The Other Side of the Coin: The Ethical Responsibilities of Donors
The ethical obligations of resource development professionals is a well examined topic, but what about the ethical responsibilities of donors and funders towards the agencies they support?
Yes, donors have rights and the nonprofit organization is responsible to fulfill its obligations to the donor. At the same time, the donor also has ethical guidelines that should guide the interactions and requests with the funded agency. Despite this, in our efforts to maintain good relations with our donors and funders we do not necessarily refer to their responsibilities towards the organizations they fund.
What are the limits to the donor’s rights for information concerning the use of the contribution? When the funds contributed are supporting programming in an agency it is appropriate to share with the donor the frequency of the program and the number of people who have benefited from it. It is even appropriate to provide demographic information reflecting the ages, sexes, and perhaps the geographical distribution of the people who have received services. It is not ethical, however, for the donor to request any identifying information about the recipients of the service. Members and clients have a right to anonymity and there is no reason for a donor to request any identifiable information about clients or patrons.
If and when a donor requests to meet a recipient of a service the agency can approach people and ask if they are willing to meet with someone from outside the organization who has been a supporter. It must be done in a non-coercive manner and the recipient of service should have every right to say no. At the same time, the donor has to accept the agency’s responsibility to respect and protect the privacy of the people who are benefiting from the agency’s services.
Donors have the right to request the budget of the organization they are funding and they can even request a breakdown of the budget for a specific program they are funding. The information provided should deal with categories such as administration, salaries, transportation, equipment and supplies, etc. It is not ethical for the donor to request the specific salaries of individual employees, whether it is the chief executive officer (CEO) or the program staff.
Generally, salary information is considered confidential and there should be a formal system of checks and balances within the organization to monitor the salaries to ensure they are equitable and not out of proportion with the market rate. For example, a CEO’s salary is commonly negotiated with the president or chairperson of the board and approved by the finance committee and/or the board of directors. The board and its leadership are in place to provide oversight and accountability and if the donor has enough confidence in the organization to consider funding it then there should be trust in the governance of the organization. If the donor or funder does not feel the board of directors acts in a responsible manner then they should reconsider contributing or allocating funds to the agency.
There are ethical limits to how a donor should stipulate the use of contributed funds to the organization. When a donor contributes to a nonprofit there can be limitations placed on the use of the funds. Donations can be designated for general support, for program budgets and even for a specific program in the organization. However, it is not appropriate for a donor to request a breakdown as to how their funds were used in specific line items in a budget unless this was negotiated in advance. For example, a donation can be designated for the purchase of equipment, such as printing costs, rental fees, etc. Ethically, the designation should be made prior to the donation, which means any requests for budgetary breakdowns after this point are not appropriate.
Perhaps the most difficult ethical issue to discuss is the one involving donors who pledge contributions before knowing whether they have the funds available. People are often moved emotionally by touching stories or by the description of unmet needs. Whether we are discussing immigrants, children-at-risk, Israeli victims of terror or many other pressing needs involving vulnerable populations, there are occasions when a donor’s heart is in the right place and they want to help provide the needed services. When that happens, the pledge is made, the donation is announced, and the services are put into place, however, the funds are not forthcoming. Even though there is every intention to transfer the funds, because the donor has overestimated the amount of available resources and cannot fulfill the pledge, the nonprofit is left in a very difficult position. Do they cancel the plan to either build a building or create the programs that were to be implemented with the funds promised?
The ethical obligations of the donors and funders are just as salient as those of the nonprofit and its professionals. We must discuss ethical obligations with all appropriate parties – from the fundraiser to the donor – before forming a partnership. Through ethical behavior we not only strengthen the nonprofits we work with, but we let the community know that the voluntary organizations and their leadership strive to represent the highest standard of values.
Stephen G. Donshik, D.S.W., is a lecturer at Hebrew University’s International Nonprofit Management and Leadership Program and has a consulting firm focused on strengthening non-profit organizations and their leadership for tomorrow. Stephen is a regular contributor to eJewish Philanthropy.
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Stephen, how do you suggest nonprofits respond when a major funder demands the kind of information you say should not be disclosed — as many do?
Along the same lines as the first response, indeed many foundations require a document specifying the top five salaries.
Actually, most nonprofits in the US are required by law to disclose their top salaries in a public filing to the tax authorities — the IRS Form 990. But many funders (including the Jewish Agency) want to know the salaries of specific individuals working on the projects they fund, and these are often far from the top salaries. So the question remains.
Ron,
I think there is a difference when the salaries are questioned by a donors to prove that nonprofit CEO’s are overpaid. If a donor wants to look at the IRS From 990 that is most appropriate, however, there is nothing wrong with professionals having some privacy. It is important for agencies to be complete transparent and at the same time they should acknowledge the employees’ right not to have everything publicized in the community. There is agreement in some ways because it is only the 5 top salaries that are listed on the Form 990.
In terms of your question about other salaries, it can be handled by first asking the donor what is there reason for asking. Once the board chair or CEO hears the question they can respond in an appropriate manner by providing the salary scale that is used by the organization or by the community. It can be stated by saying the people in this position are within the range of X to Y.
The discussion also provides an opportunity to speak with the donor about the way the organization determines its salary scale and how it has been developed by the finance committee and the personnel committee, if this is the case. There are ways of responding to donors’ questions that provide the information without violating the privacy of the individual employee.
Thank you for the opportunity to clarify the issue.