5.4.11 Class

Michele R. Berard, MBA, CFREDirector of Funds Development, Butler Hospital

President/CEO, Ascent Advisors, LLC

May 4, 2011 Lecture

Non-Profits & PhilanthropyRIC Certificate Program

for Nonprofit Studies

Learning Objectives – May 4, 2011

1. What Fundraising Funds 2. The Case & Case Statements3. The Development Process4. Fundraising Vehicles5. Establishing Your Professional Brand6. Ethics in Fundraising

Note: Time dependent

A couple of points before we dive in…

Fundraising or Fund Raising Association of Fundraising Professionals (AFP)

changed Fund Raising to Fundraising in 2000 when they changed the organizational name, formerly National Society of Fund Raising Executives (NSFRE))

Philanthropy Healthcare, large institutions

Development, Fund Development Smaller non-profits, social service agencies

Advancement Education

For the purpose of this class, they all mean the same thing…

…from 819,008 to 1,238,201 in 10 years

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

819008865096

909574964418

10103651045979 1064191

11283671186915

1238201

Source: Giving USA 2010 The Annual Report on Philanthropy for 2009, Executive Summary

Discretionary Spending (total $1.368 trillion) some line items:

•Defense ($664b) •HHS ($79b)•Education ($46.7 b)•Homeland Security ($42.7 b)

and the list goes on…

Government Spending 2010 - $3.55 Trillion

Operations = Your Organization’s Purpose

Nonprofits exist to fill the gaps in services that public and private sectors do not provide The trend of increasing non-profits provides evidence

that unmet needs are increasing

Recent attention to reducing the Federal deficit will result in: Less government funding for non-profits

More gaps in services; smaller government

Opportunities for Private and Nonprofit Sectors

Organization’s Purpose = Mission = Operations

#1 - What Fundraising Funds

The Planning Process will undercover funding needs of the organization

In order to design a development plan and implement a program, it is important to work with the finance office (and other departments) in order to prioritize the organization’s funding needs.

E.g. if your organization requires $150,000 of operating support each year, a gift of $250,000 for the endowment is not going to add value

Organization’s generally raising money to fund: General Operating Expense Capital Needs Endowment

General Operating Expenses Pay for the expenses that carry out the mission of the

organization Can be programs, can be salaries, can be services Also referred to “General Fund” or “Unrestricted

Donations” Stigmatized

Interesting Parody: Organizations mostly need General Operating contributions, but they are the hardest to solicit/acquire due to: Increasing trend of donors wanting ownership Overall negative stigma of “paying for administrator’s

salaries” Difficult to marketing/report outcomes Sustainability (will need again next year)


General Operating Expenses (continued) Are recruited through:

Fundraising Events Direct Mail Appeals Corporate Sponsorships Internet Giving Grants (…however, requires some creativity) Planned Gifts (e.g. bequests)

The task in recruiting philanthropy revenue to support General Operating Expenses is finding a component (or components) in your organizational budget where the impact of the gift can be measured.

E.g.: Aftercare Program, Charity Care, …


Capital Expenses “Brick and Mortar” New Buildings, wings, major renovations (that result in

expanded or enhanced capacity) Large pieces of equipment

E.g.: MRI, DaVinci Robot, TMS Chair, Van/Delivery Vehicle

Donations to fund capital expenses are recruited through: Grants (foundations/government) Corporate Gifts Individual Major Gifts


Capital Expenses (continued)Contra to General Operating Expenses, it is easier to recruit

philanthropy revenue to support Capital Expenses because: The project timeline is finite It can be measured (you build it, order it, install it) Appeals to wider masses (due to: naming opportunities, committee

work,...emotion) Its easier to recruit large gifts for capital since the overall project is also

large Multi-year pledges The impact to the organization’s financial position – a bona fide revenue

stream that can be leveraged!

A Capital Campaign is a specific fundraising initiative that occur over a period of years to raise a predetermined goal Both timeframes and monetary goals of Capital Campaigns are both

trending upward


Endowment:According to the AFP Dictionary – is a permanently

restricted net asset, the principal of which is protected and the income from which may be spent and is controlled by either the donor’s restrictions or the organization’s governing board.

