Ethics Education

AFP Saskatoon Chapter is now offering three sample cases every month for enhancing members' understanding and practices of AFP Code of Ethical Standards and potential preparation for CFRE. Please contact our Ethics Chair Trevor Howell at info@handsonoutreach.ca if more information is needed. 

You can subscribe our newsletter to receive updates and other education program announcements by e-mailing afpsaskatooncommunications@gmail.com.  

Case 1. Trust Revoked
Case 2. Helping the Needy

Case 3. Moveable Assets
Case 4. The Big Favor
Case 5. Building on Principle
Case 6. Sharing the Wealth
Case 7. Bonus Points

Case 8. Like Mother Like Son 
Case 9. Ringing Up New Contributions 


Case 1. Trust Revoked

In your old job with a highly regarded, financially stable organization, you developed a close working relationship with an elderly couple who set up a revocable trust with the organization. You then move to a new organization whose financial situation is somewhat shaky. Several months later the couple comes to you and says that because they have such confidence in your ability to look after their interests, they want to revoke the original trust and set up a new one through you with your new organization.

A. What should you do?
1. Accept the offer on behalf of your new organization.
2. Reject the offer.
3. Ask the CEO of your new organization to make the decision.
4. First clear the offer with the general counsel of your new organization to be sure the trust can be revoked legally.

Answer: Reject the offer. Accepting the offer violates numerous AFP Standards including Standards #1, #2, and #3, but most directly #4 which prohibits exploitation of any relationships with a donor, prospect, volunteer, client or employee for the benefit of the members or the member’s organization.

B. Suppose the couple proposed to make a major gift to your new organization without revoking the old trust. What should you do?
1. Accept the offer on behalf of your new organization.
2. Reject the offer.
3. Ask the CEO of your new organization to make the decision.
4. Ask the couple to deal with someone else in your new organization.

Answer: Ask the couple to deal with someone else in your new organization and disclose your prior relationship with the couple to your current CEO. There is nothing fundamentally problematic in this scenario, but there is a danger of an appearance of impropriety, and the possibility of an appearance of misuse of information obtained while in the employ of your former organization. In very small organizations, it may not be possible to deflect the gift transaction to another individual, but in all other instances, this is the best option. Failure to do so runs the risk of violating Standard #1 and Standard #2. With the couple’s permission, disclosure to the original organization is also advisable.


Case 2. Helping the Needy

You are director of an international emergency relief program. Within one month, three large scale disasters occur — an earthquake in Mexico, a hurricane in the Pacific, and a flood in the U.S. Because of the severity of the disasters and the thorough, constant media coverage, donations have been pouring in. Most gifts are designated to either the earthquake or the hurricane victims; however, many people in the U.S. have lost their homes in the flood and are in desperate need of help.

As time passes, you see that the relief needs of the hurricane and earthquake victims will be easily met by 60% of the relief money coming in, but more than 95% of the money is designated by the donors for the hurricane and earthquake, leaving you with insufficient funds to meet the needs in the U.S.

A. Would it be a violation of the AFP Code to use some of the donations designated for the earthquake or hurricane victims to assist victims of the flood?
1. Yes
2. No
3. It depends
4. Don’t know

Answer:
Yes. This would be a violation of Standard #14 – Members shall take care to ensure that contributions are used in accordance with donors’ intentions.

B. To comply with the Code, should you return the donations that were not needed in the areas for which they were designated?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: It depends. A member could contact a donor, explain the circumstances and request permission to use the funds for a different disaster (Standard #16). If permission is not provided, donations should be returned in order to comply with the Code.


Case 3. Moveable Assets

You have built an excellent reputation as development officer for a fine arts organization in a small city. You’ve been able to enlist the support of many new donors and have cultivated numerous major gifts. You’ve been offered a higher paying job at the city hospital.

