aspirations.

If our fundraising is not effective, then our highest public values may languish.

If our fundraising is not ethical, then our highest public values will be tainted by misbehavior, again threatening our ability to further those values.

And thus, we embrace the inextricable links between effective and ethical fundraising on behalf of the public trust.

For more than 50 years, the Association of Fundraising Professionals (AFP), formerly the National Society of Fundraising Executives (NSFRE), has been vigilant and focused in its commitment to ensuring that its member fundraisers live up to the highest ethical standards. The self-regulation of the profession by its membership has aimed at securing the public trust.

That self-regulation has evolved to a dual focus: on ensuring that ethical principles and standards for practice set a high bar for professional behavior, and at the same time, offering a vision of individual and common professional character.

We believe that our commitments to ethical and effective fundraising must be embraced by all who seek to serve the public trust through non-profit, mission-based organizations.

To that end, we invite all those engaged in philanthropic fundraising to embrace the commitments of AFP members, who are guided in their ethical decision-making by the AFP Code of Ethical Principles and Standards, which in turn is grounded in a set of values that fundraisers aspire to honor in their lives and work.

We contend that those engaged in effective and ethical fundraising aspire to: observe and adhere to the AFP Code and all relevant laws and regulations; build personal confidence and public support by being trustworthy in all circumstances; practice honesty in relationships; be accountable for professional, organizational and public behavior; be transparent and forthcoming in all dealings; and be courageous in serving the public trust.

These values are at the heart of our public character as those engaged in philanthropic fundraising – and essential to our doing both well and good. We are committed to supporting the continued growth of all our members and their organizations in ethical understanding and practice – on behalf of the public trust we have the privilege to serve.

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Seven Ethical "Dilemmas" In Philanthropic Fundraising

Tim J. Burchill, CFRE (deceased)

Executive Director

The Hendrickson Institute for Ethical Leadership

Saint Mary's University of Minnesota

Winona, Minnesota

By virtue of their missions, non-profits are often held to an even higher (some

might argue, a different) standard of ethical performance than for profit

corporations. While the overwhelming majority of non-profit leaders, both staff and

volunteers, are persons of unimpeachable integrity, on occasion these good people

make bad choices simply because they are unprepared to deal with the ethical

complexities of their actions.

Over the years, I've observed what I've come to call the "Seven Ethical

Dilemmas of Fundraising." These dilemmas are not obstacles to raising money,

but they are issues about which all nonprofit leaders, governing boards,

fundraisers and donors need to be aware.

Dilemma #1: Tainted money- This concerns conflict between an organization's

mission and the source of the contributed funds. For example, Mothers Against

Drunk Driving would not accept money from Anheuser-Busch, because the

company derives profits from the sale of alcohol. But an art museum or a

historical society may have no issues with a gift from the same benefactor. An

organization's mission always needs to be top-of-mind with its board and

fundraising staff and never compromised.

Dilemma #26 Compensation - Nearly all associations of fundraisers and

fundraising consultants have prohibitions in their codes of ethics against paying

finder's fees and against fund raisers working on a commission basis.

Nonetheless, the practice can be found, especially in small organizations that see

this approach as "risk-free." Compensation for fundraisers and fundraising

consultants should never be connected to the amount of funds raised. In the spirit

of philanthropy, fundraisers are motivated by advancing the mission of their

organizations, not by "earning" a percentage of funds raised.

Dilemma #3: Privacy- Organizations should neither obtain nor retain

nonessential and highly personal information about donors in their paper or

electronic files. Also, care must be taken to assure that development staff

members do not take information about donors with them when they change

jobs. Nonprofits need to be methodical stewards of personal information in an

era where privacy concerns rightly run rampant.

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Dilemma #4: Stewardship - Nonprofits must assure the public that the funds the

organization raises are indeed being used for the purposes for which they were

given. Non-profits must honor the spirit as well as the letter of donor intentions.

Dilemma #5: Honesty and full disclosure - Nonprofits must give people enough

information to make informed giving decisions, not "sugarcoat" their

organizations' stories to make them more attractive to a wider array of donors.

Honesty with donors is the essential foundation of healthy benefactor relations.

