Not For Profit Shared Interest Group

You work in the finance function of a nonprofit organization. A major donor offers a significant contribution that could fund critical programs for the next year.

However, during informal discussions, you learn that the donor's wealth may be tied to:

• Environmentally harmful practices
• Potential labor violations
• Ongoing legal investigations (not yet proven)

Leadership's stance:

• "This funding will help thousands of people."
• "We are not responsible for how donors make their money."
• "If we don't accept it, another organization will."

There is no formal donor due diligence policy in place.

You feel conflicted:

• Accepting the donation supports the mission
• But it may compromise the organization's ethical integrity and reputation
  
  

  Discussion Questions

  1. Ethical Boundaries

  • Should nonprofits evaluate the source of funds, or only the impact of their use?
  • Where should organizations draw the line when accepting donations?

  2. Governance & Responsibility

  • What role should the board play in donor acceptance decisions?
  • Should there be a formal donor due diligence policy? What should it include?

  3. Reputation & Risk

  • What are the reputational risks if the donor's activities become public?
  • How might this impact other donors, partners, or beneficiaries?

  4. Mission vs Integrity

  • Is it ever justifiable to compromise ethical standards to advance a mission?
  • How should organizations balance short-term impact vs long-term trust?

  5. Transparency

  • Should the organization disclose controversial donors publicly?
  • How transparent should nonprofits be about funding sources?

  6. Finance Team's Role

  • What responsibility does finance have in raising concerns about donors?
  • Should finance teams be involved in donor vetting, or is this purely development/leadership?

This is the exact situation that a board approved gift acceptance policy is critical.  It provides guidance and a process for decision making regarding gifts that come with ethical concerns or potential issues with restrictions.   

In response to your questions specifically...

1)  Yes, nonprofits should consider the source of their funds and should not accept funds that could conflict with their mission. The board and leadership need a well-crafted gift acceptance policy that outlines the types of gifts they will and will not accept and the framework for making decisions about potential gifts. 

2) Ultimately, the board should review and approve a gift acceptance policy. The board is often required to be the final decision maker regarding specific gifts in question.  There are some great templates online for policies.

Gift Acceptance Policies | National Council of Nonprofits

How to Write a Nonprofit Gift Acceptance Policy (+ Free Template)

Message from Bloomerang

3) The risk depends entirely on the specific conflicts of the donor and mission and any restrictions imposed by the donor. It could cause other donors and volunteers to rescind their support. Some gifts may create legal or tax implications or cause the organization to incur unreasonable costs.   

4) The board has 3 primary duties. The Duty of Care means they are actively involved and make informed decisions. Duty of Loyalty means they avoid personal conflicts of interest and advocate for the organization to ensure the actions of the organization align with its mission. Lastly, the Duty of Obedience means they ensure the organization complies with all legal requirements and ensures its activities align with its stated mission.  These duties provide the framework for board actions. The board must act in the best interest of the organization and make decisions that take into account all available information and ethical concerns. Long-term and short-term impact and trust are definitely part of the factors the board must consider.

5) Nonprofits are required to include their donor list on the 990, but this disclosure is not part of the public disclosure document. Most nonprofits recognize their donors publicly in a variety of ways based on the size of the donation unless the donor specifically asks to be anonymous.  Large gifts often include a significant amount of public recognition. If Leadership has concerns about making the donor's name and giving amount public, then the donation needs to be evaluated as to whether it is appropriate to accept.

6) The finance team may raise concerns through the proper leadership channels, but the decisions regarding acceptance are the responsibility of the board and senior leadership. Again, this is where a gift acceptance policy is critical in outlining the roles and responsibilities of all parties and the types of gifts that will be refused. If you raise concerns and the leadership chooses to accept the gift anyway, that is their responsibility - not the finance team. However, if you feel the organization's acceptance of the gift is a significant ethical problem, start looking for another job. If leadership doesn't take this kind of ethical concern seriously there will likely be many other ethical issues that you will want to avoid.

You work in the finance function of a nonprofit organization. A major donor offers a significant contribution that could fund critical programs for the next year.

However, during informal discussions, you learn that the donor's wealth may be tied to:

• Environmentally harmful practices
• Potential labor violations
• Ongoing legal investigations (not yet proven)

Leadership's stance:

• "This funding will help thousands of people."
• "We are not responsible for how donors make their money."
• "If we don't accept it, another organization will."

There is no formal donor due diligence policy in place.

You feel conflicted:

• Accepting the donation supports the mission
• But it may compromise the organization's ethical integrity and reputation
  
  

  Discussion Questions

  1. Ethical Boundaries

  • Should nonprofits evaluate the source of funds, or only the impact of their use?
  • Where should organizations draw the line when accepting donations?

  2. Governance & Responsibility

  • What role should the board play in donor acceptance decisions?
  • Should there be a formal donor due diligence policy? What should it include?