A. Suppose you have been cultivating a wealthy philanthropist, Mrs. X, who has no real interest in the arts. Mrs. X has numerous health concerns. She is likely to respond favorably to a request for support of the hospital primarily because she has high personal regard for you. Would it be a violation of the AFP Code of Ethical Standards to ask Mrs. X to make the gift to the hospital instead?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: Yes. It would be a violation of the Code. Standard #18 states: “Members shall adhere to the principle that all donor and prospect information created by, or on behalf of, an organization or a client is the property of that organization or client and shall not be transferred or utilized except on behalf of that organization or client.”

In accordance with this standard, the prospect information you have gathered about Mrs. X belongs to your old organization and should not be utilized on behalf of any other organization.

If your personal relationship with Mrs. X pre-dated your employment with the arts organization, then it would not be a violation to begin new discussions with her once you have moved to your new organization, but bear in mind that Standard #4 forbids exploiting any relationship with a donor, prospect, volunteer, or employee to the benefit of the member’s organization. AFP recommends in this situation that you declare your previous relationship with the donor to your CEO or supervisor.

B. Suppose you have worked hard to write original text for planned-giving brochures that have been successful for the arts group. Would it be a violation of the Code to copy from them when you create the brochures for the hospital?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: It depends, on what and how much you “copy.” Standard #18 states: “Members shall adhere to the principle that all donor and prospect information created by, or on behalf of, an organization or a client is the property of that organization or client and shall not be transferred or utilized except on behalf of that organization or client.” 

It would be a clear violation of the Code to copy text, slogans, taglines, or special terms you created for the old organization. The general tone, approach, and technical terms of a planned giving brochure are more difficult to define and measure, and therefore it may be more difficult to discern whether similar examples of such matters have been copied. The safest course is to steer clear of text and designs you have used before, or to seek approval from your prior organization. (Sometimes, there are agreements as to who owns the text.) In many cases, they probably would not be effective for the new organization.

C. You know that the hospital and the arts group solicit the same type of donors, although for entirely different purposes. Would it be a violation of the Code to make a list of donors to the arts organization from memory to add to the prospect list for the hospital?
1. Yes
2. No
3. It depends
4. Don’t know

Answer:
Yes. In accordance with Standard #18, all donor and prospect information you have gathered for your old organization must be used only for that organization. That principle applies whether you keep the list of donors in your head, in a notebook, or in a computer file.


Case 4. The Big Favor

It is April 15 (U.S. tax filing deadline), and you are in your first week as director of development for a university when you get a phone call from the university’s largest donor. The donor is the chairman of a Fortune 500 corporation who has given several million dollars to the university and already has a building named for him. He announces that his tax advisor says he needs to make another donation for the previous year and that he is sending over a check for $100,000. He asks you to prepare a letter of acknowledgment dated prior to last December 31. Before you can think of what to say, he hangs up.

A. What should you do?
1. Prepare the letter of acknowledgment thanking the donor.
2. Call the donor back and tell him you cannot accept the gift on these terms.
3. Discuss the matter with your hospital CEO.
4. Ask the hospital CEO to decide what should be done.

Answer: Discuss the matter with your CEO. What the donor has proposed is a violation of the law, which is paramount. Accepting the gift on the terms proposed would also be a violation of Standards #2 and #5. This is your first week on the job. Encourage your CEO to make the call; if he/she won’t, make the call yourself.

B. Suppose you inform your CEO about the offer and the CEO says, “Don’t worry about it, I’ll write the letter.” What should you do?
1. Warn the CEO that it would be a violation of the AFP Code to comply with request.
2. Warn the CEO that it would be illegal to comply with the request.
3. Ask the chief financial officer for an opinion.
4. Keep quiet; this is a matter between the CEO and the donor.

Answer: Warn the CEO that it would be illegal to comply with the request, as well as a violation of the AFP Code. This is a clear violation of Standards #2 and #5.

C. Suppose that upon further investigation you learn that occasionally in the past the university has done similar favors for some of its large donors. What should you do?
1. Continue the practice; it’s working.
2. Warn the CEO that it would be a violation of the AFP Code to continue this practice.
3. Warn the CEO that it would be illegal to continue this practice.
4. Resign your position.

