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("Every nonprofit organization
must have basic governing board philanthropic gift and
grant policies. These policies must address the planning,
promotion, solicitation, receipt, acceptance, management,
reporting, use and disposition of private sector resources."
Arthur C. Frantzreb)
A few months ago, the Mid-America Chapter of the National
Society of Fund Raising Executives hosted an extensive
program on practical, ethical decision-making skills
in fund raising. The program was led by Dr. Marilyn
Fisher of the University of Dayton, who coauthored the
model with the Dayton, Ohio chapter of NSFRE.
Many of the ethical dilemmas presented in the workshop
could have been avoided or dealt with openly through
the creation and adoption of development policies by
the institutions affected. It always comes as a shock
that so many, otherwise sophisticated and successful
nonprofits have no written policies, unnecessarily
exposing themselves to aggravation, public relations
nightmares and even lawsuits.
Is there a large nonprofit any where that doesn't
have a staff member or volunteer directly contacting
major funders on their own...without telling anyone?
How many nonprofit board shave hired a fund raiser
and paid them a percentage of gift income, only to discover
that the nonprofit's minuscule share of the money has
been opened for ridicule on the front page of the local
newspaper?
Has a major donor given your organization a large gift
at some time in the not-too-distant past, only to be
promptly thanked and subsequently ignored by everybody
including the development office and the CEO? Do you
have a major donor who is mad at you because he believes
you are not doing what you said you would do with "his"
money?
Here is a brief litany of why a nonprofit with any
kind of development program at all should have clearly
stated and continually updated written policies:
Written policies...
• ... define who has the authority to solicit
and/or accept gifts on behalf of the nonprofit.
• ... ensure control of the development process
in a central authority.
• ... can clearly define "preferred use"
to avoid the misunderstanding that such gifts are over
and above budgeted allocations.
• ... help to protect the nonprofit's exempt
status.
• ... assure equal treatment of donors.
• ... define gift acceptance, naming restrictions,
and protect the nonprofit from being "used,"
as an object of investment to shelter income and avoid
taxes. (I understand there is a billboard in the LA
area highlighting the Charitable Remainder Unitrust
as the "Last Tax Shelter In America.")
• ... can establish development credibility and
ethical standing.
• ... assure donors of sound fiscal management
and stewardship of their gifts.
•... can assure that gifts (and there-fore the
donors) are not doing the nonprofit's planning for
them.
•... enable a nonprofit to politically decline
unacceptable gifts—per-haps protecting staff from
well-meaning, but naive executives and board members.
• ... can eliminate duplicate gift credit, as
in a donor including a corporate match to his personal
total.
• ... prevent the overvaluing of gifts-in-kind
and gifts of property.
• ... can avoid even the appearance of conflict
of interest.
• ... can assure no personal gain inuring to staff
or volunteer.
• ... require that legal counsel review trusts,
contracts and other agreements.
• ... can preclude the appearance of the nonprofit
coercing or otherwise unethically influencing donors.
What are the questions an organization must ask itself
when policies are being developed? Here is a partial
list:
• Who can ask for gifts and what methods can they
use to do it?
• Who can accept gifts and what kinds of conditions
might accompany them?
• Should the nonprofit act as a trustee for lifetime
gift agreements?
• What stewardship obligations does the nonprofit
incur with gifts?
• How will gifts be recognized?
• Will the nonprofit accept encumbered property?
If so, under what circumstances?
• How will gifts be publicized?
• How are annual giving, restricted annual giving,
endowment, quasiendowment etc. defined?
• If the nonprofit accepts naming gifts for capital
purposes, are overhead and maintenance also required?
• What are the minimum amounts for each of the
planned gift agreements offered?
• What are the minimum amounts for chairs, buildings,
scholarships or other named gift opportunities?
• What is the nonprofit's policy on conflict
of interest?
• On what basis does the nonprofit compensate
outside counsel?
• What are the guidelines for valuing various
gifts against a campaign goal? For example, are gifts
of life insurance valued at the face amount of the policy?
