Domain 6: Key Terms & Concepts

Question 1

Accountability

Answer 1

“An obligation or willingness to accept responsibility or to account for one’s actions.” In nonprofit terms, accountability is the process of opening oneself and the organization to scrutiny, voluntary external review, and feedback from stakeholders. In 1995, AFP adopted the following definition of accountable organizations:
“The accountable organization clearly states its mission and purpose, articulates the needs of those being served, explains how its programs work, and how much they cost, and what benefits they produce. The accountable organization freely and accurately shares information about its governance, finances, and operations. It is open and inclusive in its procedures, processes, and programs consistent with its mission and purpose.”

Question 2

Annual Report

Answer 2

The most common tool used to exhibit transparency and detail stewardship. Typically produced at the end of the fiscal year for the organization, it is a comprehensive report of all revenue and expenses. Additionally, it shows how the organization used the resources it received in order to advance its mission and explain how successful those efforts were.

Question 3

Audit

Answer 3

An evaluation of fundraising procedures, policies, and results by an organization, usually conducted by a third-party entity.

Question 4

Consultant

Answer 4

A fundraising specialist hired by an organization to recommend solutions to problems, provide advice, and offer guidance.

Question 5

Charitable Deduction

Answer 5

The value of a gift of cash, securities, or property transferred to a legally recognized charitable organization, deductible for income, gift, and estate tax purposes. Typically, this refers to the portion of a gift that is deductible from the donor’s income subject to federal income tax.

Question 6

Conflict of Interests

Answer 6

A situation in which a person in a position of trust is faced with competing professional and personal interests.

Question 7

Donor Intent

Answer 7

A donor’s expectation of how a gift will be used and what outcomes may be expected from the use of the gift are defined as donor intent. Donor intent is the guiding principle for how gifts should be accepted and used.
If donor intent does not align with the mission and policies of the organization, this should be discussed with the donor. If an agreement cannot be reached, the gift should not be accepted.

Question 8

Donor Recognition

Answer 8

The creation and implementation of a system of recording and thanking donors that is accurate and timely. This process is critical to both transparency and donor retention. Donors must be acknowledged and thanked in ways that are meaningful and appropriate to the gift level. Donors are best served when gift acknowledgements express the value of the investment the donor has made and its impact on the mission of the organization.
Some items to consider:
1. Review the legal requirements of your region to determine your org’s obligations for receipts and disclosures.
2. Orgs should have a written policy for recording, recognizing, and acknowledging gifts, and it should be reviewed on a regular basis.
3. Ensure that gifts are recorded accurately in a secure database.
4. **In general, donors should be thanked within 48 hours of making a gift. **
5. Gift acknowledgements can be and often are separate from receipts. These are more personal in nature and stress both the benefit to the org’s mission and the gratitude of the org.
6. Include a contact person in the acknowledgement for the donor to contact should they have any questions about their gift or the org.

Question 9

Donor Records

Answer 9

One element of donor trust is that the organization will be a good steward of donor’s gift and the donor’s information. Implied in that trust is that the organization will not misuse or share the donor’s information without prior consent. The donor should also be able to expect that the organization will take all reasonable measures to ensure the safety of digital information from being compromised via a data breach. Privacy and security policies should be in place and reviewed regularly.

It is also important to know how your state, region, or territory defines a data breach (what information is included/excluded) and what are the reporting requirements in the event one occurs. Should your organization carry data liability insurance or is it required where you operate? Finally, what will be your response to donors and other stakeholders if a breach occurs?

Question 10

Donor information and the permission implied with it is our single greatest asset as development professionals.

As such, it should be treated with great care. Donor records should be kept clean and updated with a high priority on accuracy. Records should include but are not Limited to:

Answer 10

1. Full name and salutation.
2. Address.
3. Email address.
4. Giving history (with dates, amounts, and related donor appeals).
5. Volunteer history (where applicable).
6. Preferred method(s) of communication.
7. Preferred method(s) of giving.
8. Event participation (where applicable).
9. Appeals sent/received (via all forms of communication).
10. Donor relationships (to staff, to the board, to other volunteers/donors).

Question 11

Ethical Fundraising

Answer 11

The sum total of applying transparency, accountability, and the Donor Bill of Rights to all aspects of fundraising. The ethical fundraising professional does not seek personal gain, but rather puts the donor first and the organization second in all fundraising activities.

Question 12

Fiduciary Duty

Answer 12

The legal obligation to act on behalf of another or others with resources that have been entrusted.

Question 13

Gift Acceptance Policy

Answer 13

A best practice that establishes what types of gifts your organization is willing to accept and provides an explanation for donors on what is acceptable. It may also be a requirement, based on your region or country’s laws.

The gift acceptance policy is an effective tool for managing the expectations of your donors. While some gits may be in opposition to the organization’s mission or values, other gifts (commercial real estate, for example) may be beyond the organisation’s ability or resources to accept and maintain. In either case, the gift acceptance policy helps guide the conversation between the perspective donor and development professional.

