Sample Ethics Case—Solicitation and Stewardship of Philanthropic Funds: Everyone Wins

Ethical Dilemma:

You are the Vice President for Development of a large organization that has a moderately large geographic regional presence with nine satellite offices.  Your staff of nineteen is located across the region.  Your organization has worked to create a culture of philanthropy.  And, your team encourages collaborative pursuance of funding opportunities.  

Additionally, you are a volunteer leader with the local chapter of AFP and your organization has Organizational Membership which require all staff members to adhere to the Code of Ethics.

Your organization, We Act, We Serve (WAWS), is part of a diverse cohort of like-minded groups whose mission is to advocate for access to essential services.  The program staff of your organization regularly collaborate with colleagues within the sector.  Gloria, your organization’s Director of Outreach, was approached by a sector partner whose organization recently received a very large grant from an anonymous donor.  It was shared with Gloria that among other restrictions the donor has stated that the grant should not be used to pay any expenses toward their fall music concert.  Undeterred, the sector partner accepted the gift and chose to use the funds for regranting opportunities to sector partners like your organization.

Gloria was told that WAWS is eligible to submit a proposal for a sizeable grant.  The grant opportunity of $75,000 was presented to Gloria.  The only requirement is that $25,000 of the funds should be set aside as a lead sponsorship for the fall concert being hosted by the sector partner.  Excited for the opportunity, Gloria thanked the sector colleague, told her she thought this was something the organization could do, but would need to discussion this with her supervisor and would get back as soon as possible with an answer.

Who’s involved:

• WAWS Program Staff
• Partner Organization

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

• Should Gloria have had the initial conversation without a Development team member present?
• Can an organization make the decision to regrant funds entrusted in their care?
• Who is the donor: the regranting organization or the original donor?
• What obligations, if any, does We Act, We Serve have with the original donor?
• Since the conversation regarding the original donor’s wishes was informal, but not off the record, there could be shared accountability to honor donor intent.

What are some possible considerations or solutions?

• Is it the responsibility of WAWS to adhere to the wishes of the original donor if the donor is not directly connected to WAWS?
• Were there any professional boundaries crossed by the sector partner in sharing the details of the original donor’s wishes?
• As an Organization Member of AFP, should this situation be reported to the AFP Ethics Committee?
• Consult with counsel if there is uncertainty about whether it is appropriate or not to accept the gift.
• If the gift is accepted without the restriction of using part of the gift to sponsor the event, does this move from being an ethical issue to a moral issue?
• What obligations, if any, does We Act, We Serve have with the original donor?
• Since the conversation regarding the original donor’s wishes was informal, but not off the record, there could be shared accountability to honor donor intent.

Related Ethics Standards:

Standard 14:  Affirm their primary responsibilities are to their organizations while also safeguarding the interests of the donors.

• All information shared (written or verbal) should be taken into consideration when seeking support of any kind.
• Consider what the impact would be on your organization if such an agreement was accepted.

Standard 15:  Ensure contributions are used in accordance with donor intent and restrictions.

• While the original donor does not have a connection with WAWS, as an organizational member of AFP, it has a responsibility to ensure their organization adheres to all known and applicable wishes of the donor regarding use of funds.
• Consider that regranting could potentially obligate an organization to multiple donors, not just the regranting organization.  In this scenario, information was informally shared about the original donor’s restrictions.  Should the gift be accepted, all organizations who accepted the funds could potentially be held liable for not honoring the donor’s wishes.

Standard 17:  Obtain explicit consent from donors, donors’ successors, or appropriate legal counsel before altering the conditions of previously restricted financial transactions.  

• Whether an organization making grants of any or an organization accepting grants, it is always best practice to seek legal advice and counsel to ensure clarity, accountability, and agreement on accepting grants.  
• Consider including language in all grant agreements that include an option to change or alter conditions of restricted gifts in signed agreements.  This can also be explicitly stated in the organization’s gift acceptance policies.

Steps you can take:

• Talk with the partner organization about your adherence to ethical fundraising practice and how the funding as proposed is incongruent to ethical practice.
• Provide more training and even role playing to program staff or others within the organization to help with how to deal with these types of fundraising dilemmas.
• If there are gaps in your gift acceptance policies regarding these types of situations, be sure to refresh your policies.

What are the potential outcomes if nothing changes?

• Should the donor become aware of the arrangement of the sponsorship kick-back, all organizations who knowingly accepted grants could be held accountable for breach of agreement.
• The entire sector could be negatively impacted by the action of a few bad actors.

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

• The organization could forego accepting a grant.  A sponsorship could still be made to support the concert.  Then the two organizations could look for other ways to partner that avoid potential ethical conflicts.  
• The WAWS could accept a grant and agree to help the partner organization to raise other sponsorship support.