Domain 6: Ethics, Accountability, and Professionalism

Question 1

Fundraising is a values exchange that exists within the complex set of stakeholders and relationships that comprise the philanthropic sector. Within this context, there are three essential “value commitments” that the fundraising professional must consider, work with, and balance:

Answer 1

1. Organizational mission.
2. Relationships with stakeholders.
3. The fundraising professional’s own sense of professional and personal integrity

Question 2

More and more, potential donors and other interested in the organization are seeking info from various “watchdog” organizations, so part of accountability is ensuring that:

Answer 2

organizations such as GuideStar and Charity Navigator have accurate info.

Question 3

Another way constituents can find out about the organization is requesting a copy of IRS Form 990 (T3010A in Canada);

Answer 3

making it easily available is one more step towards being properly accountable.

Question 4

It is the responsibility of the development professional to ensure that every gift is properly “stewarded”:

Answer 4

o Manage and protect funds.
o Record and track contributions to ensure they’re used exactly as the donor intended.
o Respond to and thank donors.
o Recognize donors and report results to them.
o Protect donors’ privacy.
o Protect donors’ rights.

Question 5

Hank Rosso defines stewardship as the responsible management of entrusted resources for the public good, emphasizing responsibility, accountability, and trust.

Answer 5

Stewardship goes beyond administrative tasks, involving a commitment to mission fulfillment, leadership for the public interest, effective management, and maintaining quality.

Question 6

Rosso’s vision sees stewardship as the heart of philanthropy,

Answer 6

promoting a better world through responsible resource utilization.

Question 7

• As part of the application process, all CFRE candidates must attest that they are knowledgeable about and abide by the laws regulating fundraising in their geographical area(s) of practice. Generally, these laws deal with issues regarding:

Answer 7

o Charity and charitable solicitation registration.
o Means of conducting charitable solicitations.
o Truthfulness and transparency in charitable solicitations.
o Reporting and accounting standards.
o Taxation.

Question 8

Prospects and Donors:

Answer 8

• Have confidence their own needs/wants are being met.
• What their contributions will be sued for.
• Who is managing the organization and its funds: board and staff expertise.
• Appropriate confidentiality is maintained.
• Interim reports to learn how things are going.
• The outcomes their contributions helped to support.
• Appropriate recognition.

Question 9

Volunteers and Board Leaders:

Answer 9

• In addition to their concerns as donors, want additional comfort in knowing the time they give to the organization is used effectively and efficiently.
• Their efforts are being contributed to a worthy cause or effort.
• Staff is sufficiently knowledgeable to provide the planning and management skills needed.

Question 10

“Watchdog” Organizations:

Answer 10

• How funds are being spent.
• The success rate of programs.
• The percentage of donations spent for administrative costs vs. for programs.

Question 11

Fundraising executives/leaders/managers have a responsibility to be informed and to think carefully and critically about:

Answer 11

the ethical standards and ethical issues that are essential to the health of the nonprofit sector and philanthropy.

Question 12

As professional fundraisers, we have a legal and ethical responsibility to make certain that we, and all others associated with our organizations, do not benefit personally from the funds that are contributed to the organization –

Answer 12

The “nondistribution clause” (This does not mean we should not be paid fairly and equitably for our work).

Question 13

These commitments are proposed as essential to those who are associated with the nonprofit and philanthropic sectors:

Answer 13

1. Commitment beyond self is at the core of a civil society.
2. Obedience to the laws, including those governing tax-exempt philanthropic and voluntary organizations, is a fundamental responsibility of stewardship.
3. Commitment beyond the law, to obedience to the unenforceable, is the higher obligation of leaders of philanthropic and voluntary organizations.
4. Commitment to the public good requires those who presume to serve the public good to assume a public trust.
5. Respect for the worth and dignity of individuals is a special leadership responsibility of philanthropic and voluntary organizations.
6. Tolerance, diversity, and social justice reflect the independent sector’s rich heritage and the essential protections afforded it.
7. Accountability to the public is a fundamental responsibility of public benefit organizations.
8. Openness and honesty in reporting, fund raising, and relationships with all constituencies are essential behaviors for organizations that seek and use public or private funds and purport to serve public purposes.
9. Responsible stewardship of resources is a concomitant of public trust.

