Association
of Fundraising Professionals
Fundraising
Ethics – Frequently Asked Questions
Obtained from
www.afpnet.org
Frequently asked questions: fundraising ethics
Percentage
compensation
Q.
What is the AFP Standard of Professional Practice regarding percentage compensation?
A.
Standard No. 16 states: “Members shall not accept compensation that is based on a
percentage of charitable contributions; nor shall they accept finder’s fees.” In
this context, a finder's fee is defined as a fee paid for bringing a donor or a charitable
contribution to a not-for-profit organization.
Q.
What does this standard mean?
A.
It means that an AFP member or any other person subscribing to the AFP Code of Ethical
Principles may not accept any compensation that is based on a percentage of charitable
funds raised. For the purpose of this standard, charitable funds are those defined by and
subject to government regulations, or as reported on government reporting forms as
contributions, gifts, grants, or similar amounts received.
Q.
What are examples of acceptable compensation and examples of compensation that is not
acceptable?
A.
Acceptable forms of compensation include:
- A
salary or fee based on expertise, experience, or the time requirements of the position.
- A
commission for work other than charitable fundraising.
- A
graduated fee based on reaching specified milestones in a fundraising campaign (provided
the fee is not a percentage of the charitable funds raised).
Examples
of unacceptable compensation practices include:
- Accepting
percentage-based compensation because an organization lacks sufficient budget.
- Disguising
compensation as salary, fee, or bonus when it is, in truth, a percentage of funds raised.
- Accepting
a compensation package in which a part is salary or fee and the balance is to be made up
of a percentage of the funds to be raised.
Q.
What is the purpose of this standard?
A.
There are two primary principles underlying this standard:
- Charitable
giving is a voluntary action for the public benefit.
- The
seeking or acceptance of charitable gifts should not provide personal inurement to anyone.
The
purpose of this standard is to ensure that fundraising professionals are compensated for
their experience, expertise, and the work they actually perform on behalf of the
charitable organizations that employ their services, and not for work performed by others,
or for funds obtained without effort by the fundraiser, or for funds obtained outside of
the mission of their organization. This standard recognizes that fundraising is a
continuing practice in which present funds received may be the result of efforts of others
in previous years, and current fundraising activities may result in funds only in the
future. Similarly, persons give to causes in which they believe, and sometimes gifts
arrive unexpectedly, without solicitation.
Finder's
fees
Q.
What constitutes a finder's fee under the AFP code?
A.
A finder's fee is a fee paid for bringing a donor or a charitable contribution to a
not-for-profit organization.
Q.
What do the AFP Standards of Professional Practice say regarding finder's fees?
A.
Standard No. 16 states that members shall not accept finder's fees. Standard No. 18 states
that members shall not pay finder's fees and shall take care to discourage their
organizations from making such payments.
Q. Is
it acceptable under the Code to pay a finder's fee to an attorney or financial advisor for
referring a potential donor to a not-for-profit organization?
A.
No. That would be a violation of Standard No. 18.
Q. Is
it acceptable under the Code to pay a finder's fee to someone for referring a potential
sponsor or cause-related marketing contractor to a not-for-profit organization?
A.
Yes, because revenues from sponsorships and cause-related marketing are not charitable
contributions. Such fees are generally described as referral fees in business-to-business
transactions.
Conflict
of interest
Q.
What constitutes a conflict of interest?
A.
A conflict of interest exists whenever an AFP member or someone in the member’s
immediate family has a formal relationship with an actual or prospective donor or a
material interest in a firm that is an actual or potential vendor to the member’s
organization.
Q.
When is a fundraiser in conflict with his or her organization or donor?
A.
A fundraiser is in conflict with his or her organization or donor when an actual or
potential conflict of interest exists and the member does not disclose that conflict to
his or her organization.
Q. Why
does AFP restrict a development officer from serving as an executor of an estate or
receiving compensation from an estate in which the organization employing the officer is a
beneficiary?
A.
Because it is impossible to avoid the appearance of a possible conflict of interest in
such a situation. An AFP member may not receive compensation from the estate of a donor to
any organization for which the member has worked, for services performed as a financial
advisor, executor or other officer to the donor’s estate. AFP members are not
forbidden to receive funds from the estate of a friend or relative who has made minor
contributions to the AFP member’s organization if the relationship was not the result
of the member's employment in any not-for-profit organization. In such case, notification
to the employing organization is still advised.
Incentive
compensation
Q.
What is considered to be incentive compensation?
A.
Incentive compensation is compensation (such as a bonus) that is based on the
accomplishment of mutually agreed-upon, pre-established overall goals related to a
fundraiser’s responsibilities within his or her organization. In accord with Standard
No. 17, incentive compensation must meet all of the following conditions to be acceptable:
- The
member's organization must have a policy and practice that awards performance-based
compensation.
- The
policy must have the approval of the organization's governing body.
- The
policy and practice must include, but not be limited to, the member's area of
responsibility, e.g., be a norm within the organization.
- The
criteria must be restricted to mutually agreed-upon, pre-established overall goals.
- The
criteria for determining the eligibility for and amount of such compensation must exclude
any consideration of a percentage of charitable contributions as defined by, and subject
to, government regulations, or as reported on government reporting forms as
"contributions, gifts, grants, and similar amounts received." This should be
interpreted as an absolute prohibition of any reference to, or use of, a percentage of
charitable contributions to determine compensation, either in effect or actuality.
Q.
How is incentive compensation different from percentage compensation?
A.
Incentive compensation is based on the achievement of mutually agreed-upon, pre-existing
goals related to the fundraiser’s responsibilities (and must meet all of the
conditions described above), whereas percentage compensation is compensation that is
computed purely as a percentage of charitable contributions obtained.