Many organizations have an endowment that provides revenue to support operations or a specific program

Prominent in Academic Setting with growing popularity in Healthcare settings e.g. Endowed Chair – The revenue earned from the fund is used to pay

the salary (or specifics mentioned in the endowment policy associated with that endowment)



Endowment (continued) Endowment Policies provide the details of the

administration (and often the investment) of the endowment 4% of interest earned from the ABC endowment goes to support the

salary of the Chief of ABC. Any additional earnings above 4% will be reinvested into the ABC endowment

The endowment will be invested in portfolio comprised of 40% stocks 60% bonds

ADVANCED: policies should consider the mission of the organization

Are recruited through Planned Gifts (mainly bequests) Major Gifts (primarily from Individuals) Special Campaigns (major, regular individual giving, events)

Endowment funding is generally never recruited from Foundations or Corporations


The Case for Support Case for the Institution - The case is the statement of

the cause Mission and strategic plan drive the case Explains why donors might want to contribute to the

advancement of the mission Describes the organization’s goals and objectives Explains the role of philanthropy in achieving organizational

goals One large case for the organization, from which smaller

individual case statements are developed for various constituencies and programs

Align organizational funding needs to donor’s wishes Also known as “The Case” or “The Boilerplate”

(internally) Purpose – Show the organization’s impact on the

community economically, socially, artistically, spiritually and/or historically for today and tomorrow

#2 – The Case & Case Statements

Who Creates The Case? Development Staff – they act as interpreters between

external constituencies and external constituencies Review, comments, approval, support by internal and

external constituencies

The Development Committee to

review, endorse

The Board to endorse

Goes to the constituency for testing

CDO begins the process

back to the CDO for edits

Hands off the CEO for review


The Case Contents: (Hank Rosso refers to this as case resources)

Mission Statement Goals Objectives Programs and services Finances Staffing Facilities and services delivery Planning and evaluation History

These are the parts that create your organizational whole. When put together, the case may also be referred to as the “boiler plate” or “template” for foundation grant requests.


Case Statements - what are they:? Written version of The Case for a specific

constituency or campaign and should state: The institution’s services, programs, and objectives How the goals of the fundraising program support the

institution Ways in which the institution will remain significantly

productive in the next decade The difference it would make if a donor supported the cause What the institution must do to improve or change its activities

and aims, and why the institution is valuable to society

The Case Statement must align donor wishes and funding needs of the organization


Internal vs. external cases (Hank Rosso) The completed case or template = the internal case The external case tells the story to the constituency

E.g. “…brochures, foundation (and corporation) grant proposals, direct mail letters, web site development, campaign prospectuses, news releases, newsletters, speeches, and face to face solicitations…” (Rosso, 2003)

To maintain alignment with organizational needs and donors’ desires, the following questions should be answered:

What is the problem or social need that is central to our concern?

What special services or programs do we offer to respond this need?

Why are the problems and services important? What constitutes the market for our services?

Continued on next slide…


Alignment questions (continued): Are others doing what we are doing to serve our market – and

perhaps doing it better? Do we have a written plan with a statement of philosophy,

objectives, and a program? What are the are the specific financial needs against which

private gift support will be sought? Is the organization competent enough to carry out the defined

program? Who are the people associated with the organization: staff, key

volunteers, trustees, directors? Who should support the organization?

Preparation of a case statement is first step in any aspect of the organization’s total development program (including: annual giving, capital giving, planned giving)

Case Statements are just for Capital Campaigns any more!


SWOT Analysis is helpful here…

The Case Statement is an internal document and the basis for and external “sales” publication with many uses:

To secure feedback and create ownership

To recruit volunteer leadership

To test the market

To form a basis for case (marketing) materials

To tell a story


Applying/Adapting to Your Market Segments The final step before writing the case statement(s) is

to determine your most critical constituencies

Which Constituencies: Are the strongest supporters? Give on a regular basis? Have the greatest ability and interest to give? Are the most interested in specific components of a

campaign?

