Ethical Issues and Accountability in Fundraising

Recently, I read about an individual being prosecuted by the state's DOJ for stealing a large amount of funds from the NPO they were working for. Unfortunately, this was not the first article like this I have read, not even this year. It made me think that although this topic is not fun, it should be discussed. I have two different takes on this topic. The first is here on how to be a good steward of funds, and the second will follow with ideas for compliance and maintaining ethical standards and compliance in fundraising activities.

So, on the topic of being good stewards….In the realm of fundraising, ethics and accountability are paramount. Non-profit organizations thrive on the trust and generosity of their donors, and maintaining this trust is crucial for long-term sustainability. This blog delves into four core areas where ethical issues and accountability intersect in fundraising: respecting donor privacy and intent for gifts, ensuring fundraising costs are reasonable, being transparent about the use of donations, and honoring donor restrictions and stewarding gifts.

white hands holding golden wrapped box outstreched as if preseting gift

Respect Donor Privacy and Intent for Gifts

Respecting Donor Privacy

One of non-profit organizations' fundamental ethical responsibilities is respecting donor privacy. Donors entrust organizations with their personal information, and it's imperative to safeguard this data diligently. This includes names, contact details, and financial information.

  1. 1. Data Protection Policies: Non-profits should implement robust data protection policies. These policies must comply with relevant data protection laws, such as the General Data Protection Regulation (GDPR) in Europe or the California Consumer Privacy Act (CCPA) in the United States. Ensuring data encryption and secure storage of donor information are critical steps.
  2. 2. Consent for Communication: Organizations should seek explicit consent from donors before contacting them. This consent should cover the types of communication (e.g., emails, phone calls, mail) and the frequency of contact. Providing an easy opt-out mechanism is also essential.
  3. 3. Anonymity Requests: Some donors may prefer to remain anonymous. Non-profits must respect these wishes and have processes to ensure anonymity is maintained in public acknowledgments and records. We have seen an increase in this in the past few years. Even long-time donors are now moving to have their annual gifts be anonymous. Respect these wishes, or you may find they no longer are your supporters.

Respecting Donor Intent for Gifts

Donors often contribute to specific projects or causes within an organization. Respecting these intentions is ethical and crucial for maintaining donor trust.

  1. 1. Clear Communication: When soliciting donations, be clear about how the funds will be used. If a campaign is for building a new community center, ensure that all promotional materials, solicitation letters, and verbal pitches accurately reflect this purpose.
  2. 2. Use of Funds: Allocate the funds precisely as the donor intended. If circumstances change and the original purpose cannot be fulfilled, communicate with the donor to seek their approval to reallocate the funds.

Ensure Fundraising Costs Are Reasonable

Balancing Costs and Benefits

Effective fundraising requires investment, but it's crucial to balance these costs to ensure that the majority of funds raised support the organization's mission.

  1. 1. Cost Analysis: Conduct regular cost analysis to evaluate the efficiency of fundraising activities. Calculate the return on investment (ROI) for various campaigns and events to identify which strategies yield the best results.
  2. 2. Reasonable Compensation: Ensure that salaries and benefits for fundraising staff are reasonable and in line with industry standards. However, respect that those individuals working for the NPO are still working, and they need to be paid a wage equivalent to those in the private sector, specifically those at the lower levels of the organization. Just because the front desk staff is working for a NPO, it does not mean they should be making half of what their peers doing the same job are making.
  3. 3. Operational Transparency: Be transparent about fundraising costs. Include detailed breakdowns of expenses in annual reports and financial statements if asked. Donors should see how their contributions are divided between operational expenses and mission-driven activities.
blurry background of while male in dark suit holding a tablet that is projecting upwards a virtual screen showing charts and graphs…

Be Transparent About the Use of Donations

Open and Honest Communication

Transparency is the cornerstone of donor trust. Non-profits must provide clear, accurate, and timely information about how donations are used.

  1. 1. Regular Updates: Provide regular updates on the impact of donations. This can be done through newsletters, social media, and annual reports. Highlight success stories, project milestones, and future goals. This is where I would like to say we "Celebrate the Success" of your work. Show off how awesome you are. A new project, increased mission reach, and a generator to keep staff safe are all things to laud.
  2. 2. Detailed Reporting: Include detailed financial reports in your communications. These reports should outline income sources, expenditures, and allocations. Consider using visual aids like charts and graphs to make the information more accessible.
  3. 3. Independent Audits: Conduct independent audits and make the results available to the public. Audits objectively assess the organization's financial health and adherence to ethical standards.

Engaging Donors

Engage donors in the process by seeking their feedback and input. This fosters a sense of involvement and reinforces transparency and stewardship. The more involved they feel, the more connected they are and the more invested you have made them on multiple levels—a win-win for all involved.

  1. 1. Donor Surveys: Conduct regular surveys to gather donor opinions and suggestions. Use this feedback to improve transparency practices and address any concerns. This can be formal or just soliciting casual feedback from donors when the chance arrives.
  2. 2. Donor Meetings: Organize periodic meetings or webinars where donors can ask questions and receive direct updates from organizational leaders. This personal touch can significantly enhance trust and accountability.

Honor Donor Restrictions and Steward Gifts

Adhering to Donor Restrictions

Donors may impose specific restrictions on their contributions, such as earmarking funds for a particular project or program. It is the ethical duty of the organization to honor these restrictions.

  1. 1. Documenting Restrictions: Maintain detailed records of donor restrictions. These records should be accessible to all relevant staff members to ensure compliance. GET THE RESTRICTIONS IN WRITING so that it is clear to all, not just an implied idea to people who may or may not be with your organization for the long term.
  2. 2. Regular Monitoring: Regularly monitor the use of restricted funds. This can involve internal audits and reviews to ensure the funds are used appropriately.
  3. 3. Clear Communication: If challenges arise in using the funds as intended, communicate openly with the donor. Seek their input and approval for any necessary adjustments.

Stewarding Gifts

Stewardship goes beyond the initial donation. It's about nurturing long-term relationships with donors and ensuring they feel valued and appreciated.

  1. 1. Personalized Thank-Yous: Send personalized thank-you notes to donors. Highlight how their contributions are making a difference and express genuine gratitude. I cannot express how impactful a personal thank you card, call, or text is. Want proof? When was the last time you received a thank you? Can't remember? Did you even get one?
  2. 2. Impact Reports: Provide detailed impact reports showing their donations' tangible results. Use stories, photos, and videos to illustrate the positive changes their support has facilitated. The more visual and less words you have, the better it will be received.
  3. 3. Ongoing Engagement: Keep donors engaged with the organization through regular updates, event invitations, and opportunities to see their impact firsthand. Building strong, lasting relationships encourages continued support.

the word

Ethical issues and accountability in fundraising are critical for building and maintaining donor trust. Non-profit organizations can uphold the highest ethical standards by respecting donor privacy and intent, ensuring reasonable fundraising costs, being transparent about the use of donations, honoring donor restrictions, and stewarding gifts. These practices strengthen donor relationships and ensure that the organization can continue to fulfill its mission effectively and sustainably. As public trust and generosity stewards, non-profits must always prioritize ethics and accountability in their fundraising efforts.

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