Q.
What does it mean to be within the prevailing practice of an organization?
A.
This means that the practice of awarding bonuses or other incentive compensation for
achieving mutually agreed-upon, pre-existing objectives related to one’s
responsibilities must apply to all or most executive positions within the organization and
not simply to members of the development staff alone.
Donor
information
Q.
A development officer is asked to provide donor names and contribution information to the
Board Chair, Development Chair, and CEO of the officer’s organization. Is it a
violation of the AFP Code to provide the information?
A.
No, if the development officer determines that the persons have a need to know, cautions
them that the information is confidential and not to be shared with others, and has not
received directions to the contrary from the donor.
Use of
funds
Q. My
institution wants to use a restricted fund for purposes other than the purposes for which
the donations were solicited. Is this ethical, and how do I handle it?
A.
No, it is a violation of the AFP Code to use monies from a restricted fund for a purpose
other than the purpose for which they were solicited. You should advise your institution
that such a use would violate the principle of honoring donor intent and would be a
violation of the AFP Code of Ethical Principles. You should strongly urge your institution
not to follow such a practice.
AFP
enforcement process
Q.
When can the AFP enforcement process be triggered?
A.
The enforcement process can be triggered at any time that the AFP Ethics Committee
receives a signed complaint on the AFP Complaint Form alleging that a violation of the AFP
Code has occurred.
Q. Can
a non-member of AFP with a CFRE or ACFRE credential be charged with a violation of the
Code?
A.
Yes, because all persons who hold an AFP-sanctioned credential must sign an enforced Code
of Ethics. If a certificated person has signed the AFP Code, that person has sworn to
uphold the AFP Code as a condition of receiving the credential.
Q.
What is the enforcement process?
A.
Anyone may submit an ethics query or file a complaint alleging violation of the AFP Code
of Ethical Principles by an AFP member or person holding an AFP-sanctioned credential,
whether or not the person lodging the query or complaint is a member of AFP. Inquiries
about actions of members are held strictly confidential and may be made only to the Office
of the President and CEO.
Before
filing a complaint or submitting an ethics query, you may call and have a conversation to
see if you wish to proceed. An ethics query is a means for inquiring whether a practice
warrants filing a complaint alleging a violation of the AFP Code, and for requesting
assistance from the Ethics Committee to resolve an issue or practice of concern without
invoking the formal Code enforcement process. The goal is to bring about improvement in
professional practice without having to resort to enforcement proceedings.
An
ethics query may be lodged via a confidential letter or memorandum to the Office of the
AFP President and CEO identifying the person against whom the ethics query is lodged and
describing the incident or practice that is of concern. A complaint is a formal allegation
of violation of the AFP Code of Ethical Principles. The filing of a complaint initiates
the AFP Code enforcement procedure. In filings, AFP requires complaining parties to agree
that, upon request of the AFP Ethics Committee, the complainant will give personal
testimony in the presence of the person against whom the complaint is lodged.
Once
a complaint is filed, it is reviewed by the AFP Ethics Committee. If the Committee finds
that the complaint alleges a violation of the Code of Ethical Principles and is supported
by sufficient documentation, the Committee Chair sends written notification of the
complaint to the person against whom the complaint is lodged, requesting the member to
respond in writing to the complaint. If the person against whom the complaint is lodged
responds to the complaint, the Ethics Committee reviews the information presented in the
response.
If
the Committee determines that there are grounds to support a charge of violation of the
Code and that efforts to persuade the person to cease and desist have failed, the
Committee may decide to hold a hearing to (1) determine whether a violation of the Code of
Ethical Principles has occurred and (2) decide what disciplinary action, if any, is
appropriate. Penalties for violation of the Code can include:
- A letter
of censure and prohibition against holding national office in AFP.
- Suspension
of membership in AFP for a stated period.
- Permanent
expulsion from AFP membership, including withdrawal of any AFP-sanctioned credential.
All
communications and records regarding questions of ethical misconduct are held strictly
confidential in the Office of the President and CEO.
Q.
What is the chapter’s role in enforcement?
A.
The chapter does not have a role in the enforcement of specific cases. The chapter’s
role with respect to fundraising ethics is to inform and educate members, their
organizations, and the public about the provisions of the AFP Code and enforcement
process, and to advise persons who wish to make a query or complaint about a specific
situation to direct their communications about the matter to the President and CEO by
telephone, fax, mail, or email.
Q.
Where can I find the enforcement process and complaint form?
A.
You can find a description of the enforcement process and an AFP Complaint Form on the AFP
Website or you may obtain a copy by contacting the AFP President and CEO by telephone,
fax, mail, or email.
Q. Who
may file a complaint?
A.
Anyone may file a complaint alleging a violation of the AFP Code by an AFP member or a
person holding an AFP-sanctioned credential. The complaint must be written on an AFP
Complaint Form and signed by an individual.
Q. How
long does a complaint take to process and work through the AFP Ethics Committee process?
A.
The length of time can vary, depending on the nature of the complaint, the completeness of
submitted documentation supporting the complaint, the number of persons involved in the
complaint, the promptness of responses to Ethics Committee communications by the
complainant(s) and the person against whom the complaint is lodged, whether a hearing must
be held, and other factors. A complaint that does not require a hearing can usually be
processed within six months. A complaint that requires a hearing can require from six
months to a year or more to process. To be considered, a complaint must be filed with the
AFP President and CEO within one year after the acts in the alleged violation have
occurred.
Information from the
Association of Fundraising Professionals
1101 King Street, Suite 700
Alexandria, VA 22314
(703) 684-0410
http://www.afpnet.org