The most effective tactic is to develop an individualized case for each constituent group as you are getting the greatest alignment (however, this is not practical)

Individualized attachments Individualized cover letters


Grouping Constituencies

Source: CFRE Review Course (faculty manual) 2004 Edition

Constituency Groups Case Statement Suggestions

Major Donors •Point out that you are looking for a few major givers•Ask for their advice and participation •State needs more briefly•Emphasize leadership of your organization and campaign•Be candid about request•Develop a low-key “insider” appearance (that is not too slick)

Community Audience •Emphasize economic contributions of your organization and/or its employees

Corporations •Emphasize any services you provide to the corporation and/or its employees

Foundations •Avoid formal printing•Be prepared to fit the foundation’s proposal format•Address annual goals, hidden agendas, stated areas of interest


#3 - The Development Process

Annual Fund

Endowment, Capital

Buildings, Equipment, Endowment

Special Programs

& Projects

Ongoing Programs

& Services

Estate Planning

AssetsIncome, Assets

Current Income

Benefit:

Source:

Donor

Major Gifts

Program

Capital Campaign

Planned Giving


No organization is similar; therefore needs different strategies and tactics to build and sustain a successful development program.

The Development Officer’s Job… to “Right Size” it for your organization’s needs

Answer the following questions for direction: What are the needs of your organization? What are the resources available to you? What champions to you have?


Stages of Development - Getting in moving up the Donor Pyramid

1. Identify potential prospects Compile and develop lists of predisposed individuals Similar organization’s annual reports, book of lists, professional

organizations, natural constituencies,etc.

2. Convert potential prospects into qualified prospects Test the list effectiveness by identifying linkages Engage volunteers, staff (e.g. rating session) May be combined with step 1

3. Convert qualified prospects into initial donors Build on linkages, test interest by asking for gift Solicit by personal contact (telephone, direct mail, special

event) Acknowledge gift (opportunity to validate the linkage; negate

buyers remorse)



4. Convert initial giver into donor of record Build on interests and linkages Report to the donor how the organization used their gift Invite to renew, Acknowledge

5. Increase the gift Research, building on linkages and interests Inform (report on use), involve in organization Invite to renew at a higher level (use gift club concept) Acknowledge

6. Secure Special Gift (e.g. $1,000) Continue research through linkages, involve, build on interests Align interests with a special need of organization Personally solicit (face-to-face) , invite to gift club membership



7. Secure Special Gift (e.g. $1,000) (continued) Acknowledge

8. Secure Major Gift (e.g. $10,000+) Validate donor as a major gift prospect via linkages and

donor research (i.e. capacity) Involve the donor in the institution via planning, case

evaluation (“testing the case statement”) As a loyal donor, ask him/her to participate in cultivation

events or help in identifying new prospects; join board committee

Share needs of the organization; align solicitation to donor’s desires, face-to-face solicitation by CEO/Board Chair, acknowledge

Reward/Recognize



9. Secure Big Gift Continue to involve and engage through linkages and interests Employ donor as an important advocate; invite to serve as

volunteer leader (board member); Foster a desire to give and ask by involving in cultivation events

and engaging his/her personal contacts Ask, Acknowledge, Reward/Recognize

10. Secure Planned Gift Continue involvement with the purpose to strengthen bond

between the donor and the organization Create feelings of belonging to and identifying with the

organization Foster mutuality of interests Giving in perpetuity (endowment) or legacy



HOWEVER: Evolves over a very long time horizon (e.g. 10 - 20

years) Through many Development Professionals

Very time consuming As donor progresses up the pyramid, the tactics become

more personal (hence dedicated MGO) Greater access; involving the time/energy of organizational

leadership outside of the Development Office 80/20 rule: 20% of your donors will provide 80% of the

funding Most of your donors will only progress so far in up the donor

pyramid


Individuals75%

Corporations5%

Foundations13%

Bequests8%

Source: Giving USA 2010 The Annual Report on Philanthropy for 2009, Executive Summary

2009 Contributions: $303.75 billion by giving source of contributions

Different funding streams contribute (or invest) for different reasons

Hint: start with funding needs of the organization, then work to align those needs to your constituencies

The Donor Pyramid illustrates the process of a development program and is a common element in fundraising education (note: google “donor pyramid” for other examples).

Donors enter at the base (the widest part of the pyramid) and are “stewarded” up the pyramid to more significant giving.

