Ethical Considerations in Fundraising

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Ethical Considerations in Fundraising
By Craig Bowman

Nonprofit organizations are built to serve people and communities. Individual organizational missions, your program’s structure, the populations you serve may all vary, but in the end, the goal is always to help people and communities.

To facilitate this work and sustain your program, you have to raise money. I am of the opinion that the “best” money is money that comes from individuals because those investors likely share your organization’s passion and purpose. This money generally comes with fewer strings and it is more sustainable than government, corporate, or even foundation support.

But I am also an executive director and I understand the need to create and maintain diverse funding streams in order to realize our mission and vision and leverage important relationships. The challenge comes in doing this work in a way that is consistent with our organizational values.

In deciding whether to pursue or accept corporate contributions or enter into a new partnership agreement, an organization must ground itself in who it is and who it is ultimately accountable to—those who your program serves and benefits. These are the stakeholders you must be most concerned about in terms of the impact of your decisions.

Accordingly, you should strive to develop fundraising practices that reflect your values and strategic goals and do not work at cross-purposes with your mission and vision. Usually, these issues arise most often when discussing potential corporate contributions, especially funding from companies that offer products and services that are generally seen as problematic in communities—alcohol, tobacco, guns—but also companies that are perceived to target or exploit people or have questionable corporate practices. These companies can be more difficult to identify, but you’ll certainly recognize them when community controversy explodes.

As these are very difficult issues for all nonprofit organizations, I recommend creating a set of guidelines that can be used in evaluating any kind of corporate or private contribution as well as other kinds of partnerships. If you have a policy that you use consistently, it will help to minimize any negative reactions you may receive once the decision is made and announced (or discovered).

I recommend that your Board of Directors, which is ultimately responsible for policy decisions, create a set of criteria that will guide your decision-making, as well as a set of tools (tests) to help guide the Executive Director and the staff responsible for implementing the policy. It is forward thinking on their part, if they consult key stakeholders (including staff), both as these criteria are being developed and before their adoption as policy.

Every nonprofit program develops in a unique way. We have a specific purpose or mission, our own way of framing the future and our vision for it, and each of our organizations has a set of values (whether we articulate them or not) that guide our day-to-day decisions and our long-term planning.

The issues your program views as critical and in need of addressing are specific to you. As a result, your corporate contributions (or partnership) policy will need to be specific to you as well. In the next section, I am going to give you some information about my former organization as an example of how you get from mission, vision, and values to a clearly articulated framework for making difficult fundraising decisions. Remember, however, this was our policy, it reflected our work and our values. Your policy will likely look different and that will require effort and tough conversations on your part. Use this as an opportunity to engage your Board of Directors and strengthen your program’s infrastructure. This is at the heart of what it means to build sustainable programs.

Case Study: The National 4-H Council and Philip Morris USA

As your organization begins to grapple with creating policy related to your fundraising efforts, you will undoubtedly face the dilemma of whether or not to create blanket prohibitions against things like alcohol and tobacco funding. This is not an easy decision and despite the well-crafted arguments that can be made on either side, the ultimate decision needs to be grounded in your organization’s values as it relates to meeting the needs of people.

For example, let’s take a look at some of the key arguments in favor of a blanket prohibition against youth programs taking tobacco company funding. Most of the groups and individuals who advocate against taking money from tobacco companies begin with a history lesson. They remind us that for decades, tobacco companies, according to their own industry documents, specifically targeted young people through their marketing and advertising. They knew even then, advocates argue, that 90 percent of regular smokers begin the habit before their 18th birthday. They recognize that future generations must become addicted in order for them to make money.

Many in youth services feel that it is wrong to use “blood money,” as some call it, even if the programs it supports have health-positive goals. They believe that the ends do not justify the means. They believe that the tobacco companies’ efforts now are too little, too late; and worse, that they are only contributing money to try to polish their severely tarnished images.

One study published in the Journal of Family Practice1 found that the “Helping Youth Say No” program, funded with tobacco company dollars, could actually encourage youth to smoke through its suggestion that tobacco use is an adult activity.

1 DiFranza, J.R. & T. McAfee, The Tobacco Institute: Helping Youth Say “Yes” to Tobacco, Journal of Family Practice, 34(6):694–6 (June 1992).

As you can see, arguments on this side of the question are powerful and persuasive. On the other hand, the National 4-H Council made a decision in 1999 to accept a $4.3 million grant from Philip Morris, one of the nation’s largest tobacco companies, so it could develop a youth tobacco prevention program.

The leadership at 4-H contended that Philip Morris would have no control over the curriculum, program design, its implementation or its evaluation, and that the program would focus on positive youth development and life skills development as an approach to preparing young people to make healthful lifestyle choices.

The guiding voice for the proposed program, they argued, would be a national level group of youth and adult partners representing 4-H/Cooperative Extension, other youth organizations, education, government, health, and the social-profit and business sectors. The National 4-H Council believed that the past was the past and that Philip Morris USA was recognizing its responsibility to prevent underage smoking by making a commitment to fully fund this program for two years.

Again, these are powerful and thought-provoking arguments, but this time on the other side of the debate. Regardless of the decisions you make when considering tobacco funding, or alcohol company dollars, or gun company support, etc., the conversations that will be required to make them will add tremendous value to your program. It will give your organization the chance to discuss and debate key aspects of your organization’s mission, vision, and values; and it will make you stronger.

Finally, it is important for you to remember that according to the American Association of Fundraising Counsel, corporate giving in the United States amounts to only 5 percent of total giving, or about $15 of the $290 billion given in 20102. It is also true that most of this money comes from the corporation’s marketing departments, not their foundations.

These facts are important for three reasons.

First, as you can see from the numbers, the amount of available money is tremendously limited and the competition is fierce. It is not easy to develop corporate partnerships that lead to significant revenue for your organization.

Second, because the funds come largely from marketing departments, they are usually tied to annual marketing plans. This makes it unlikely that corporate dollars will lead to long-term sustainability. The money can be great in a year when fundraising is tough, but for relatively small programs with limited development resources, investing a lot of your time in raising corporate money rarely pays off. These dollars also have many strings.

2 Source: Giving USA 2010, USA Giving Foundation.

Third, because these decisions are not easy and can be polarizing, your leadership should conduct an informal cost-benefit analysis before placing tough decisions in front of the entire organization. In fact, it is likely that your program staff will see these decisions in a very particular way, while your managerial, development, and administrative teams may have a different view. Their roles and responsibilities are quite different and may at times feel at odds. They aren’t, of course, but organizations must do a lot of hard work to bridge the gap than can exist between the people responsible for raising the money and those responsible for spending it. If the decision you ultimately make isn’t a consensus decision, it can have repercussions that can last for a very long time.

I can tell you that the National 4-H Council has spent an unbelievable amount of time defending its decision to accept the funds from Philip Morris; and dozens of their affiliates around the country have had to struggle with whether to implement the program. Even today, almost eight years later, the 4-H decision is still receiving attention.

Having said all this, perhaps it boils down to a couple of simple points: Every decision your program makes should revolve around your key stakeholders; and clearly articulated policies provide consistency, imply (and we hope, represent) careful forethought and offer the best chance you have for making the “right” decision.

Bowman, C. (2008). Ethical Considerations in Fundraising. In M. Garringer (Ed.), Sustainability planning and resource development for youth mentoring programs (pp. 115–120). Washington, DC: Hamilton Fish Institute on School and Community Violence, and Portland, OR: Northwest Regional Educational Laboratory, National Mentoring Center.

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