Answer:
Warn the CEO that it would be illegal to continue this practice, as well as a violation of the AFP Code. Fundamentally, the same explanation that applies to the previous question also applies here. To protect one’s integrity, the choice to resign is an option for consideration.


Case 5. Building on Principle
You are the vice president for advancement and alumni affairs of a small college. After many months of careful cultivation, you succeed in obtaining a pledge from a famous alum for the largest gift in the college's history. The only catch is, the alum insists that the college put his name on a building that was named for a previous donor (now deceased) as a condition of that alum's gift. You try to persuade the new donor to change his mind, but the donor is insistent.

A. Should you refuse this gift?

1. Yes
2. No
3. It depends
4. Don’t know

Answer: Yes. You have a responsibility to vigorously and ethically raise funds for your college while ensuring that the intent of all donors is honestly fulfilled. Presumably the naming of the building (in perpetuity) was a part of the original gift agreement with the previous donor, and to make any changes would be a violation of Standards #12 and #14.

You must review the original gift agreement and may wish to get advice from counsel if the gift agreement is complex or if one was not
written. Assuming the Board approves significant naming opportunities, you will need to take the matter to your Board with the advice that the original donor’s name remain on the building.

B. Suppose the new donor agrees to a proposal to name the building jointly for both donors. Would this arrangement pass muster under the “donor consent” standard of the AFP Code?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: No. The proposal on its own would not pass the “donor consent” test. The guideline to Standard #14 notes that a member may meet with surviving family members or representatives to discuss potential alteration in the original conditions of a gift.

C. Suppose the college president and the Board of Trustees vote to rename the building for the new donor. Should you resign?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: Yes. For this scenario, we will assume that the president and Board have the ultimate authority to accept or decline a gift (certainly a gift of this magnitude). If the Board and President are in breach of the terms of the donor’s gift agreement and/or are not complying with approved donor recognition and naming policies, you should resign from the college. You will not be able to adhere to the AFP Code nor practice your profession with integrity, honesty, and truthfulness at this institution.


Case 6. Sharing the Wealth
As the chief development officer for a religious organization, you receive an offer from a long-distance telephone company. For each member of your organization who switches to the company's long-distance service, the company will make a donation to your organization, or to any other charity designated by the member, equal to 3% of each monthly payment for long distance service. The company promises that its rates will never be higher than the average of the rates of the leading long-distance telephone companies. All that your organization must do is to help publicize the offer through your newsletter and normal channels of communication with members.

A. Would this offer be acceptable under the AFP Code of Ethical Standards?
1. Yes
2. No
3. It depends
4. Don’t know

Answer: Yes. This is an advertising/promotional arrangement being proposed by a for- profit company with no philanthropy involved. The religious organization is not providing the lists of its constituents or any other privileged information. Therefore, there is no violation of the Code.

B. Suppose the company offered to pay your organization a fixed fee ($25) for each member who switches to its services for at least one year and who spends at least $25 per month on long distance service. Would this offer pass muster under the AFP Code?
1. Yes
2. No
3.It depends
4. Don’t know

Answer: Yes. Acceptance of this offer would not violate the Code as it also would be payments to the religious organization as the result of a promotional/advertising arrangement.


Case 7. Bonus Points
You are the director of development of a biomedical research organization. The organization’s Board decides to establish a bonus plan for all senior managers, based on performance of responsibilities. Your bonus is to be 10% of your annual salary if you bring in 10 new corporate sponsorships and another 10% of your annual salary if you bring in at least 10 major gifts of $10,000 or more.

A. Would this bonus plan be acceptable under the AFP Code of Ethical Standards?
1. Yes
2. No
3. It depends
4. Don't know

Answer:
Yes. The AFP Code provides that members may accept performance-based compensation, such as bonuses, provided such bonuses are not based on a percentage of contributions (Standard #22). In this case, the bonus is a fixed amount and it is based upon the number of sponsorships and major gifts that you bring in, not a percentage of the amount of the contributions.

