For the past several weeks, we have been discussing governance and ethical behavior within nonprofit organizations. Thus far, we have discussed legal standards, effective governance and financial oversight. This week, we will be wrap-up the series with a discussion of fundraising.
Every organization has to have some way of raising funds to support its mission. Some organizations rely on funding from foundations or corporations while others seek donations from individual donors, special events or some combination of these strategies.
All board members need to know and understand that when an organization solicits funds and funds are given for a specific purpose, they must be used for that purpose. In solicitation letters and marketing materials the intent of the funds raised should be clearly laid out. In addition, funds received through grants must only be used for the purposes expressed in the grant proposal. A careful review of any grant agreement is necessary to ensure that the organization is willing and able to meet all of the grant terms.
Organizations have the responsibility of providing donors with an acknowledgment of their charitable contribution. This is a requirement of the IRS. This process can be smooth and seamless when clear policies are in place for donor recognition and acknowledgment.
Organizations and their boards should develop Gift Acceptance Policies. This set of policies will help the organization to establish whether or not a contribution will be accepted by the organization. Some considerations include—alignment with organizational values and mission, perception of conflict of interest or negative publicity –all of which may be reasons not to accept a donation. It is much easier to decline a gift when the policy is in place than when someone is prepared to write a check to the organization.
Organizations should not compensate fundraisers or grant writers based on a commission or percentage of the amount raised. When a fundraiser receives compensated based on a percentage of the money raised, can encourage unethical behavior by the fundraiser. Instead, fundraisers should be compensated based on skill, effort and time.
Donor privacy must be a priority for all organizations. Organizations should tell donors how their names will be used and provide an opportunity for donors to give anonymously.
What areas are areas of weakness for your organization? Feel free to contact us, we can help!