  3. Reputation & Risk

  • What are the reputational risks if the donor's activities become public?
  • How might this impact other donors, partners, or beneficiaries?

  4. Mission vs Integrity

  • Is it ever justifiable to compromise ethical standards to advance a mission?
  • How should organizations balance short-term impact vs long-term trust?

  5. Transparency

  • Should the organization disclose controversial donors publicly?
  • How transparent should nonprofits be about funding sources?

  6. Finance Team's Role

  • What responsibility does finance have in raising concerns about donors?
  • Should finance teams be involved in donor vetting, or is this purely development/leadership?

Thank you Barbara!! I wish you can join the Professional Ethics SIG and post this answer there too! very informative! Thank you for all the resources you've shared and the insights! I would like to use the content to write a new blog too.. many finance professionals in this not for profit field need to know this.

This is the exact situation that a board approved gift acceptance policy is critical.  It provides guidance and a process for decision making regarding gifts that come with ethical concerns or potential issues with restrictions.   

In response to your questions specifically...

1)  Yes, nonprofits should consider the source of their funds and should not accept funds that could conflict with their mission. The board and leadership need a well-crafted gift acceptance policy that outlines the types of gifts they will and will not accept and the framework for making decisions about potential gifts. 

2) Ultimately, the board should review and approve a gift acceptance policy. The board is often required to be the final decision maker regarding specific gifts in question.  There are some great templates online for policies.

Gift Acceptance Policies | National Council of Nonprofits

How to Write a Nonprofit Gift Acceptance Policy (+ Free Template)

Message from Bloomerang

3) The risk depends entirely on the specific conflicts of the donor and mission and any restrictions imposed by the donor. It could cause other donors and volunteers to rescind their support. Some gifts may create legal or tax implications or cause the organization to incur unreasonable costs.   

4) The board has 3 primary duties. The Duty of Care means they are actively involved and make informed decisions. Duty of Loyalty means they avoid personal conflicts of interest and advocate for the organization to ensure the actions of the organization align with its mission. Lastly, the Duty of Obedience means they ensure the organization complies with all legal requirements and ensures its activities align with its stated mission.  These duties provide the framework for board actions. The board must act in the best interest of the organization and make decisions that take into account all available information and ethical concerns. Long-term and short-term impact and trust are definitely part of the factors the board must consider.

5) Nonprofits are required to include their donor list on the 990, but this disclosure is not part of the public disclosure document. Most nonprofits recognize their donors publicly in a variety of ways based on the size of the donation unless the donor specifically asks to be anonymous.  Large gifts often include a significant amount of public recognition. If Leadership has concerns about making the donor's name and giving amount public, then the donation needs to be evaluated as to whether it is appropriate to accept.

6) The finance team may raise concerns through the proper leadership channels, but the decisions regarding acceptance are the responsibility of the board and senior leadership. Again, this is where a gift acceptance policy is critical in outlining the roles and responsibilities of all parties and the types of gifts that will be refused. If you raise concerns and the leadership chooses to accept the gift anyway, that is their responsibility - not the finance team. However, if you feel the organization's acceptance of the gift is a significant ethical problem, start looking for another job. If leadership doesn't take this kind of ethical concern seriously there will likely be many other ethical issues that you will want to avoid.

You work in the finance function of a nonprofit organization. A major donor offers a significant contribution that could fund critical programs for the next year.

However, during informal discussions, you learn that the donor's wealth may be tied to:

• Environmentally harmful practices
• Potential labor violations
• Ongoing legal investigations (not yet proven)

Leadership's stance:

• "This funding will help thousands of people."
• "We are not responsible for how donors make their money."
• "If we don't accept it, another organization will."

There is no formal donor due diligence policy in place.

You feel conflicted:

• Accepting the donation supports the mission
• But it may compromise the organization's ethical integrity and reputation
  
  

  Discussion Questions

  1. Ethical Boundaries

  • Should nonprofits evaluate the source of funds, or only the impact of their use?
  • Where should organizations draw the line when accepting donations?

  2. Governance & Responsibility

  • What role should the board play in donor acceptance decisions?
  • Should there be a formal donor due diligence policy? What should it include?

  3. Reputation & Risk

  • What are the reputational risks if the donor's activities become public?
  • How might this impact other donors, partners, or beneficiaries?

  4. Mission vs Integrity

  • Is it ever justifiable to compromise ethical standards to advance a mission?
  • How should organizations balance short-term impact vs long-term trust?

  5. Transparency

  • Should the organization disclose controversial donors publicly?
  • How transparent should nonprofits be about funding sources?

  6. Finance Team's Role

  • What responsibility does finance have in raising concerns about donors?
  • Should finance teams be involved in donor vetting, or is this purely development/leadership?