Question 14

Some considerations for a gift acceptance policy include:

Answer 14

1. Include the advice of legal counsel with language in the policy for donors to seek professional counsel
2. Be clear and specific about types of gifts that will not be accepted.
3. Spell out any specific arrangements such as special acknowledgements and/or naming rights, as well as terms and conditions for removing names from organizations or physical space.
4. Distribute the policy to the development team, executive staff, and board members
5. Share the policy on the organization’s website.
6. Determine who will review the policy and how often the review will occur.

Question 15

Gift Instruments

Answer 15

The legal vehicles that define how and when a gift will be transferred and used (sometimes called a gift agreement). In addition to the gift acceptance policy, there will be times when a gift necessitates a gift agreement. For most gifts to a nonprofit, the implied agreement is that the organization will use the gift in pursuit of its mission or specifically directed to a certain project if that was the intent of the gift.

However. when a large or complex gift requires a trust or agency arrangements, the organization and the donor will enter into a gift agreement that spells out the terms and conditions of the gift. These types of gifts could include securities, real estate, appreciated works of art, or gifts that provide donors with certain tax benefits.

Question 16

Common Elements of Gift Instruments:

Answer 16

• Date of the agreement.
• Legal name(s) of the donor and recipient.
• Detailed description of what is being contributed and the dates on which it will be contributed and the amount (cash) or quantity (personal property assets) or legal description (private or commercial real estate).
• Description of the means of transfer and instruments) of conveyance, where applicable.
• The purpose for which, and time periods during which, the gift may be expended.
• Determination that the donor’s gift or pledge is unconditional and irrevocable, and that the designation of the organization as recipient also is irrevocable.
• Whether the gift is irrevocable, but the donor retains the right to amend the recipient. In such a case, the contribution would be conditional and not recordable by the organization.
• A statement of the donor’s intent in the event that the donor passes before execution of the gift agreement.
• Any other terms, restrictions, or other details agreed-to by the organization and the donor(s)
• A definition of purposes for which the gift may not be used by the organization.
• The signatures of an authorized representative of the donor and organization.

Question 17

Legal Standards

Answer 17

Prevailing local and regional laws and rules that determine how gifts are solicited and used.

It is incumbent upon the fundraising professional to understand the legal implications of fundraising both where you operate and where you raise money as the laws and rules may be different where your organization is headquartered from those regulations in other countries.
Do you raise funds online? Do your disclosures and policies apply to a donor who does not reside in your territory?

Question 18

Mission Statement

Answer 18

The articulation of the purpose of an organization, including who it serves, the implied community need, and how the organization meets that need.

Question 19

Professional Development

Answer 19

Ongoing training and learning for the development professional. The fundraising professional has a duty to pursue continuous education. understanding, and mastery of best practices within the field to stay on top of changes in the law that impact fundraising, and be mindful of new technologies and resources as they emerge.

It is important to grow in understanding of the best practices within the field as well as becoming well-rounded citizens. Fundraising professionals are encouraged to seek opportunities such as professional organization membership, mentorship, research, committee involvement, and sources of continuing education.

Question 20

Professional Mentoring

Answer 20

The practice of advising or training a younger or less experienced colleague.

Organizations (such as Association of Fundraising Professionals, Canadian Association of Gift Planners, Association of Healthcare Philanthropy, etc.) offer you a professional community in which to grow, seek mentors, become a mentor yourself, and to learn. Such organizations also have a code of conduct or ethics that members must adhere to which also promotes ethical best practices.

Question 21

Professional Standards

Answer 21

Accepted best practices and ethical codes of conduct of a sector. In the nonprofit sector, those professional standards are best expressed in the Donor Bill of Rights, International Statement of Ethical Principles in Fundraising, and member organization documents like the Association of Fundraising Professionals Ethical Principles and Standards, the Association of Healthcare Philanthropy Professional Standards and Conduct, etc.

Question 22

Public Trust

Answer 22

Public trust (in a nonprofit context) refers to an organization created for the benefit of the community or to meet societal needs. Nonprofits enjoy a unique status as tax exempt organizations. In return for that status and the benefits implied, the organization is expected to be ethical and transparent in its efforts to address the community need inherent in its stated mission. This is the essence of the concept of public trust and implies that nonprofit organizations and their employees are held to a higher standard of conduct than those operating in a different sector.

Question 23

Stewardship

Answer 23

The process of accepting and managing resources that have been entrusted to the organization through philanthropy. Good stewardship culminates in reporting to donors that funds were used as intended and the results of that use.

Question 24

Tasks that are typically associated with good stewardship include but are not limited to:

Answer 24

• Honoring donor intent.
• Maintaining accurate and secure donor records.
• Reporting on both restricted and unrestricted gifts.
• Keeping donors apprised of endowment results.
• Timely execution of annual reports and all government required reporting.

Question 25

Transparency

Answer 25

The process of allowing the public access to information that sheds light on an organization’s stewardship of gifts, program outcomes, and daily operations.