As the saying goes, ‘tis the season – and now is the season for giving. 20-25% of all charitable giving, “year-end” happens in December, with 10% alone on the last two days of the year! We are creatures of habit, and getting those last minute tax deductions drives this lopsided curve.
Many of you know that I write about the efficiency and effectiveness of nonprofits, something I have been researching and reporting on for nearly three decades. Today, however, I will touch on another, but related, subject: ethics and morals in fundraising.
I strongly believe that nonprofits should be held to a different, and often higher standard than businesses. The main reason is that nonprofits operate on outside funding, both public (governmental) and private (foundations and individuals). Therefore, they should feel a huge responsibility to be as careful with OPM (other people’s money) as possible. I often talk about this point regarding salaries – business salaries should be based on profitability, but nonprofit salaries should be reasonable, regardless of success.
Another area is the differences between nonprofit and business deals regarding operational ethics. Here, I will pose many questions, and while some of the answers are quite clear regarding crossing the ethical line, others are not. Many others, in fact, are in that infamous gray area, and it is something that you, as a donor, should be aware of, to enable you to make your decisions accordingly.
If a nonprofit runs a fundraising dinner, or event that loses money every time, is that an issue? What about entertaining journalists at a cost (like taking them on a helicopter ride, or paying for flights from overseas, etc.)? I have often been offered a chauffeur driven limo’ to pick me up when visiting a nonprofit, which sees me as a potential donor – is that acceptable?
There is a very common custom of sending gifts to potential donors, including return address labels, calendars or even more costly gifts. Is this better, worse, or the same as sending gifts to actual donors themselves? And what level of gift is considered appropriate?
What if some, or all of the costs of the above, are covered by a donor, so that the nonprofit doesn’t have to use any of its own money? Could one argue that the paying donor should instead have used their donation to feed more hungry people or buy more heaters for winter for those in need? And conversely, what if the fundraising event lost money, but introduced more people to the nonprofit who later, donated? Does that justify running a deficit event?
I don’t have a simple yes or no to these questions, since each one needs to be looked at carefully, but it should immediately raise a red flag, suggesting that there is something which requires more information before deciding to donate.
AND OF course, there is the big question about the ethics and morals of the fundraiser. May a fundraiser work on commission, i.e. take a percentage of how much they raise and keep it as compensation? Would it matter if it were minimal (say, 3%) or huge, perhaps 40%? What I do know is that there is not a single professional fundraisers association in the world that allows for that, and it is even illegal in some places.
What do you think happens to your donation when you get a phone call asking for a contribution? Is the caller working at a call center which can take 25%-70% of all funds raised?
Many nonprofits feel this it doesn’t matter since they still receive some funds after all the expenses are paid. I feel strongly that the ethics of where my donation goes is important – if 50% goes to a company or the fundraiser and does not provide after-school tutoring as promised, for example, then I believe that this is simply theft.
One more area you should be aware of: those tzedaka boxes by the cash register at almost every store. The vast majority are collected by a driver who is allowed to keep 49% of all the coins, and gives the organization 51%. Is that the best use of your precious tzedaka shekels?
In sum, there are often no easy answers. I think it would be easier if all non-profits were more transparent about the issues mentioned above. If they said that the slick advertising video they made was donated by the video company, or that all expenses for the dinner were paid for separately, and so on, then at least a donor would have more information upon which to decide.
Transparency and honesty are among the most important values when deciding where to donate. Don’t be afraid to ask the tough questions of the nonprofit – every good one (although sadly, there aren’t that many of them) will be happy to answer, and willing to share their financial due diligence.
The writer has been engaged in tzedaka (charity) work in Israel for nearly 30 years and is a recognized expert in micro-philanthropy.