Sample Ethics Case—Public Trust and Transparency: Not-So-Good Form

Ethical Dilemma:

You are a development officer in a three-person development office reporting to the VP for Development. 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 prepared by the audit firm, reviewed and approved by the board 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."

Who’s involved:

• CFO
• Audit Firm
• Board of Directors

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

• The discrepancy itself does not reveal which, if either of the documents, is correct.
• Donors or donor advisors who review campaign material and compare them with the organization’s online filings and discover the inconsistency may raise questions or develop doubts about the organization such as recordkeeping accuracy, reporting, and trustworthiness.
• The due diligence of the organization's staff, audit firm, and board of directors may be called into question.
• Questions may be raised by people such as prospective donors, donors, members of the news media, regulators, etc.
• A concern or scandal may damage the brand and presents risk to the organization’s reputation.

What are some possible considerations or solutions?

• Request a meeting with your boss, the VP, to review the discrepancies.
  • Review the sources of the data reported on the audited form and the campaign material.  
  • Discuss the implications for eroding prospective donor, donor, and donor advisor confidence in the agency.  
• Considering reporting relationships, the VP of Development is responsible for taking the finding to the CEO (their boss) to develop an action plan:
  • If the reporting form is correct, develop an action plan to correct the posted campaign information.   
  • If the reporting form is incorrect, the CEO & CFO must develop an action plan to be sure the corrections are made and amended form is filed.
• If the reporting form is incorrect and VP for Development reports the CEO & CFO do not want to take the necessary steps to correct and file an amended return, there may be alternate routes within the organization for you as well as the VP for Development such as:
  • Using an internal confidential reporting process such as informing the Board chair of the discrepancy and that either federal law or an AFP Code violation exists.  
  • If organization leaders are unresponsive, you may consider reporting the case to Federal officials or going public, in which case you may be protected by the whistle-blower protections in your resident country.  
  • Evaluate whether you want to be a part of an organization that does not take accounting of its information seriously.

Related Ethics Standards:

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

• Providing inconsistent financial data may raise questions about whether the organization violated federal laws by filing misstated financial returns.

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

• Publishing incorrect or inconsistent investment data in the institution's campaign publicity violates these standards.

Steps you can take:

Engage with Your Colleagues:

• You have a responsibility to inform the VP for Development about the discrepancy and/or be sure the CFO knows of the discrepancy.
• Document everything!

Protect yourself and the Organization:

• If or when you see a discrepancy in the reporting of financial information, it is your responsibility to use channels within the organization to bring the organization into compliance with the federal laws, which are paramount to any ethical considerations.
• Maintain documentation of your interactions with all parties, to clarify record your actions and intentions.

What are the likely outcomes if nothing changes?

• It is possible nothing will happen … but more likely in this age of scrutiny of online information, a discrepancy will be found and called into question.  Anyone who had a part in gathering and/or reporting information or who should have identified the errors and had them corrected may be caught in a public incident which may escalate to a media event or scandal.
• If the discrepancy to audited and filed reports eventually leads to legal action against the organization or the individuals involved with preparing and filing the report, the organization’s brand and reputation is at risk as well as the people involved.

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

• All persons involved immediately and diligently work to correct what was an error and not a deliberate misstatement.
• Finance Department Operations policies clearly state that all fundraising communications shall be based upon audited and documentable results which mirror and reinforce these ethical practices.
• Development Office Operations policies including but not limited to gift solicitation and fundraising communication policies clearly state that all fundraising communications shall be based upon audited and documentable results which mirror and reinforce these ethical practices.