B. Suppose that instead of the plan above, the size of the bonus was based on your performance in three areas: 
- Number of new volunteers recruited
- Number of new major gifts received
- Exceeding the amount raised the previous year in the organization’s annual fund

Could such a bonus plan be acceptable under the AFP Code?
1. Yes
2. No
3. It depends
4. Don't know

Answer: Yes, as there is no violation of Standard #22. This is an example of a performance- based compensation plan that provides financial and non-financial indicators that are acceptable under the Code.

C. Suppose that the bonus was a fixed amount (5% of your base salary) and was based on achieving three performance targets:
- Recruiting 50 new volunteers
- Successfully soliciting 10 new major gifts
- Growing the organization’s annual fund receipts from the previous year

Would this bonus plan pass muster under the AFP Code?
1. Yes
2. No
3. It depends
4. Don't know


Answer: Yes. There is no violation of the Code (Standard #22), and the criteria are not based on a percentage of contributions.


Case 8. Like Mother Like Son
As the chief development officer for a youth organization, you learn from a donor that the son of the chair of your Board has been calling donors to the organization to solicit business for his investment company.

A. What should you do?
1. Inform the chair of the Board that the AFP Code of Ethical Standards forbids this practice and it must stop.
2. Ask your CEO to advise the chair of the Board that this practice must stop.
3. Inform your CEO that the AFP Code does not speak to this practice.
4. Keep quiet.
5. Other

Answer: Other. Nothing improper is necessarily going on here. The whole situation could be a coincidence. However, consistent with Standard #2, it would be advisable for you to advise your CEO that the activities of the son of the Board chair could give an appearance of impropriety or misconduct and that consequently, it might be advisable to have her son cease soliciting business for his investment company from donors. 


B. Suppose that investigation reveals that the son obtained the list of donors from the printed program of your organization's recent recognition dinner. Would this practice be acceptable under the AFP Code?
1. Yes
2. No
3. It depends
4. Don't know

Answer: Yes. The information contained in the program cannot be considered privileged or confidential information, since it was publicly available information. (Standard #19)

C. Suppose your investigation reveals that the Board chair has been giving the names of 
donors and acquaintances to her son to help the son get his business started. What should you do?
1. Inform the Board chair that the AFP Code of Ethical Standards forbids this practice and it must stop.
2. Ask your CEO to advise the Board chair that this practice must stop.
3. Inform your CEO that the AFP Code does not speak to this practice.
4. Keep quiet.
5. Other.

Answer: Ask your CEO to advise the Board chair that this practice must stop. Providing her son with the names of donors to the organization is proscribed by the AFP Code (Standard #17) and must stop.


Case 9. Ringing Up New Contributions
You are the chief development officer for a nonprofit organization serving underprivileged children, and a marketing firm offers to provide telemarketing services to raise money for your organization’s annual fund in return for being compensated with 50% of all contributions generated.
A. Would this arrangement be acceptable under the AFP Code of Ethical Standards?
1. Yes
2. No
3. It depends
4. Don't know
Answer: No. Standard #24 reads: “Members shall not pay finder’s fees, commissions or percentage compensation based on contributions, and shall take care to discourage their organizations from making such payments.”
The arrangement clearly compensates the marketing firm based on a percentage of all contributions. This would put the marketing firm in conflict because they may be seeking funds in part for personal gain (the 50% of contributions generated).
B. Suppose the marketing firm offered to charge a fee for each completed telephone call,
whether or not the call results in a contribution. Would this arrangement be acceptable
under the AFP Code?
1. Yes
2. No
3. It depends
4. Don't know
Answer: Yes. This is acceptable because the fee is charged based upon work that the firm proposes to do and is not based on percent of funds raised. Fees paid should be reasonable and performance should be monitored.
C. Suppose the marketing firm proposed receiving a small fee for each completed call
plus 7% of all contributions generated from the telemarketing program. Would
this arrangement be acceptable under the AFP Code?
1. Yes
2. No
3. It depends
4. Don't know
Answer: No. As with part A of this case, the scenario violates Standard #24 because as stated in the Standard, it is unacceptable to pay fees that are based on a percentage of philanthropic contributions raised.

 


Check back often for more sample case studies.