Dilemma #6: Conflicts of interest- Non-profit organizations that "do business"

with members of their governing boards must ensure that such transactions are

completely transparent and are subject to the same rules (e.g., bidding process) as

all other transactions. Other areas with potential for concern include

fundraisers- acting as executors for estates of their benefactors.

Dilemma #7 The appearance of impropriety- There are many things that

fundraisers can do that are legal, but are unethical, such as a fundraiser

benefiting personally from a benefactor's estate gift, bequest or outright gift. The

profession views such behavior negatively.

Awareness of the existence of these dilemmas can be the most important step in

avoiding unethical behavior. There is no ethical dilemma when choices are

clear-cut - when there is both a "right" and a "wrong" decision that can be made.

However, there is an ethical dilemma inherent in choosing between two "rights."

Using tainted money as an example: a school can benefit from a gift of $1 million to

upgrade its technology; but the prospective benefactor is a convicted felon. Is the

nature of the felony relevant? If the person has served a sentence and is

rehabilitated does that matter?

Non-profit institutions need to determine the values that are important to them (e.g.,

honest, integrity, fairness, loyalty, compliance with the law, accountability, etc.).

Whatever values they choose must be regarded as fundamental, but none of them

are absolute. Ethical dilemmas will arise when the organization has to make a

decision between two or more competing institutional values.

Making sound ethical decisions typically involves seeking counsel and

perspective from other people prior to making such a decision. Practicing "Lone

Ranger" ethics can be dangerous.

Can Familiarity Cause Ethical Dilemmas?

Abstract: A fundraiser secures a major gift from a donor, who happens to be the fundraiser’s

domestic partner/spouse. The paper explores the challenges of determining the ethical issues of donor relations, conflicting values, and when is too close a relationship an issue? Background:

Our imagined fundraiser “Ann” is a major gifts officer for a private teaching hospital in a

major city. She has been in this position for less than a year, and this is her first major gifts position. Prior to joining the development team at the hospital, Ann was the director of development for a smaller arts nonprofit in the same community. Ann’s spouse is a cardiologist affiliated with the same hospital. He has worked for several years in developing a specialized catheter which if successful could benefit many cardiac patients.

The hospital is engaged in the early stages of an ambitious capital campaign and a new

cardiac wing is among the projects to be funded. Ann’s responsibility is to secure major staff gifts. She is given a list of physicians with specialties matching those included in the campaign. Her spouse’s name is included in this list. Over dinner, Ann shares her new assignment with her spouse, who offers to donate $50,000 to proposed cardiology wing. “Think of this as a lead gift to get the ball rolling with my colleagues,” he says.“ “Additionally, this contribution will help me with added visibility at the hospital, important as my catheter research is finalized and ready for market.”

Ann is a new member of AFP and she is aware of AFP’s ethical standards. Just last

month, she attended a monthly chapter meeting where a member of AFP’s Ethics Committee talked about ethical dilemmas in fundraising. Ann agrees that fundraisers need to maintain an ethical stance in their interactions with donors. She recalls the speaker making the point that ethical dilemmas are not always right versus wrong. Competing “rights” are often the basis of a dilemma. Donor Relations

A suggested beginning for identifying possible ethical challenges is to ask if Ann should have requested that her spouse’s name be removed from her prospect list. Ideally, Ann would identify their personal relationship as a matter of transparency. But, it appears that Ann did not make this request, and it further appears that her spouse offered to make the contribution without Ann asking for a contribution. Should Ann accept her spouse’s offer of a $50,000 gift for the Cardiac Wing of the hospital? Is it appropriate for her spouse to make this contribution, with the understanding that he seeks favorable recognition for the gift? Will Ann’s colleagues be justified if they complain that Ann took advantage of a personal relationship to secure a gift? What if the donor is not Ann’s spouse, but someone she has a close personal relationship with? Does that change the situation?