#4 – Fundraising Vehicles

1. Direct Mail Direct Mail is used to acquire new donors

and to renew current donors (note: Individual Donors)

Via a Direct Mail Appeal CLARIFICATION: “Appeal” is the call to action that

motivated the donor to respond with a gift. Often in fundraising, we use “Appeal” to describe a direct mail solicitation – e.g. Fall Appeal

Direct Mail Appeals come in all shapes and sizes and should be right-sized/right-toned to your organization (i.e. mission and culture)


Direct Mail (continued)

Main components of the Direct Mail Solicitation (a.k.a. Appeal):

a) The letter… evoke emotion (Anger, Exclusivity, Fear, Flattery,

Greed, Guilt, Salvation) write to get the attention of “scanners” and “readers”

(use readability statistics on Microsoft Word) clearly state the purpose of the letter clearly state the goal; how success will be measured;

what results a gift will produce… use a “P.S.” signature

Via a Direct Mail Appeal CLARIFICATION: “Appeal” is the call to action that

motivated the donor to respond with a gift. Often in fundraising, we use “Appeal” to describe a direct mail solicitation – e.g. Fall Appeal

Direct Mail Appeals come in all shapes and sizes and should be right-sized/right-toned to your organization (i.e. mission and culture)




b) The reply device… Draft first – before the letter Test Include credit card options, “in memory of”,

specific programs, check boxes for additional information (E.g. planned giving)

Revise and test, etc. Use as another communication device (for the

scanners) Include on-line giving instructions if applicable




c) The remittance envelope… Self Addressed and Postage Paid

The internet is giving the USPS major competition. Don’t make it harder for your donors (or prospective donors) to have to buy a stamp, look up your address, write it down, and deliver it to the post-office!

Note: You’ll need a BRE Permit from your local post-office to use self-addressed, post-paid envelopes.




d) The outside envelope… #10 window or plain (research has shown

that this is the most effective/efficient) Teaser Copy – If you appeal doesn’t get

opened, it doesn’t matter how long you spent on your reply device, or how well written your letter is, or even how compelling your call to action is!

“From the Office of the President” “Learn how your can help others access

healthcare” “See inside for details on a great investment offer “




e) Premiums and gifts… Premiums are Give-A-Ways included in the

direct mail package to entice (guilt) a prospective donor

Premiums are most effective for donor acquisitions; less effective for renewals

Gifts are given only to donors; more control on the organization side, but also more time consuming



Other forms of Direct Mail (used more for stewardship):

Newsletter Invitations Announcements Surveys Annual Report Mailings Event Calendars…

Basically, any time you mass mail to your constituency or a segment of your constituency



Is the tactic most used to recruit donors because it can be mass produced at somewhat of a low cost. However…it is impersonal, which explains why first time donors don’t necessarily renew their support.

Long-Time Donor = Strong RelationshipPersonal Attention = Strong RelationshipPersonal Attention = Expensive, Time

Consuming and not replicable


Special Events/Fundraising Events An opportunity to capture new donors

(“Donor Acquisition Vehicle” Good for organizations that:

need to build a donor base have a dedicated volunteer group to recruit

corporate sponsorships A mission that resonates with the community at

large (to recruit new supporters) -or- Have a large beneficiary base (Alumni, Patients,

Staff, Members, etc) to support the event (note: not a donor acquisition vehicle)


Special Events/Fundraising Events (continued)

Usually funds General Operating, however could be appropriated to a specific fund or project (this should be discuss with you organization’s CFO ahead of time)

A huge variety, for example: Golf Tournaments Gala (Dinner & Dancing) Silent/Live Auction (stand along or an add-on) Fashion Show Food & Wine Tasting Celebrity Luncheon

The only limit is imagination!


Special Events/Fundraising Events (continued)

A downward trend Expensive (% of net vs. gross) Ethical considerations (misleading donors) Time consuming Sponsorships correlated to economic times

A purpose beyond raising money Communicating your mission Recruiting new volunteers Recognizing community leaders Bonding experience for organizational staff Opportunity for your Board Members to participate


Corporate Gifts/SponsorshipsFirst, some background Charitable contributions to non-profit

organizations reduces a corporation’s tax-liability

A contribution to your organization helps the corporation pay less in taxes

Good Economy = Sponsorships Two “pots” to pull from:

A charitable division of the corporation (usually larger with giving guidelines)

The marketing department (usually smaller with less restrictions)


