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Ethics is an
emerging
issue that
is being
dealt with
quite poorly
by
fundraisers
as a
profession.
If we do not
police this
better
ourselves,
the U.S.
Senate
Finance
Committee
may end up
doing it for
us in coming
months.
Although
professional
associations
such as
Association
of
Fundraising
Professionals
(AFP) have
adopted a
code of
ethical
principles,
it is
evident that
more needs
to be done
in this
area.
AFP adopted
its Code of
Ethical
Principles
in 1964;
amending
them in
2004. In
addition to
outlining
aspirations
for
fundraisers,
the Code
outlines
standards of
professional
practice. A
variety of
areas are
covered
including:
professional
obligations,
guidelines
on the
solicitation
and use of
funds,
presentation
of
information
and
compensation.
Similarly,
NCPG has
ethical
guidelines
for its
members. In
2001, NCPG
made a joint
statement,
along with
American
Council on
Gift
Annuities to
reiterate
both
organizations’
long
standing
opposition
to the
practice of
charitable
organizations
paying sales
commissions
to
for-profit
planners in
connection
with the
sale of
charitable
gift
annuities.
Recent
attention
has focused
on this
issue,
primarily
due to
concerns
raised by
individuals
such as
Bruce Makous,
a fundraiser
at a
Philadelphia
cancer
organization.
Makous
charges that
donors are
being
influenced
to set funds
by financial
advisers
receiving
“blatantly
unethical”
fees.
Makous feels
that many
stockbrokers,
money
managers,
and other
financial
advisers
have a
conflict of
interest
because they
earn fees by
steering
donors to
the funds,
particularly
those
managed by
commercial
investment
firms, and
helping
donors
invest
assets in
the funds.
As a result,
he says,
advisers
don`t always
present
donors with
the full
range of
giving
options
available
-- some of
which might
make more
sense for
them
financially
and produce
more money
for charity.
Few
fundraising
or financial
experts
agree with
Mr. Makous`s
contentions.
But his
views have
attracted
attention,
in part
because they
come at a
time when
donor-advised
funds, which
hold more
than
$13-billion
in assets
according to
a
Chronicle
study,
are under
scrutiny in
Washington.
Some of
AFP’s Code
of Ethics
related to
this are:
16. Members
shall not
accept
compensation
that is
based on a
percentage
of
contributions;
nor shall
they accept
finder’s
fees.
17. Members
may accept
performance-based
compensation,
such as
bonuses,
provided
such bonuses
are in
accord with
prevailing
practices
within the
members’ own
organizations,
and are not
based on a
percentage
of
contributions.
18. Members
shall not
pay finder’s
fees, or
commissions
or
percentage
compensation
based on
contributions,
and shall
take care to
discourage
their
organizations
from making
such
payments.
A violation
of the AFP
Standard may
subject the
member to
disciplinary
sanctions,
including
expulsion,
as provided
in the
AFP Ethics
Enforcement
Procedures.
Despite
these
attempts,
many feel
that the
standards
are
inadequate
or
impractical
when applied
to the
real-life
situations
faced by
countless
fundraisers.
The Senate
Finance
Committee
and the
Internal
Revenue
Service have
been looking
into how the
funds are
run, and
lawmakers
expect to
propose
legislation
soon to
regulate the
funds.
Senate aides
say they are
concerned
about
conflicts of
interest
surrounding
the creation
and
distribution
of money in
donor-advised
funds.
Today, few
regulations
or laws
specifically
apply to
them.
Fundraising
experts and
officials at
financial
institutions
that work
with
charities
and donors
say Mr.
Makous is
calling
attention to
problems
that do not
exist. They
note that
ethical
codes of
major
fundraising
associations
say it is
acceptable
for
professional
financial
advisers to
be
compensated
through the
percentage
of assets
they manage,
as long as
they are not
charging
unreasonable
amounts
compared
with other
advisers.
Makous
approached
AFP and NCPG
several
years ago
with his
concerns;
however, he
feels that
they are not
moving
quickly
enough.
Trusts &
Estates
magazine
published an
article by
Makous
outlining
his
arguments.
The article
urged people
who shared
these
concerns to
join a group
of donors,
fundraisers,
financial
advisers,
and others
who want to
educate
donors about
their rights
and call
attention to
unethical
practices.
In addition,
some feel
that Makous`
motives may
be publicity
seeking
because he
sent some
reporters
promotional
materials
about a
mystery
novel he
wrote
related to
his career
in
fundraising.
Financial
companies
say Makous
has unfairly
criticized
them. For
example, a
spokesperson
from Merrill
Lynch said
that as long
as advisers
are
disclosing
fees and not
making their
fund sound
like the
only
solution,
that the
adviser
shouldn’t be
faulted for
offering a
limited
number of
options to
meet
client’s
objectives.
Others
involved in
fundraising
and the
creation of
donor-advised
funds also
say Mr.
Makous
concerns are
unjustified.
Not only are
abuses rare,
they say,
but
financial
advisers
should be
applauded
for helping
to channel
more money
into
charitable
funds.
Officials at
the
professional
fundraising
organizations
that Mr.
Makous has
pressed to
take action
also say
they have
seen little
evidence of
abuse. They
feel that
although he
raises some
legitimate
concerns, he
is
overstating
the problem.
The
Association
of
Fundraising
Professionals
three years
ago asked
Mr. Makous
to gather
fundraisers
and other
experts to
look into
the issue.
Association
officials
say that the
organization
may decide
to
investigate
the matter
further when
its ethics
committee
meets in
September,
but they
question
whether
their
association,
which
represents
fundraisers
who work for
charities,
not
companies,
could help
curb abuse
by
commercial
advisers
-- even if
abuse were
found.
So the
question
remains, are
the Ethical
Practices in
our industry
adequate?
As
fundraisers,
should we be
self-regulating
in a
different or
more
regulated
manner? Or
should we
relinquish
control to
an outside
body such as
the Senate
Finance
Committee? |