Sample Ethics Case—Public Trust and Transparency: I Just Need a Gift Receipt

Ethical Dilemma:

It is April 1st a few days before the annual income tax filing deadline. You are in your first month as director of development for a history museum. During your interview you met the chief financial officer, director of collections, director of operations, as well as the CEO.  You have completed employee orientation and have spent a little time with them as well as other members of the senior staff.  You get a phone call from the agency’s largest donor.  The donor is an officer of an influential local corporation who has given several million dollars to community organizations, including a local university which has a building named for him. He has recently become very involved with the museum, and the senior staff is very eager to be sure you continue building the relationship. The donor calls to ask you for one thing. The donor said their tax advisor says the donor needs to make another donation for the previous year and that the donor is sending over a check for $50,000.  The donor asks you to prepare a letter of acknowledgment dated prior to last December 31. Before you can respond, the donor hangs up.

Who’s involved:

• Donor
• Donor Tax Advisor
• CEO, CFO

What are the possible ethical issues; who else might be impacted?

• The request is a violation of tax laws.
• The request is a violation accounting standards.
• If the letter is provided, discovered, and eventually leads to legal action against the donor, the organization, and individuals involved with the organization, the organization’s brand and reputation is at risk.

What are some possible considerations or solutions?

• Report the call and message to the CEO (your boss) and the CFO. Discuss the call and, if needed, explain why it not possible to comply with this request to provide a post-dated receipt.  What the donor has proposed is a violation of the law, which is paramount – and inconsistent with accounting standards.
• If the CEO thinks this is “no big deal” and says they will draft the letter, try to gain the support of the CFO – as accepting these funds cannot have a clean paper trail to the prior year through the agency’s financial records – and a future audit of the donor or agency would reveal this.
• Even though this is a relatively new donor to the museum the donor must be known to someone on the senior staff or board. Ideally the CEO or CFO makes the call, perhaps informed by the staff or board member who knows the donor.
• If the CEO won’t make the call you must return the call yourself –make sure the CEO and CFO will support you if the donor calls to complain and ask for the letter.
• If later you learn that occasionally in the past the organization has done similar favors for some of its large donors what should you do?

Internal Assessment: 

Policies and Documentation:

• Review development office operations policies and make sure the gift acceptance policy makes it clear that gifts are booked on the date they are received.
• Review development office operations policies and make sure the gift acknowledgement policy makes it clear that acknowledgements and receipts are compliant with laws and accounting standards.

Related Ethics Standards:

Standard 2: Comply with all applicable local, regional, and national laws and regulations.

• Providing the requested thank you letter would violate federal laws.

Standard 8: When stating fundraising results, use accurate and consistent accounting methods that conform to the relevant guidelines adopted by the appropriate authority.

• Providing the requested thank you letter would violate accounting standards.

Steps you can take:

Engage with External Auditor:

• Seek external advice, if needed, to confirm for the CEO and CFO that the donor’s request cannot be honored.
• Document everything!

Reply to the Donor:

• Call the donor and inform the donor that you will not be providing a postdated acknowledgement letter, and the reasons why.
• Document everything!
• Provide documentation of your interactions with the donor and the attorney, if necessary, to clarify your actions and intentions.

What are the likely outcomes if nothing changes?

• If you discover letters of this type have been provided in the past, you must take appropriate steps to educate relevant staff and volunteers as to why this practice cannot continue.
• If this specific request honored is discovered, and eventually leads to legal action against the donor, the organization, and individuals involved with the organization, the organization’s brand and reputation is at risk.

What could have made the outcome(s) more ethical?

• Development Office Operations policies including but not limited to gift acceptance and gift acknowledgement policies, clearly prohibit these actions.
• Finance Department Operations policies mirror and reinforce these ethical practices.