Corporate Gifts/Sponsorships The marketing department:

Contacts are usually public; reach out to them Personal/Professional relationships are helpful

(engage Board Members and Volunteers) note: we will discuss in greater detail in future modules

Do your research – What organizations has the corporation sponsored in the past and for what project? (usually located on the organization’s website under “Community Relations” or a similar heading)

Tailor your ask to what the corporation has done in the past

Make sure it contains a marketing benefit Examples


Corporate Gifts/Sponsorships The Charitable Division:

Contacts are also public; reach out to them But first, do your research as there is usually a distinct

mission of this function (see Foundation Center – www.foundationcenter.org) or call them directly for their “Giving Guidelines”)

Review the funding needs of your organization – do they fit within the giving guidelines? If yes, begin proposal process

A word on square peg round hole approached Proceed with caution on exploiting

Personal/Professional relationships Examples


Foundation Grants Similar to Charitable Division gifts from

Corporations Usually fund specific components of your

mission: A program A building project

Vary in size, scope, geographic area, mission requiring a substantial amount of research before the solicitation process

www.foundationcenter.org (free resource) Foundation Directory Online - h

ttp://fconline.foundationcenter.org/ - annual membership based on level of service/access

Guidestar – 990s


http://fconline.foundationcenter.org/

http://fconline.foundationcenter.org/

Foundation Grants Researching Foundation Grants (note: will be

discussed in future module) The 990 – All non-profit/501(c)3 IRS Status file thee

990 as their annual tax return (foundations are non-profit/501(c)3 IRS Status)

The 990 contains valuable information, such as: The value of the endowment Application instructions (note: “…gives to only

preselected organizations…” is the default on the 990) Board of Directors Listing Grants Awarded Listing – with amounts to each

organization and often an explanation of the purpose Website


Major Individual Giving Individuals who give major gifts (the amount

that qualifies one as “major” is determined by the organization) have a strong connection to the organization or the cause (e.g. your board members)

They are usually not first time donors, nor do the gifts come out of the blue (i.e. unsolicited)

These gifts are in the upper-tiers of the donor pyramid

Donors are engaged and want to see their gifts make a difference (measurable, innovative)


Major Individual Giving (continued) The focus on MG programs is increasing:

Less expensive; High ROI (return-on-investment) Less dependent on the economy like Corporate

Sponsorships (however, not isolated from it either) Major Givers are usually great stewards of your

organization (if they are going to give multi-figure gifts to your organization you can bet they will say great things about you!)

Due to the proven success of MG Programs, good MGOs (Major Gift Officers) are often the highest paid in the Development Office


Major Individual Giving (continued) However (the downside):

High pressure to meet metrics Lack of organizational strategic Generally does not support General Operating

Expenses The donors are very knowledgeable about non-profit

operations (they are using the same research tools you are using!)

The cultivation period is long (two-years) The investment in a MG Program is hard “to sell” to

Executive Leadership when return is in future fiscal years

Ethical considerations


Planned Giving (or Gift Planning)

According to the AFP Dictionary - “a systematic effort to identify and cultivate a person for the purpose of generating a major gift that is structured and that integrates sound personal, financial, and estate-planning concepts with the prospect’s plans for lifetime or testamentary giving. A planned gift has tax implications and is often transmitted through a legal instrument, such as a will or a trust.”

For the purpose of this course, Planning Giving will be presented as an overview to the average Development

Officer


Planned Giving (or Gift Planning) - Two kinds: (1) outright or current gifts (2) deferred (realized in the future)*

A donor who is considering, or has already made, a planned gift is at the top of your donor pyramid:

They know, believe and trust in your organization They’ve donated (money and/or time) for several

years, if not decades) They tend to be savy; appreciate the tax benefit

and creativity involved in establishing a planned gift to a non-profit organization

They want to be involved up until their passing (if deferred)



Types of Deferred Planned Gifts1. Bequest

The most popular type of deferred planned gift and the least daunting

Once made, less than 10% change, those that do increase the amount to charity

Easiest to publicize; verbiage should be on your organizational website (See

http://www.butler.org/body.cfm?id=245); on reply devices, in newsletters, etc.

