Support legal, ethical and principled fundraising
As fundraising appeals increase and opportunities for giving grow — especially online — it's an unfortunate fact of nonprofit life that fundraising scams are also increasing. In response to growing instances of fraud, potential donors are also becoming more savvy and alert to fundraising irregularities, scams or unethical practices.
As a nonprofit, it's on you to make sure your fundraising staff isn't misleading or pressuring potential donors or offering rewards that undermine the principles of charitable giving. In addition, you must take steps to avoid even the appearance of fraud. Here are five ways to keep your fundraising practices on the up and up.
1. Know the law
Fundraising appeals are protected by the First Amendment, since asking for donations is free speech. To enable donors to make tax-deductible donations, however, your organization must be appropriately registered with the state in which you operate. Check the Unified Registration Statement for state-specific details.
Also, while you can ask for donations, you can't promise a reward in exchange for a donation. A donation isn't a transaction. Offering a donor some benefit in return for a gift could put your organization's tax-exempt status at risk.
2. Exercise care when employing professional fundraisers
If you're planning a phone-based fundraising campaign with the help of a professional fundraising firm, make sure the fundraisers you hire use tactics that are in sync with your organization's values and principles. They shouldn't pressure or manipulate potential donors, or suggest that donors will receive rewards for giving.
Also keep in mind that professional fundraisers are required by law to disclose that they're professionals. If they don't make this disclosure, they might appear to be misrepresenting themselves and their association with your nonprofit. In some cases, that misrepresentation could be grounds for a fraud investigation or even legal action.
3. Observe industry-endorsed ethical standards
Consider the Code of Ethical Standards from the Association of Fundraising Professionals (AFP). Whether you're employing an outside contractor or using your own employees or volunteers to staff a fundraising campaign, the code:
- Forbids paying fundraisers a commission or percentage of money raised
- Prohibits misrepresenting anything about the organization or the fundraiser's relationship to the organization (for example, misstating the percentage of a donation that will be used to support additional fundraising efforts)
- Requires that the fundraiser makes sure that any donation is used according to the donor's wishes
In addition, the AFP recommends offering continuing ethics training for fundraisers.
4. Value clarity and transparency
Transparency (financial and otherwise) is a critical element of any nonprofit's fiscal policy. So, make sure your public disclosures are just that: public. Make it easy for donors to see how their dollars are being used — and how their donations impact the work you're doing. Provide detailed, clear, easy-to-understand explanations of how financial gifts translate to impact.
5. Fight fraud from the top
To demonstrate that your organization takes fundraising ethics seriously, make it an executive responsibility. Enforce ethical practices and establish a zero-tolerance policy for fraud throughout the organization. The leader responsible for fundraising should hold regular ethics training sessions, monitor fundraising practices and quickly address any cases of potential fraud. Serious ethical concerns with a staff member or contractor should be grounds for immediate discipline or even dismissal.
Also consider participating in the BBB Wise Giving Alliance accreditation program. Like your financial disclosures, this accreditation is a simple way to show donors that you're serious about ethical fundraising practices.
This article draws on the expertise of Grace Davies, a Minneapolis-based attorney with special interest in product liability, medical malpractice and employment discrimination.
GuideStar: Fundraising: What laws apply? (2003)
Federal Trade Commission: Charity scams
Lawyers.com: Fundraising fraud
Association of Fundraising Professionals: Code of ethical standards (2014)