Question 14

Approaches to Ethics:

Answer 14

• Clear-cut choices exist in some scenarios, but conflicts between goods create challenges.
• Tainted-money situations, like accepting money obtained questionably, raise complex ethical questions.
• Fundraisers must consider what benefits the greatest number of constituents in the long run.
• Ethical conflicts can be resolved through sets of values, beliefs, and commitments.
• Ethics is rooted in a set of values and beliefs, fostering trust in decision-making.

Question 15

Three steps for considering ethical conflicts:

Answer 15

1. All decisions must take into account and reflect a concern for the interests and well-being of all shareholders.
2. Ethical values and principles always take precedence over nonethical ones.
3. It is ethically proper to violate an ethical principle only when it is clearly necessary to advance another true ethical principle, which according to the decision maker’s conscience, will produce the greatest balance of good in the long run.

Question 16

Three documents were developed by and are generally accepted by the profession as guidelines for ethical behaviour:

Answer 16

o Donor Bill of Rights
o AFP Code of Ethical Standards
o International Statement of Ethical Principles in Fundraising
As they are now generally accepted by the profession, organizations engaged in fundraising should adopt them as policy documents.

Question 17

The Donor Bill of Rights - Representing the leading fundraising associations, this document outlines what donors have a right to expect from the charitable organization to which they contribute:

Answer 17

o To be informed of the organization’s mission, of the way the organization intends to use donated resources, and of its capacity to use donations effectively for their intended purposes.
o To be informed of the identity of those serving on the organization’s governing board, and to expect the board to exercise prudent judgement in its stewardship responsibilities.
o To have access to the organization’s most recent financial statements.
o To be assured their gifts will be used for the purposes for which they were given.
o To receive appropriate acknowledgement and recognition.
o To be assured that the information about their donations is handled with respect and with confidentiality to the extent provided by law.
o To expect that all relationships with individuals representing organizations of interest to the donor will be professional in nature.
o To be informed whether those seeking donations are volunteers, employees of the organization, or hired solicitors.
o To have the opportunity for their names to be deleted from mailing lists that an organization may intend to share.
o To feel free to ask questions when making a donation and to receive prompt, truthful and forthright answers.

Question 18

AFP Code of Ethical Standards - This code was adopted in 1991; it is regularly reviewed and updated. In joining AFP, members agree to abide by this document to ensure the continuing integrity of the profession as a whole.

Answer 18

o The code suggests that a fundraiser must:
 Seek to inspire others through their own sense of dedication and purpose.
 Commit to the improvement of their professional knowledge and skills, to serve others better.
 Practise integrity, honesty, and full disclosure – the benchmarks of the development professional’s ethical responsibility.
o Specific areas covered:
 Public trust, transparency & conflicts of interest.
 Solicitation & stewardship of philanthropic funds.
 Treatment of confidential & proprietary information.
 Compensation, bonuses & finder’s fees

Question 19

The International Statement of Ethical Principles in Fundraising states fundraising professionals will define their ethical approach by** acting with honesty, respect, integrity, transparency, and responsibility toward their stakeholders.** The International Statement identifies these areas of concern that are at the heart of standards of practice for fundraising excellence:

Answer 19

o Responsibility to fully comply with relevant legislations and regulatory standards.
o Responsibility to supporters.
o Responsibility to their (fundraising professionals’) cause and beneficiaries.
o Management reporting, finance, and fundraising costs.
o Pay and compensation.

Question 20

Transparency is the beginning of ethical behavior.

Answer 20

Transparency means that organizations open their private organizational processes to public view because they serve the public good, and hence they must accept responsibility for the public trust. Transparency will create larger public involvement, better public understanding, and enhanced public trust.

Question 21

The events that catch our attention today are similar to those outlined in the first edition of Achieving Excellence in Fundraising:

Answer 21

o Fundraising can be accomplished less and less on a “business as usual” basis.
o The challenge to many fundraising habits comes from changes in nonprofit organizations themselves, from changes in the public’s assumptions about nonprofits, and from technological shifts in how fundraising is done.
o Being responsive to changing circumstances and conditions leads nonprofit leaders and managers to consider moral issues that pertain to their organizations.

Question 22

Fundraising organizations are accountable to donors. Stakeholders, and regulatory agencies. For each donor, the following info must be kept as part of that accountability:

Answer 22

o How to contact the donor.
o Donor’s history of participation – level of support, giving patterns, campaign response(s).
o Proper accounting of each contribution for reporting: internal, regulatory agencies, donor.
o Security and confidentiality issues – access to files is limited: discussions about donors occur only internally.
o Ethical considerations about what data to keep – e.g., should “invasive” info, such as marital status, etc., be maintained?

