Ethical Responsibility of the Not-For-Profit Sector
I have worked in the not-for-profit sector for 39 years. That is a long time to make philanthropy one's career. I have had a number of opportunities to leave the philanthropic career interstate but have chosen to remain on this interstate because I care about others before self.
I want to make a difference and use my talents to help others. I believe every person in this profession has a moral and ethical responsibility to promote the profession in the best way possible. My dad said that your reputation is everything. I also believe the profession has a reputation that is everything. That is why I have zero tolerance for fraud and abuse in our profession.
Brian Collins, CPA, an accountant with Eisner Amper, noted that the Independent Sector reported that there are more than 1.1 million not-for-profit organizations in the United States that employ 13.7 million individuals. This sector generates an estimated $1.5 trillion in revenue each year. The Association of Certified Fraud Examiners estimates that organizations lose 5 percent of annual revenue to fraud, which means the not-for-profit sector is a victim of $77 billion in estimated annual losses due to fraud.
Collins also noted besides the funds lost, the impact of fraud is felt in damage to the organization's reputation, negative publicity, lower employee morale, cost of litigation and investigation, and disruption to business operations. The not-for-profit sector is often more susceptible to fraud and abuse due to the nature of many organizations. Excessive control is often placed in a key founder, director or volunteer. Many not-for-profits do not have the resources for financial oversight, volunteers with too much confidential information, boards with limited operational expertise, methods that can be abused or hidden practices tolerated because of the fear of public exposure.
Some examples of fraud include deceptive fundraising practices or fraudulent financial reporting. In some cases, some not-for-profits handle a great deal of cash, which is tempting to unethical behavior. I had to fire an employee who was caught repeatedly stealing cash. In fact, in two other positions I found a number of uncashed, large corporate checks in a desk of an employee long after the checks were written and another employee using whiteout to change the payee names on checks to her own name.
Other examples of fraud in the headlines include:
- "$2 Million Embezzlement by Ex-PBS Official"
- "$317,000 Charity Fraud by Sportscaster"
- "Sisters Charged with Stealing $1.4 Million from Nonprofits"
According to an article in GuideStar, in the nonprofit world, fundraising is as inevitable as death and taxes in the for-profit world. If only a small percentage of fundraisers are unscrupulous, the general public may lose trust in the entire sector. Potential donors can protect themselves by asking a number of questions prior to making donations. It is up to the thousands of honest and ethical fundraising professionals to look out for potential fraud and abuse in our profession. That said, I am very proud to have been a member of the Association of Fundraising Professionals (AFP) for more than 30 years.
On Jan. 21, the AFP board of directors approved a new format for the association's Code of Ethical Principles and Standards, which members are required to sign every year as part of their membership. The ethical principles were originally adopted in 1984 and amended in 2014.
These principles include areas of:
- Public Trust, Transparency and Conflicts of Interest
- Solicitation & Stewardship of Philanthropic Funds
- Treatment of Confidential & Proprietary Information
- Compensation, Bonuses & Finder's Fees
These principles disclose what members shall and shall not do in their fundraising activities. I am proud of this organization and its nearly 30,000 international members who collectively work to abolish fraud and abuse in our profession. When I called a donor the other day, I asked why she made gifts to the Salvation Army for so many years. She proudly said, "I trust your organization and trust that you will use my gift to help others in the wisest way possible." We build this trust honestly one donor at a time. Need I say more?
Let's strive to totally eliminate fraud and abuse in our profession beginning today.
F. Duke Haddad, EdD, CFRE, is currently associate director of development, director of capital campaigns and director of corporate development for The Salvation Army Indiana Division in Indianapolis, Indiana. In addition, he is also president of Duke Haddad and Associates, LLC, and freelance instructor for Nonprofit Web Advisor.
He has been a contributing author to NonProfit PRO for the past 13 years.
He received his doctorate degree from West Virginia University with an emphasis on education administration, master’s degree from Marshall University with an emphasis in public administration and a bachelor’s degree from West Virginia University in business administration, with an emphasis in marketing/management. He has also done post graduate work at the University of Louisville.