Discuss with the donor the intent of the gift Gift Acceptance Policies should reflect every

situation imaginable


http://www.butler.org/body.cfm?id=245


Types of Deferred Planned Gifts (continued)2. Charitable Gift Annuity – A legal contract between the

donor and the charitable organization, through which the donor exchanges cash, stocks, or other assets for an agreed-upon income for life

3. Charitable Remainder Trust – The Donor transfers assets to a Trust, which then goes to the charitable organization after the death of the beneficiary. The donor retains a fixed or variable income for life

4. Life Estate Contract – The Donor transfers the deed of real property to a charitable organization while reserving the right to live on the property for life.



Types of Deferred Planned Gifts (continued)5. Charitable Lead Trust – Donor transfers assets to a

trust; the trust provides income to the charitable organization for a period of X years. After the said period, the assets revert back to donor (grantor) or someone else (non-grantor)

6. Life Insurance Policy – Two types (a) transfer ownership of an existing policy to the organization or (b) purchase a new policy/contract that names the charitable organization as the beneficiary (note: can also add charity to existing policy as another beneficiary)

7. Pooled Income Fund – A common trust with many donors; pro rata shares; as each beneficiary dies, the value of their portion transfers to the organization



Advantages to the Organization: Long-term relationships with donors Provides future funds Promotes alternative thinking: “assets as gifts”

Benefits to the Donor Opportunity to give (via assets as gifts) Income tax deductions Fixed or variable income Retirement income Reduction of capital gains Asset management



What the experts won’t tell you - “You don’t need to know it all; the details are done by estate attorneys and financial planning experts!”

Resources: RI Foundation – Videos on Options for Giving

http://www.rifoundation.org/ProfessionalAdvisors/VideosOptionsforGiving/tabid/530/Default.aspx

Partnership for Philanthropic Planning (PPP) – formerly the National Committee on Planned Giving (NCPG) National website: www.PPPNET.org RI website: www.PPPRI.org (for RI meeting

schedule/info)

Invitation to attend a PPP-RI Meeting: contact me if you would like to attend a meeting as my guest at no charge.




http://www.pppnet.org/

http://www.pppri.org/

Other Tactics – Telephone & Internet Both are in a state of transition but each has a

role in recruiting first time donors and renewing donors

Phone-a-thons are a good way to follow-up on a direct mail appeal

Provides a higher level of personalization and acts as a reminder

A great way to engage volunteers in the process (especially in phone-thank-a-thons)

The prominence of cell phones/cancellation of land-lines makes it difficult to reach a “live person”

“Do not call” list myths


Other Tactics – Telephone & Internet (continued)

Internet Giving depends on the scope, target audience, and mission of the organization

Walks, Bike Rides, etc. have sophisticated web programs that are very successful as they empower the grassroots based fundraising team

Most organizations don’t have such a force and should regard internet fundraising as a add-on

Have an on-line giving option and include that link on all direct mail pieces

Incorporation a scope of programs to support on your on-line portal

Increase the number of credit cards accepted on your on-line portal

Great way to get more information about your donor, e.g. email address, mailing information, preferred phone number; can also include one or two survey questions on your online portal


#5 – Creating your Professional Brand

“Organizational Expert”Butler Hospital…and other employers

“Teacher/ Mentor”RIC/Bryant…alumni relationships, teaching positions

“Industry Expert”Ascent Advisors …and clients

“Community Volunteer”American Red Cross…and other volunteer opportunities

“Industry Champion”

AFP/PPP…and other professional associations

Linked In

My Profile

http://www.linkedin.com/home

http://www.linkedin.com/home

http://www.linkedin.com/profile/edit?trk=hb_tab_pro_top

Your skills of aligning funding needs to your prospective constituencies depends on your knowledge of external and industry factors (note: SWOT analysis will help with this)

Get feedback from people outside of your organization; objective feedback

Affiliation with other networks helps to provide credibility to you as a professional and to your organization (where you are not the paid “mouth-piece”)

Provides you with Best Practice information; use in your own organization; use to provide leverage for new idea implementation

Opportunity for Peer Learning


Get out of the office and interact with others

AFP, CASE, AHP, PPP gatherings – Professional Associations

Alumni Groups – Not only for Colleges (e.g. LRI)

Chamber of Commerce Events – membership is not required

Civic Clubs (Rotary, Lions, etc.)