Question 23

Canadian and US Information Resources:

Answer 23

• Canada = Canada Revenue Agency’s website
• US = US Internal Revenue Service (IRS) website.
• Both sures include info on tax issues, filing requirements, etc.

Question 24

While the development plan is being created, build into every aspect of it methods for capturing info about performance.

Answer 24

Specific, measurable goals, objectives, action plans, and timetable will aid the process of determining progress.

Question 25

There are seven important areas from which info can be obtained to evaluate the development program:

Answer 25

o Job descriptions
o Annual performance expectations for all staff and volunteers
o Action plan and timetable – written to provide action steps and dollar goals for each element of the development program (annual giving, grants, endowment, etc.).
o Departmental budgets
o Prospect records and systems
o Results reports (gift and pledge reports)

Question 26

Gift and pledge reports are the source of an incredible amount of information about the organization’s development plan. They reflect all performance activity within each solicitation method used in the development program.

Answer 26

It’s very important to maintain these reports faithfully and accurately. They provide a record, or history, of each solicitation method and its results – allowing the methods to be monitored, compared to prior years, and measured against strategic goals and objectives.

Question 27

Some objectives for ensuring gift and pledge reports cover so much information:

Answer 27

o Show accurate funding results.
o Provide greater understanding of the methods of fundraising performance.
o Permit analysis of performance activity within each solicitation method.
o Compare prior performance with current performance.
o Compare current solicitation-method performance with the organization’s strategic and development plan goals and objectives.
o Prepare for and justify budget requests.
o Establish relationship between the dollars spent by program, and individual results within each program.
o Permit analysis of donor performance.

Question 28

There are three primary areas for reporting (gift & pledge reports):

Answer 28

o Sources of gifts and pledges.
o Purpose of /uses for the money.
o Results of each fundraising program.

Question 29

Gift & Pledge reports provide:

Answer 29

o Percentages of participation – clues to indicate is prospects like what is being sent to them, or early indications of a change in interests.
o Renewal rates and average gift sizes – indicators of donors’ enthusiasm for the appeal method.
o Volunteers’ personal solicitation performance – percentage of assigned prospect visits completed, and the number and size of gifts received.
o Donors’ response to recognition – their attendance at recognition events and responses to invitations to give higher amounts.
o Special and benefit event ticket sales – how well tickets sold, the measure of public interest in the event, clues that the event design/flavour should change or whether the event is still needed.

Question 30

The Board’s Legal Responsibilities:

Answer 30

• Accountability is the job of everyone in the organization, and particularly those who serve on the board of directors. As the legal corporate entity of the organization, the board has responsibility for ensuring the organization’s accountability to its stakeholders.
• Being legally responsible for the organization’s accountability in part means ensuring fiscal integrity and financial health. It also means the board is legally and morally accountable to stakeholders, including the public-at-large, for the actions of the organization.

Question 31

Setting Policies and Overseeing Operations (Board):

Answer 31

• The board sets policies that are then implemented by staff, led by the CEO.
• They must set policies that are in line with reporting and accountability issues. This includes investment policies and guidelines as well as management/operational policies.
• Another aspect of the board’s role in accountability is operational oversight. They must ensure that management, marketing, promotion of programs and activities, etc., are carried out according to policies, appropriate laws and regulations, and to the organization’s mission.

Question 32

Setting Policies and Overseeing Operations (Board) - oversight includes:

Answer 32

o Oversight of the CEO.
o Use of legal counsel for situations that arise on a continuing basis.
o Use of consultants and experts as required to supplement or support the work of staff in order to achieve the organization’s mission.
o Awareness of potential conflicts of interest and ethical issues involving the organization’s activities.
o Ensuring that appropriate and adequate safeguards are in place to maintain confidential information.

Question 33

One of the most critical aspects of accountability, to ensure public confidence as well as remain legal, is:

Answer 33

the need to comply with both state/provincial and national legal requirements and accounting standards.

Question 34

What Legal Requirements Govern:

Answer 34

• How contributions are recorded and acknowledged.
• The value of contributions and the return to donors.
• Accepting gifts across boarders.
• Internet solicitation.

