The Ethics of Fundraising: What are the Nonprofit’s Obligations?

Last week’s posting about the protocol for soliciting past and present clients elicited numerous responses – both on and off-line. In several coming postings, I will be addressing the issues of ethics and fundraising as they pertain to nonprofit organizations, fundraisers, and donors. More questions may be raised by opening this discussion and I welcome an exchange of ideas.

If we begin the discussion from the perspective of the nonprofit organization there are a number of ethical obligations that warrant serious consideration. When beginning a fundraising campaign, whether it be for a capital (physical) project or for new or ongoing programs, the nonprofit needs to ensure the funds will be utilized for the purposes they are solicited. Unfortunately, all too often we hear of organizations that have raised funds for one program yet used the funds for another purpose.

When the organization embarks upon a campaign to solicit funds it should adhere to the guidelines that it set for itself. The projects and programs are usually detailed in written material that is prepared in advance or submitted in response to a request for proposals. In either case, it is the nonprofit’s obligation to communicate with individual funders or foundations if the plans are changed. At the same time, the organization should be acting in good faith when it raises funds for programs and has confirmed the need for the services it intends to provide to the community.

Several years ago there was an Israeli nonprofit organization providing food to needy families and decided it would be appropriate to also offer vocational training for unemployed people. It decided to develop a course to train beauticians and solicited donors based on the government support of such programs. However, by the time the organization was raising funds from private donors to fund the training program, the government had decided that there were too many beauticians and there was no need to train additional people. It was unethical for the organization to misrepresent the need and to continue raising funds for a program that was cancelled by the government.

Donor recognition is another issue that presents a number of ethical issues to nonprofit organizations. An institution of higher Jewish education has been very successful in both engaging donors and soliciting wealthy people to participate in their building campaigns. Every few years they expand their physical facilities, which gives them many opportunities to recognize donor support.

Not too long ago I was on a site visit to this institution and I walked into a study hall and noticed a sign acknowledging the generous support they received from a number of donors who were memorializing the patriarch of the family. On the way out of the study hall I noticed a second sign in the same room thanking another family for their support of the yeshiva’s library. In response to my question about the signs, I was told that the first donors gave the funds for the building of the room and the second sign referred to the fact that the room was also used as a library and there were bookshelves lining the room.

I do not think it is splitting hairs to point out the fine line that was being drawn by the institution’s FRD professional, and I doubt the generous donors would have been satisfied by the answer that was provided to my question. Of course, I wondered to myself whether both signs remained on the walls when the respective donors were visiting the school. Such practices have a negative impact not only on the organization in question, but also in regards to prospective contributors who will soon learn to beware of the school’s fundraising ethics.

Another example is the large nonprofit organization Israel that provides services throughout the country, which received a very respectable contribution to name one of the buildings on the campus of its national headquarters. In appreciation of the donation there was an agreement to earmark one wall in the main entrance to recognize the support of the building. Several years later the organization submitted a request to place a door in the middle of the wall so that people could have easy access to the organization’s gift shop.

It was only by chance that the nonprofit asked permission to build the door in the wall. A representative of the foundation that provided the funding happened to be in the building at the time the renovations were being planned. It is quite possible that the change might have been carried out had the foundation not had an onsite presence at this particular time. Of course, the foundation’s representative responded and said that once the funds were returned, the organization could build the door.

The ethical obligations and responsibilities of the nonprofit organization’s fundraising activities have to be first and foremost on the agenda before a single contribution is solicited. Once the contribution is received the agency has to maintain its commitment to the agreement with the funder. When the organization maintains its ethical standards it will reinforce the initial trust the donor placed in the agency’s ability to utilize the funds as agreed. It will also encourage the donor to encourage others to participate in the organization’s efforts to raise funds for its annual or capital campaigns. In addition, the nonprofit becomes an example for other agencies in the voluntary sector and it enhances the standards that are essential for all those involved in philanthropic ventures.

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.