Ethics and Morals in Fundraising

Feb 1, 2023 | Advice, Finances and Giving

Written by Arnie Draiman

At the end of December, something strange happened – well, perhaps not so strange since it happens every year. A lopsided amount of money was given to tzedakah; indeed, 20-25% of all charitable giving is “year-end”, with 10% alone on the last two days of the year! We are creatures of habit, and getting those last minute tax deductions drives this lopsided curve. Jewishly, by the way, large amounts of giving occur around the High Holidays.

Many of you know that I write about the efficiency and effectiveness of non-profits, something I have been researching and reporting on for nearly three decades. Today, however, I will touch on another, but related, subject: Ethics and Morals in Fundraising.

I strongly believe that non-profits should be held to a different, and often higher, standard than for-profit businesses. The main reason is that non-profits operate on outside funding, both public (like governmental) and private (foundations and individuals). Therefore, they should feel a huge responsibility to be as careful with OPM (other people’s money) as possible. I often talk about this point regarding salaries – business salaries should be based on profitability, but non-profit salaries should be reasonable regardless of success. I have seen far too many organizations where dozens of individuals are earning mid-to-high six figures or more.

Another area, in addition to salary levels, regarding the differences between non-profits and business is the realm of operational ethics.  Here, I will pose many questions and while some of the answers are quite clear regarding crossing the ethical line, others are not. Many others, in fact, are in that infamous gray area, and it is something that you, as a donor, should be aware of and make your decisions accordingly.

If a non-profit runs a fundraising dinner or event that loses money every time, is that an issue? What about entertaining journalists at a cost (like taking them on a helicopter ride, or paying for flights from overseas, etc.)?

I have often been offered a chauffeur-driven limo to pick me up to visit a non-profit, seeing me as a potential donor – is that acceptable? There is a very common custom of sending gifts to potential donors, including simple things like return address labels or calendars or even more costly gifts – is this better, worse, or the same as sending gifts to donors themselves? And what level of gift is considered appropriate?

What if some or all of the costs of the above are covered by a donor so that the non-profit doesn’t have to use any of its own funding for that? Could one argue that the donor paying could’ve just used the donation to feed more hungry people or buy more heaters in winter for people in need? And conversely, what if the fundraising event lost money but introduced more people to the non-profit who later, during the year, donated? Does that justify running a deficit event? 

I don’t have a simple yes or no to these situations since each one needs to be looked at carefully, but it should immediately raise a red flag suggesting that there is something here which requires more information before deciding to donate.

And, of course, there is the big question about the ethics and morals of the person raising the funds. May a fundraiser work on commission, that is, take a percentage of how much they raise and keep it as compensation? Would it matter if it were minimal (say, 3%) or huge, perhaps 40%? I am aware of organizations and fundraisers who work on 49%, justifying by saying that “the majority of the funding goes to the non-profit.”

What I do know is that there is not a single professional fundraisers association in the world that allows for a fundraiser to work on a percentage or commission, and it is even illegal in some places. 

What do you think happens to your donation when you get a phone call asking for a contribution? Is the caller working at a call center which can take 25%-70% of all funds raised? Many non-profits feel that it doesn’t matter since they still receive some funds after all the expenses are paid. I feel strongly that the ethics of where my donation goes is important – if 50% goes to a company or the fundraiser and does not provide after-school tutoring as they promised, then I believe that this is simply theft!

One more area you should be aware of: those tzedakah boxes by the cash register at almost every store. The vast majority are collected by a driver who is allowed to keep 49% of all the coins, and gives the organization 51%. Is that the best use of your precious tzedakah shekels?

In sum, there are often no easy answers and I think it would be better if all non-profits were more transparent about all of the issues mentioned above. If they said that the slick advertising video they made was a donation by the video company, or that all expenses for the dinner were paid for separately, etc. then at least a donor has more information with which to decide. Transparency and honesty are among the most important values when deciding where to donate. Don’t be afraid to ask the tough questions of the non-profit – every good one (and sadly, there aren’t that many good ones) will be happy to answer, and willing to share their financial due diligence.

I feel strongly that the ethics of where my donation goes is important.

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