For policies to have any meaning, they must become a
part of the rules under which the nonprofit works.
As the "expert" on fund raising law, development
processes and donor relations, the chief development
officer should be the logical catalyst to the creation
of these policies and guidelines. This task, although
daunting, should be taken on with enthusiasm, as it
also represents a golden opportunity to educate the
nonprofit's leadership.
Here are some caveats to the process:
- Concentrate on issues—not personalities.
- Try to get the process in a committee of the board
(development), who will make the final recommendations
to the board.
- Be flexible.
- Get top leadership of both board and staff to commit
to support the need for policies.
- Be a team player. Seek compromise rather than one
side or another.
- Avoid issues that can't be won.
- The development officer should be prepared to subvert
his or her ego to those of the volunteers.
- The development officer should take the role of
the "expert" resource; but allow thorough
discussion of issues. He or she should also be ever
mindful that their own professional code of ethics
is also a means of protecting themselves from organization-
all unethical behavior.
Listed below are some suggested, general policies that
will be applicable to most nonprofits. Although many
of them are obvious, they should not be overlooked:
- The nonprofit will comply with all federal, state
and local laws in the conduct of development activities.
- Gifts can only be accepted by the Board of Directors;
but can be received by authorized staff.
- Gifts will be accepted if they advance the mission
of the nonprofit.
- he solicitation of gifts must be authorized by the
chief executive officer of the nonprofit.
- The development office will respect the confidentiality
of information relating to all individual records.
- Proposals for grant support shall include a factor
for overhead.
- Costs for long-term facility maintenance shall be
included in the endowment for named purposes.
- The minimum contributions for named funds and facilities
are as follows....
- The cost to transfer real estate shall be borne
by the donor.
- The cumulative total of all gifts to the nonprofit
from an individual in the fiscal year will qualify
for the donor's membership in the appropriate gift
club.
- Gifts from employers matching those of employees,
shall be recognized separately for gift club application
(combining these isn't fair to those donors who do
not have matching opportunities)
- Separate bank accounts in the name of support groups
shall require an authorized signature from the business
office. All gifts to benefit the nonprofit are the
property of the nonprofit.
- Outside development counsel will be compensated
by fixed fee or salary and not a percentage of funds
raised.
Here are some special planned giving policies that
may be included:
- A statement as to the type of gifts the nonprofit
will accept....cash, real estate, tangible personal
property, life insurance, securities...
- And the kinds of agreement offered....charitable
gift annuity, charitable remainder unitrust and charitable
remainder annuity trust, life estate, lead trust,
bequest, etc.
- Who can accept planned-gift agreements...usually
planned-giving staff, with approval of the board and/or
legal counsel.
- Specific limitations and procedures relating to
the different types of gifts...minimum ages of donors,
number of beneficiaries, term of years, amounts...
- Procedures for gift handling, acknowledgment and
auditing.
- A statement urging donors to consult with their
own financial advisors.
- A statement relating to charitable intent being
prerequisite to gift acceptance.
Once a nonprofit has an adopted, complete set of policies
and guidelines, the following should be considered:
- Communicate the policies. Decide ahead of passage
who will get them. Be prepared to respond to your
constituents, internally and externally.
- Begin to use them. For example, you may want to
renegotiate endowments with some donors for practical
and political reasons.
- Place them in board, constituent, faculty and staff
handbooks.
- Schedule a regular, annual review of policies and
revise them as indicated.
- A statement should be written into policies which
defines the method for dissolving the agreements concerning
the use of endowed funds if the purpose of the gift
is no longer
pertinent to the mission of the nonprofit. It is
probably preferable to seek alternate uses with the
concurrence of the donor prior to dissolving the original
agreement.
However, the final decision should always rest with
the governing body of the nonprofit.
In summary, development policies which have been thought
through and built from the ground up by volunteer and
staff leadership can be an invaluable tool. They can
prevent illegal, unethical and embarrassing dilemmas,
protecting the status and image of the
nonprofit, and the credibility of individuals involved
in development activities.
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