Suppose that Ann tells her supervisor of her spouse’s intentions, and the supervisor suggests that Ann ask for $100,000 instead. Now Ann would need to go back to her spouse and ask for more money. We can imagine different ways this scenario could play out, but the question of appropriateness lingers. So often, ethical dilemmas are value- centered. What Ann believes is appropriate, what her spouse believes is appropriate may be grounded in their individual personal values. Conflicting Values

Values are not normative; they cannot be aligned in some linear manner to determine which values take precedent over others. Behavior is value-driven and codes of ethics guide behavior, but ethical codes are not benchmarks for rating values. In any ethical dilemma, the resolution of the dilemma is secondary to the process used to gain understanding of the principles and values behind the different facets of the dilemma. There may not be agreement, but every effort should be taken to understand the situation from the other’s perspective. In Ann’s case, there are at least four perspectives about the pledge – Ann as the fundraiser, Ann as a spouse of the donor, the spouse, and Ann’s employer. No laws have been broken, and no harm has come to anyone, but Ann for one is in an awkward situation. Too Close a Relationship?

If professors should not be personally involved with students, and counselors refrain from personal involvement with clients, should fundraisers maintain a professional stance with their donors? A fundraiser’s professional obligation is to create and maintain relationships between the institution and the donor for the benefit of furthering the mission or core work of the institution. Dating a donor would appear to be inappropriate, but what about being married to (or in a domestic relationship) with the donor? Organizations who actively monitor potential conflict of interests with boards, trustees, and senior staff have the advantage of early identification of a possible conflict. Examples of conflicts should be included with the signed statements, and steps for identification and possible recusal should be clearly identified. Your Turn Now it’s your turn to probe Ann’s situation.

1. Imagine you are Ann. What dilemma, if any, do you have with your spouse’s generous pledge to the hospital campaign?

2. Who might disagree or have conflicting interpretation of this gift? How will you better

understand their stance?

3. What possible red flags arise from the spouse’s pledge?

4. What should the hospital’s response be to this gift scenario?

Ethics and the Fundraiser Case Studies

Case 1. “Just Be Collegial” You are the development director at XYZ University, and you are doing research on various constituencies to compile a comparative study. Your department pays a substantial fee for a yearly subscription to a highly rated online research database, which is intended for the development office only. Soon you find out that a graduate student from the university is tapping into the same electronic service without asking for permission. Upon finding this out you call and speak with the graduate student, only to learn that they have been instructed by their advising faculty member to use this electronic service. An effort is made by the development office to block this particular user from accessing the service because the information provided within the database could be potentially damaging to the organization if someone were to distribute it in an unprofessional manner. A few days later, the student uses a different name to log back onto the service. You then call the supervising faculty member to address this issue, and the response you receive is very nonchalant and dismissing in nature, basically suggesting that you should just “be collegial” and not make a big deal out of it. Do you feel any ethical issues have been violated in this case? What is your next step? ----------------------------------------------------------------------------------------------------------------------------------

Case 2. You’re So Great, You’re In the Estate! You have been the development director at XYZ University since 1989. Stella Marx is a loyal and dedicated alumna (class of 1952) who was a very successful entrepreneur and never married. Most of her close relatives are deceased, and she has devoted a large amount of her time and money to the university over the years, including substantial annual fund contributions and more recently a $500,000 endowed scholarship that you worked with her to establish. You have spent years developing a strong, positive donor relationship with Stella and meet with her for lunch once a month to discuss new developments on campus and to see how she is doing. Upon Stella’s death, you find that she left a bequest to the university in the amount of $150,000. You also find out that she included you in her will to receive $25,000 because she felt a strong sense of trust and appreciation toward you and all that you had helped her to accomplish for her alma mater through the years. Do you feel there have been any ethical issues violated in this case study?

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Case 3. To Print or Not To Print? A local printing company has contributed $10,000 annually to your organization for a scholarship fund they established in 2005. There has always been a good relationship between this company and your organization. They have been committed to your mission and always willing to offer additional financial support for the various events that your non-profit group organizes throughout the year. Recently the long-time president of your board of directors utilized the printing company’s services for a private, family event and was very unsatisfied with the customer service and the final product that the company created. Due to your board president’s anger toward this company (for his/her own personal reasons), the board president feels it is best to sever ties with the printing company. How would you handle this situation? What is your next step?