Question 35

In the US, the following organizations set laws and regulations that organizations must comply with:
o Financial Accounting Standards Board (FASB)
o American Institute of Certified Public Accountants (AICPA)
o Internal Revenue Service (IRS)
o Use of legal counsel for situations that arise on a continuing basis.

Answer 35

Regulatory bodies in Canada:
o Chartered Professional Accountants of Canada (CPA Canada)
o Canadian Revenue Agency (CRA)
o Charities Directorate of CRA

Question 36

United States:
o If your non-profit solicits donations from more than one US state, you may be required to register with the state attorney general’s office. There are vendors who provide multi-state registration services.

Answer 36

Canada:
o In Canada, an organization may incorporate federally or provincially. An organization that is incorporated federally may also be required to register provincially, depending on the nature of its activities in each province. Either way, an organization will still need to gain charitable status through the CRA.

Question 37

Maintaining awareness of the legal and regulatory environment for philanthropy helps to ensure the organization stays in compliance.

Answer 37

Doing so also allows the organization to operate in a manner that builds and sustains confidence in its stakeholders and public at large.

Question 38

Stewardship Includes:

Answer 38

Managing and protecting funds
Recording and tracking gifts to ensure the correct use
Responding to and thanking donors
Recognizing donors and reporting results to them
Protecting donors’ privacy and rights

Question 39

What prospects & donors want to know about your organization & their gifts:

Answer 39

Confidence their own needs/wants are being met
How their contributions will be used
Who is managing the organization
Confidentially is maintained
Interim reports on how things are going
outcomes their contributions supported
that they’ll receive appropriate recognition

Question 40

What volunteers want to know about your org:

Answer 40

Their time is used effectively and efficiently
Their efforts are contributing to a worthy cause
Staff is sufficiently knowledgeable

Question 41

What watchdog organizations want to know about your org

Answer 41

How funds are being spent
The success rate of programs
What percentage of donations is spent for admin costs

Question 42

What should be included in Investment Policies

Answer 42

Parameters for rate of return
Who makes investment decisions
Where and how funds are to be invested
How gifts of stock are handled
What types of gifts and gift restrictions will or will not be accepted

Question 43

What legal requirements govern

Answer 43

How contributions are recorded & acknowledged and the return to donors
Accepting gifts across borders
Internet solicitation

Question 44

Stewardship

Answer 44

• Stewardship is a process that begins even before accepting an initial gift. It starts with the establishment (by the board) of policies that define how an organization will accept, process, and invest gifts.
• Stewardship is an ongoing process of saying thank you, expressing appreciation, giving attention. providing information, and welcoming feedback.

Question 45

Principles of Ethical Fundraising

Answer 45

• Ethics go hand-in-hand with the execution of fiduciary duty and stewardship.
• Fundraising professionals should always act in the best interests of the organization, while recognizing donor intent.
• Organizations should seek to avoid the appearance of impropriety.
• Ethical fundraising includes using discernment to differentiate between a gift made for philanthropic purposes and a gift made for influence and/or access.
• Organizations that raise money must have a gift acceptance policy in place and it should be reviewed by fundraising staff on a regular basis.
• Fundraising professionals have a duty to report to their CEO or board any potential conflicts of interest.

Question 46

Principles of Ethical Fundraising (part 2)

Answer 46

• Ethical fundraising includes a commitment to transparency in regard to stewardship, reporting, and strategic planning.
• Ethical fundraising requires adherence to the tenets of the Donor Bill of Rights (see Section 2).
• Ethical fundraising comes with an implication that the organization or individual fundraising professional will take all reasonable steps to protect donor privacy and information.
• Fundraising professionals will not share donor contact information (selling or renting lists) without disclosure of intent to do so.
• Except as required by law, donors should have the right to determine the limits of the information they provide to an organization and the extent of that information that may be made public.
• Organizations have the responsibility to define how information will be collected, used, shared, and protected.

Question 47

Donor Recognition, Receipting, and Recording Best Practices

Answer 47

• Gift acknowledgements should be made within 48 hours of the gift.
• Additional recognition of the gift should be made in accordance with the organizations’ gift acceptance policy.
• A donor’s wishes to remain anonymous must be upheld.
• The process of donor cultivation should include learning any cultural or religious views on gift. acknowledgement (e.g., some cultures take offense to public acknowledgement of charitable giving).
• Consult local/regional/national regulations on the detail, timeline, and contents of the receipt.
• Centralize the collection of gift information and record keeping.
• Use the receipt process as an opportunity to reinforce the mission and the organization’s gratitude for the gift.
• It is common to send an acknowledgment separate from the receipt. These are typically more personal and don’t necessarily have to come from the centralized office (typically sent from the gift officer involved).

