The Nonprofit FAQ

The Association of Fundraising Professionals Code of Ethics
Elliott Alvorado supplied excerpts from ADP's
publications:


"Aloha you'all, I did this about a year ago when the same subject was being debated on the group list (percentage fees for fundraisers). As part of my work on a paper on incentive pay in nonprofit organizations, I've had to type in the relevant portions of the AFP position statements. As my contribution to the discussion, here are those statements. Please realize that the following is the *NOT* the complete text, only the most pertinent sections. For a full copy, contact the
AFP National Office."

(NOTE: The AFP code is now posted online at the AFP website, along with other materials about ethics in fundraising. See http://www.afpnet.org/ethics. At the time that Elliott Alvorado provided the text below, AFP was known as the National Society of Fund Raising Executives or NSFRE and had not yet developed a website! --Ed. 3/29/07)

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National Society of Fund Raising Executives Code of Ethical Principles and Standards of Professional Practice

NSFRE members...put charitable mission above personal gain, accepting
compensation by salary or set fee only;...adhere to the spirit as well
as the letter of all applicable laws and regulations;... page 19 of
Manual

Standards of Professional Practice: Adopted November 1992

4. Members shall work for a salary for fee, not percentage-based
compensation or a commission.

5. Members may accept performance-based compensation such as bonuses
provided that such bonuses are in accord with prevailing practices
within the members' own organization and are not based on a percentage
of philanthropic funds raised. page 20 of Man ual

NSFRE Position Paper Prepared by the Ethics Committee March 1992

...individuals serving a charity for compensation must accept the
principle that charitable purpose, not self-gain, is paramount. If this
principle is violated and percentage compensation is accepted, *
charitable mission can become secondary to self-gain, * donor trust can
be unalterably damaged, and * there is incentive for self-dealing to
prevail over donors' best interests

....percentage compensation, however administered, can produce reward
without merit. Charities rely, in part, on voluntary donations to meet
their budgets. Donor trust is of paramount importance. To earn and keep
that trust, every aspect of charitable activity must be absolutely
ethical. Nowhere is ethical behavior more essential, nor its absence
more damaging, than in philanthropic fund-raising. To be ethical,
philanthropic fund-raising must be mission-led, institutionally based,
volunteer-driven and professionally supported in an environment free of
improper motive, unreasonable reward, or personal inurement. The
not-for-profit sector differs from profit-making business in at least
four ways:

1. Laws and Regulation

...If a charity's income is greater than its expenses, the law requires
that the surplus remain with the charity. Surplus cannot be diverted to
private benefit.

2. Governance

...The board is the charity's legal authority; board members are charged
by law to hold in trust the assets of the charitable corporation.

3. Voluntary Support

Charitable organizations rely on donations voluntarily given...The
donor's belief that the charity will use the contribution purposefully,
effectively and efficiently for the charitable mission is the foundation
of the philanthropic exchange.

4. Motivation

The motivating factor in commercial behavior is personal gain. Because
commerce is profit-centered, employee compensation in the form of
commission or other percentage income related to output and
productivity. Workers seek and accept commercial employment in return
for personal profit. The motivating factor in charitable behavior is
social benefit. What may be proper motivation in commerce is
inappropriate in the not-for-profit sector. There is an inherent
conflict of interest between charities founded without intent of profit
or private benefit, and employees whose compensation and primary
monetary personal financial gain.

NSFRE Position: Not Dated

"...private financial benefit cannot inure to the charity, it should not
inure to the worker. By law, compensation based on skill, effort and
time expended, remunerated by salary or fee, does not constitute
personal inurement. Conversely, NSFRE believes that commission or
percentage compensation breaches the no-inurement principle and is
therefore inherently unethical for six specific reasons: (1)...the
mission and long-term interests of the charity may become secondary to
the worker's personal interest and self-gain. (2) Donor attitudes can be
unalterably damaged in reaction to undue pressure and the awareness that
a direct commission will be paid to a fund-raiser from his or her gift.
(3) Percentage or commission compensation can foster unethical behavior
or inappropriate conduct by individuals whose self-interest is oriented
to immediate results,... (4) Fund-raising is an ongoing process of donor
identification and cultivation...The role of a professional fund-raiser
should include building an increasingly committed, enthusiastic and
capable group of volunteers. Tying compensation to commission may
discourage this activity. (5) Commission and percentage compensation can
provide reward without merit. (6) Donors' interests may not remain
paramount.

Guidelines to the Standards of Professional Practice

First Edition, Approved by the NSFRE Ethics Committee: April 10, 1995.
Published July, 1995

Standard No. 4 Members shall work for a salary or fee, not
percentage-based compensation or a commission. Guidelines

a. Members accept compensation based upon the experience, expertise and
time requirements of the position.

b. Members, if offered compensation which includes a portion based upon
a percentage of the funds raised, provide information in support of
Standard No. 4, such as the NSFRE Position Paper on Professional
Compensation.

c. Members recognize that fund raising is a continuing practice in which
current funds received may be the results of efforts of others in
previous years and, likewise, current fund-raising activities may result
in future funds.

d. Members take it upon themselves to understand the bases for
compensation practices in the not-for-profit and business sectors and
that, within each, there are appropriate differences upon which
compensation may be based.

e. Members help organizations recognize that costs involved in fund
raising include staff compensation and that donors do accept
organizational costs for such activities.

f. Members who offer their services as proposal writers and agree to
accept no fee or a partial fee if the proposal is not funded, do so only
if such agreement is stated in writing in advance and the compensation
does not include a percentage of the fund s sought or raised.

Examples of Ethical Practice...

2. Recognizing the difference between percentage-based compensation and
a bonus plan, accepting the later should it be part of an organization's
regular practices...

Examples of Unethical Practice...

2. Disguising compensation as salary, fee or bonus when it is, in truth,
a percentage of funds raised...

Standard No. 5 Members may accept performance-based compensation, such
as bonuses, provided that such bonuses are in accord with prevailing
practices within the members' own organizations and are not based on a
percentage of philanthropic funds raised.

Guidelines

a. Members' freedom to accept performance-based compensation is based on
the fact that NSFRE recognizes that such can be an ethical way to reward
practitioners for industry that exceeds the scope of effort covered by
their established salary or contracted fee.

b. Members may accept performance-based compensation under the following
conditions:

1) The member's organization has a policy and practice that awards
performance-based compensation; and

2) The policy has the approval of the organization's governing body; and


3) The policy and practice include, but are not limited to, the member's
area of responsibility, i.e., are a norm within the organization; and

4) The criteria are restricted to mutually-agreed upon, pre-established
overall goals; and

5) The criteria for determining the eligibility for and amount of such
compensation shall exclude any consideration of a percentage of
charitable contributions as defined by and subject to IRS regulations or
as reported on IRS Form 990 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 philanthropic income to
determine compensation.

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Posted sometime in the early 1990s to the soc.org.nonprofit newsgroup, now (2007) part of Google Groups -- PB