Sports – golf leagues, tennis, etc. The Internet provides other opportunities

Social Networking - LinkedIn – Groups, Facebook, Twitter

E.g. Lenny Silva

AFP Open Forum (and other listserv groups)


“We in the nonprofit sector are held to a higher level of trust than our colleagues

in the for-profit sector”(Rosso, 2003)

Association of Fundraising Professionals (AFP) challenges its members to

Accept responsibility for their own behavior Accept responsibility for the behavior of their institutions In the areas of stewardship, accountability, confidentiality

A Trust Crisis 57% trusted private higher education 395 healthcare 31.6% private and community foundations 15.8% Congress (however this increased post 9/11)

“Those who presume to serve the public good must assume the public trust”(Rosso, 2003)

#6 – Ethics in Fundraising

Factors that Challenge Ethics in Fundraising1. Fund raising is not “business as usual”

Due to the amount of personal attention, engagement and creativity it impossible to outline every single scenario that can occur can document an ethical response

2. The challenge comes from changes in non-profit organizations, changes in the public’s assumption about nonprofits, and from technological shifts in how fund raising is done

Increased education and professionalism helps, but still dependent on the professional

3. Being responsive to changing circumstances and conditions leads non-profit leaders and managers to consider moral issues that pertain to their organizations

What is fine for one organization, may be a contradiction to the mission of another organization; no one size fits all approaches (some examples)


Answers to Ethical Dilemmas are not always clear

AFP suggests using the following guidelines: If you use this solution, will you be able to look in the

mirror and feel proud? Is your solution one for which your organization can

stand tall in front of its donors and clients? Given today’s climate, would this solution stand up

under the scrutiny of the press?

As a Development Officer progresses through their career they achieve higher levels of professionalism…and an ethical sense (they progress from technician to professional).

There is no substitute for experience in this field


Ethics and ProfessionalismThe text outlines six criteria that are essential to the fund

raising profession; they are: Autonomy Systematic knowledge Self-regulation Commitment and identification Altruism and dedication to service (fund raisers are

more generous with their resources and time than other citizens) Ethics and sanctions (AFP has a process in place to sanction

unethical behavior by members)

“Do we live for philanthropy or do we live off philanthropy”(Robert Payton, Former Executive Director Center on Philanthropy at Indiana University)


Section 501(c)(3) of the Internal Revenue Code Professional Fundraisers must always be cognizant of the

non-distribution clause “…no part of the net earnings of which inures to the benefit of any

private shareholder or individual,…”

Commits nonprofits and those associated to the public good

Establishment of trust between donors and organizations Professional Fundraisers must be the protectors; ensure that we,

and all others, do not benefit personally from the funds being donated to an organization

This do NOT mean that fundraisers should not be paid fairly and equitably; it does mean:

Fundraisers do not accept personal gifts from donors Salaries must be commensurate with public expectation Board members should not have competitive advantage in

bidding for business with the organization


Issues of Professionalism (Rosso, 2004)

What is the role of trust in our development as fund raising professionals?

What are the burdens placed on us as fund raising practitioners by the “non-distribution clause” in Section 501(c)(3) of the code?

As fund raising practitioners, who is are client: the donor or the organization?

In every transaction, what are the intents of the donor and what are the intents of the organization?

How can we, as fund raising professionals, protect and maintain our integrity as “boundary spanners” between donors and organizations?

How do we manage the tensions that arise as fund raisers working for organizations assist donors expand their philanthropy?


The Josephson Institute surveyed more than 10,000 to define the values that are important to an ethical or virtuous

person.

Josephson’s 10 ethical values that form the basis for ethical decision making:

1. Honesty2. Integrity3. Promise-keeping4. Loyalty (fidelity)5. Fairness

Source: Achieving Excellence in Fund Raising, Rosso, 2003

6. Concern for others7. Respect for others8. Law-abidingness and civic

duty9. Pursuit of excellence10. Personal Accountability


A Sample Ethical Dilemma:What does the professional fund raiser do (the matter of personal accountability) when the organization (loyalty-fidelity) decides to use funds given for one purpose by a donor (promise-keeping, integrity, honesty) for another purpose?