Question 48

Create an acknowledgement process to govern the initial stewardship of a gift. It should include but not be limited to:

Answer 48

o Timing of the thank you.
o Customization.
o Signatories.
o Levels of acknowledgement.
o Memorial procedures
o Delivery methods and responsibilities.
o Recording procedures.
o Internal communications expectations and procedures.

Question 49

Memorials and Honorific Gifts

Answer 49

• Follow the same procedures in place for receipting and recognizing regular gifts.
• In addition, there will be two acknowledgements: one for the donor and one for the family of the honoree.
• Create clear and simple instructions for how a person can make such a gift.
• Establish who in the family of the honoree should receive the notifications.
• Include donor contact info in the report so the family can thank the donor.
• Include in the donor acknowledgement that the family will be notified
• When possible, indicate familiarity with the person honored and the appropriateness of the tribute.
• When possible, work with the family to produce a statement as to why the organization was important to the honoree.

Question 50

Gift Restrictions

Answer 50

• Major and legacy gift donors sometimes insist on restrictions of use for part or all of their donation.
• Accepting these types of gifts must first be made in accordance with the organization’s gift acceptance policy.

Question 51

Examples of Gifts That Should Not Be Accepted or Should Be Returned

Answer 51

• Any gift where the money was obtained by illegal activity.
• Any gift where the donor maintains interest in the use of the funds. (e.g., endowing a chair to a university and then insisting on naming the chair).54
• Any gift that would constitute an assault on the integrity of the organization if it were to be accepted.
• Donations from a vendor with the expectation of future business from the nonprofit organization.
• Any gift that would create a conflict of interest or violate the organization’s gift acceptance policy.

Question 52

A gift acceptance policy should include, but not be limited to, the following:

Answer 52

• A definition of acceptable gifts.
• An explanation of the circumstances by which the organization will accept or reject a gift.
• Expectations for staff regarding stewardship, donor intent, and donor privacy.
• Donor recognition guidelines.
• Any local/regional/national legal requirements.
• Instructions/ procedures for a change of circumstances and how those will be communicated to the donor.

Question 53

The following ethical principles have been adopted by AFP International as well as other international fundraising organizations:

Answer 53

• Honesty: Protect the public trust by acting truthfully at all times.
• Respect: Conduct all fundraising activities with respect to the dignity of the profession and the donors.
• Integrity: Avoid the appearance of impropriety and avoid conflicts of interest.
• Empathy; Promote a culture of giving, ethical standards, individual privacy, and freedom of choice.
• Transparency: Provide clear information about fundraising activities and results.

Question 54

Transparency Best Practices

Answer 54

• Transparency can be defined as sharing accurate and true information about your organization, its partnerships and affiliations, your mission, and goals.
• Post required disclosures (tax form and other reports) as dictated by your local/regional/or national government.
• Share an annual report that conveys sound fiscal policy and execution, income, and expense proportionality. and that resources are resulting in community impact.
• Create a culture of transparency among staff, volunteers, and leadership.
• Utilize the organization’s website as a tool for displaying transparency. Make it easy for people to answer the questions: What do you do? And what do you do with my gift?

Question 55

The Benefits of Transparency

Answer 55

• Engagement: Donors stay engaged longer and make a deeper commitment to organizations that prioritize transparency.
• Donations: Organizations viewed as highly transparent receive 53 percent more in revenue than those perceived as not transparent.
• Donor Relationships: Donor retention is higher with organizations that are perceived to be transparent.
• Engagement: Donors stay engaged longer and make a deeper commitment to organizations that prioritize transparency.
• Donations: Organizations viewed as highly transparent receive 53 percent more in revenue than those perceived as not transparent.
• Donor Relationships: Donor retention is higher with organizations that are perceived to be transparent.

Question 56

Should a gift be accepted from a corporation whose CEO is under indictment?

Answer 56

If the property is not connected to the indictment and it does not violate the organization’s gift acceptance policy, it is okay to accept the property.

Question 57

When visiting a senior donor in a nursing home, should a family member be present?

Answer 57

If a gift is being discussed or agreed upon, then a family witness or power of attorney must be present.