Mischief Scandal and Bad Behavior Ethics in the

Mischief, Scandal and Bad Behavior Ethics in the Nonprofit Sector

John A. Scola, CFRE • Served for 35 years in the nonprofit sector in Texas, Utah, California and Arizona • Named AFP Greater Arizona Chapter’s “Outstanding Fundraising Executive” in 2002 • Former Board Member of International Catholic Stewardship Council • Coached youth sports for over 26 years • No felony convictions 2

Personal Choices • Good or Bad • Right or Wrong • Ethical or Unethical 3

Warm Up

Respond at: http: //pollev. com/jscola 013 OR TEXT: jscola 013 to 22333 5

Tender morsels of free-range chicken with wheat crust, served with pomme frites and a sweetened tomato reduction

Foundation

What is Ethics? Ethics involves learning what is right and wrong, good from evil, proper from improper --- and then doing the right thing. 11

Ethical decision-making can be complicated by: • Obeying laws • Knowing the right course of action but being tempted to take a different action • Making decisions where there is no clear good or evil, right or wrong, but rather a struggle to determine which is the best choice between competing options 12

When a fundraising action is illegal, the fact that it’s unethical becomes secondary 13

When faced with an ethical dilemma you have three choices: 1. Boldly confront the dilemma and seek solutions 2. Ignore the dilemma 3. Look for a new job 14

Simple Tests

A Quick Three-Step Process to Assess Your Ethical Position 1. The Stomach Test 2. The Grandmother Test 3. The 60 -Minute Test 16

Practice Dilemmas

Knowing the Stakes

Who Creates and Shares in Ethical Dilemmas? 1. You, as an individual 2. The agency’s staff and leadership 3. The board 4. The agency as a whole 5. The donors and prospective donors 6. The agency’s other constituents 7. Other nonprofit organizations 8. The community 23

Questions to Guide Ethical Decision Making 1. Why is this bothering me? 2. Who else matters? 3. What is my role and responsibility? 4. What are the ethical concerns? 5. What do others think? 6. Am I being true to myself and the organization’s values? Source: Institute for Global Ethics 24

Three Stages of Concern I. Clearly Illegal Example: Changing date on a receipt II. Clearly Unethical Example: Allowing a volunteer to use a donor file for another organization III. Ethical Dilemma Ethical values in conflict; honesty and loyalty; honesty and respect 25

Step By Step

Seven Questions to Address Ethical Dilemmas 1. Have you accurately defined the problem? 2. How did this situation occur in the first place? 3. What is your intention in making this decision? 4. Whom could your decision or action injure? 5. Can you discuss the problem with the affected parties before you make a decision? 6. Are you confident your decision will be valid in the future? 7. Can you confidently discuss your decision with your boss, family or the media? 27

Potential Ethical Abuse #1 Using contributions for purposes other than those to which donors assume they will go • Using restricted building funds for operational expenses • Investing funds in an endowment rather purchasing equipment • Using restricted funds to pay for a consultant 29

Potential Ethical Abuse #2 Divulging or Absconding with Donor/Prospect Information • Taking proprietary donor information with you to a new job • Sharing information about donors inappropriately both internally and externally 30

Potential Ethical Abuse #3 Intruding on Private Affairs • Obtaining an individual’s credit history • Above and beyond basic research 31

Potential Ethical Abuse #4 Exploiting Relationships • Treating donors as a means to your own end • Encouraging donors to change loyalty when they move from one organization to another • Undue influence on estate planning decisions 32

Potential Ethical Abuse #5 Negligent Security • Openly discussing prospective donors in a “rank and rate” session • Leaving files and data where they can be easily copied or studied • Leaving donor/prospect computer files open 33

Potential Ethical Abuse #6 Questionable Charges or Expenses for Services • Percentage-based compensation • Finders Fees 34

Why Not Percentage-Based Compensation? 1. The charitable mission can become secondary to personal gain 2. Donor trust can be damaged by undue pressure to give 3. The fundraiser may be tempted to influence the nature, size, and timing of a donor’s gift 4. This type of compensation ignores the role of volunteers and other staff members in the process 36

Alternatives to Percentage-Based Compensation 1. Ask the board to give and/or raise the dollars needed to hire a fundraiser 2. Consider using reserves or endowment funds 3. Look for grants that fund new development programs 4. Seek a corporate or foundation partner 5. Identify a service organization to assist 6. Think outside the box – look for an “angel” 37

Ethics Case Studies

The following case studies are all REAL* *The names have been changed, yada… 42

Case Study (from afpnet. org) Finding Help The Hospital Foundation works with a planned giving consultant who is able to provide legal, tax, and planned giving services. This consultant works with potential donors the Foundation identifies and directs donors to the Foundation. The consultant’s asks potential donors to select a charity from a list of about 200. If the potential donor is interested in children and/or disabilities, the donor may be given the name of the Hospital Foundation as a potential beneficiary of the donor’s gift. The Hospital Foundation does not accept a gift without meeting first with the donor and explaining the history and mission of the Hospital and inviting the donor to tour the hospital’s facilities, if possible. In addition, the Foundation ensures that the potential donor knows that if he or she were to make a donation to the Foundation, the Foundation would be paying some of the transaction fees for this consultant to complete the gift. 43

Case Study (from afpnet. org) Bonus Points You are the director of development of a biomedical research organization. The organization’s Board decides to establish a bonus plan for all senior managers, based on performance of responsibilities. Your bonus is to be 10% of your annual salary if you bring in 10 new corporate sponsorships and another 10% of your annual salary if you bring in at least 10 major gifts of $10, 000 or more. 44

BONUS Case Study - The Unsavory Character You are the development director of a major university. Two years ago, through a private foundation, you received a one-time, anonymous gift of $50 K from a high-profile financier. The gift was used to sponsor a university conference. The donor has cultivated a reputation as an education activist and philanthropist, and while he never earned a college degree himself, he has donated money to multiple academic institutions, topped by Harvard University, most notably contributing $6. 5 million in 2003. Recently this individual was arrested on an indictment filed by the U. S. Attorney’s Office that charged him with sex trafficking and conspiracy to traffic minors for sex. He is accused of sexually exploiting and abusing underage girls at his homes in New York City and Palm Beach, Florida, between 2002 and 2005. 45

Jeffrey Epstein in Cambridge, Mass. , on Sept. 8, 2004. Epstein has donated generously to Harvard University in the past. And you know the rest of the story…

Ethical Fallacies It’s not unethical if…. 47

Washing Your Hands of Dirty Money • AFP Code of Ethical Principles and Standards • Gift Acceptance Policies • Gift Acceptance Committee 48

Additional Sources • • • http: //ftw. usatoday. com/2014/04/ucla-donald-sterling-donation http: //www. thenonprofittimes. com/news-articles/turning-away-millionsfund-mission/ http: //www. councilofnonprofits. org/nonprofit-gift-acceptance-policy www. Afpnet. org/ethics https: //www. azcentral. com/story/news/local/arizona/2019/07/12/sextrafficking-suspect-jeffrey-epstein-donated-50 -thousand-universityarizona/1710046001/ 49

The Robin Hood Dilemma A. Robin is clearly guilty of unethical fund raising behavior B. Robin’s thievery is not against the law, because he does not recognize the government under Prince John to be valid. Therefore, his laws, specifically those prohibiting stealing from the rich, are irrelevant C. Robin did not violate the Code of Ethical Standards, because AFP did not yet exist in 13 th century England 51

John A. Scola, CFRE Chief Development Officer Boys & Girls Clubs of Metro Phoenix 602 -343 -1258 jscola@bgcmp. org 52

Thank You! 53