Three step process:1. All decision must take into account and reflect a concern for the

interests and well-being of all shareholders2. Ethical values and principles always take precedence over non-

ethical ones3. 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


Payton’s Ethics Cube: Individual (fundraiser) against the Organization surrounded by Competence, Language, Relations and Mission

First Ethical Tension – Individual vs. Organization Is the fund raising executive acting in the best interest of the

organization? Is the organization treating the professional fairly (compensation,

etc.) Who is the client?

Competence Competent in ethical and technical standard of the fund raising

profession Law abiding Pursuit of excellence Personal accountability


Payton’s Ethics Cube (continued):

Language The way we talk about our profession The way we discus the process of fund raising E.g. don’t refer to donors as “targets”; or “hit people us” Integrity, honesty, commitment to openness

Relationships Who owns the relationship? Promise keeping, loyalty and

fidelity, fairness, concern for others

Mission Fund raising begins with Mission The Donor Bill of Rights

Philanthropy is based on voluntary action for the common good. It is a tradition of giving and sharing that is primary to the quality of life. To ensure that philanthropy merits the respect and trust of the general public, and that donors and prospective donors can have full confidence in the nonprofit organizations and causes they are asked to support, we declare that all donors have these rights:

(see next slide)


The Donor Bill of RightsI. 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.

II. To be informed of the identity of those serving on the organization's governing board, and to expect the board to exercise prudent judgment in its stewardship responsibilities.

III. To have access to the organization's most recent financial statements.

IV. To be assured their gifts will be used for the purposes for which they were given.

V. To receive appropriate acknowledgement and recognition.

VI. To be assured that information about their donation is handled with respect and with confidentiality to the extent provided by law.

VII. To expect that all relationships with individuals representing organizations of interest to the donor will be professional in nature.

VIII. To be informed whether those seeking donations are volunteers, employees of the organization or hired solicitors.

IX. To have the opportunity for their names to be deleted from mailing lists that an organization may intend to share.

X. To feel free to ask questions when making a donation and to receive prompt, truthful and forthright answers.


“Moveable Assets” - You have built an excellent reputation as development officer for a fine arts organization in a small city. You’ve been able to enlist the support of many new donors and have cultivated numerous major gifts. You’ve been offered a higher paying job at the city hospital. A. Suppose you have been cultivating a wealthy philanthropist, Mrs. X, who has no real

interest in the arts. Mrs. X has numerous health concerns. She is likely to respond favorably to a request for support of the hospital primarily because she has high personal regard for you. Would it be a violation of the AFP Code of Ethical Principles to ask Mrs. X to make the gift to the hospital instead?

A. YesB. NoC. It dependsD. Don’t know B. Suppose you have worked hard to write original text for planned-giving brochures that have been successful for the arts group. Would it be a violation of the Code to copy from them when you create the brochures for the hospital? E. YesF. No G. It dependsH. Don’t know


#6 – Ethics in Fundraising“Not-So-Good Form”You are a development officer in a three-person development office. One day while reviewing your organization's government-required federal revenue agency reporting form (such as the Form 990 in the U.S., or the T-3010 in Canada) you discover a sizable difference between the total amount of donations reported on the Form and the amount published in the institution's campaign publicity. When you ask the Chief Financial Officer about the discrepancy, the CFO replies, "Don't worry, the Form is only an informational return. The revenue agency does not audit it.“

A. To be consistent with the AFP Code of Ethical Principles, what should you do?1. Inform the Chief Development Officer about the discrepancy.2. Tell the CFO that the Form must be filled out correctly.3. Inform the CEO that the Form must be filled out correctly.4. Ignore the matter because the Form is not your responsibility.5. Other

B. Suppose the Form is prepared each year by the organization’s accounting firm. Under the AFP Code of Ethical Principles, would this arrangement absolve you from any duty in connection with the Form? 1. Yes2. No3. It depends4. Don't know

Michele R. Berard, MBA, CFREButler Hospital (401) 455-6565

[email protected]

Ascent Advisors (401) 263-4902

[email protected]

CONTACT INFORMATION:

mailto:[email protected]

mailto:[email protected]

EXERCISE

SWOT Analysis : Identify general operating expenses that are taboo Conduct a SWOT Analysis for each one

Strengths Opportunities

Weaknesses Threats

Documents

5.4.11 Class