How to avoid the dark side of fundraising and philanthropy

Giving is good – but there is a darker side to fundraising and philanthropy which it is useful to be aware of.  Examples include organisations soliciting funds for questionable purposes, and donors, businesses or funding organisations using their money to influence democracy in ways which are unethical and/or untransparent.

Unfortunately, according to this excellent Radio NZ article Parliament protest: Questions remain on source of donations and where they went by journalist Tim Brown, the recent protests and illegal occupation of Aotearoa’s Parliament grounds seems to have involved both.  To summarise some of the points made in this article:

  • The protests seemed unusually well-funded, with significant resources allegedly provided for payment of parking fines, food, infrastructure, billboards, banners and court costs.
  • Two of the main organisations who appear to have been collecting funds, the ‘Freedom and Rights Coalition’ and ‘Voices for Freedom,’ are limited liability companies, not registered charities.   Worryingly, the article suggests that Voices for Freedom has links to a multi-level marketing essential oil company which “was warned by the US Federal Trade Commission for … claiming essential oils could prevent or treat Covid-19.”  In other words, they may have a vested interest in opposing vaccinations.
  • There were questions about what happened to money donated to an individual who collected funds for the protest
  • Organisations appeared to be targeting the disaffected and vulnerable. National Māori Authority chairperson, Matthew Tukaki, describes the targeting of vulnerable Māori as robbing “those Māori whānau not only of what little money they probably had, but also their mana.”

See also this follow up article, providing more information on individuals and  companies receiving funds for the protest at Parliament.

Whether or not all or any of the above are true, this situation highlights important questions for individuals, not-for-profit organisations, and funding organisations:

  1. When we donate money personally, how do we know we are giving to legitimate causes which are genuinely serving the public good?
  2. If we are a not-for-profit organisation or charity genuinely serving the public good, how do we demonstrate this?
  3. If we are a funding organisation, how do we ensure that we are using our funds in ways which are ethical and transparent?

I am a strong advocate for giving our money, or our time, or both, and I firmly believe that if we are fortunate enough to live comfortably, we should be sharing our good fortune – and doing so in proportion to what we have.  But let’s give thoughtfully and with some care, and here are six principles to consider:

Principle 1: First do no harm

It sounds obvious right?  But it is worth taking time to think through whether anyone might be negatively affected by an initiative, even unintentionally.

  • For individual donors – don’t be pressured into donating instantly – sometimes this can be a warning sign.
  • For funders and not-for-profit organisations – always consider the ‘first do no harm’ principle when deciding whether to go ahead with an initiative.

Principle 2: Avoid vested interests

Check any potential conflicts of interest or vested interests in initiatives you are considering getting involved in.  If an organisation claims to be charitable or philanthropic, but their activities appear to be feathering their own nest or pushing a self-serving political agenda, this should raise warning bells.

Principle 3: Be transparent

Let’s be open and honest about what we do so we can clearly show how we are serving the public good.

  • For individuals: Would you hesitate to tell a respected family member or friend about the cause you are about to support? If the answer is yes, maybe this is a warning sign.  Having a conversation with that respected person might useful to test your thinking before going further.
  • For not-for-profit organisations: Be clear and open about who is behind your organisation, what your purpose is, what you do, how you are funded and who funds you. Financial statements should be crystal clear, and here are some tips for making good use of the “Statement of Service Performance” to share the difference your organisation is making.
  • For philanthropic funders: All the above suggestions are relevant and important for funders. In addition, take some time to review and implement Philanthropy NZ’s transparency guidelines, which are a practical roadmap for appropriate funder transparency.   In particular, provide a list of the organisations you have funded, as withholding this information might make people wonder what you have to hide.

Principle 4: Use the right structure

A registered charity is usually the safest option for an initiative serving the public good, although it is not the only option.

  • For donors and philanthropic funders: Is the organisation you want to support listed on the Charities Register?   If so, Charities Services will have ensured that the organisation’s purposes are charitable according to current NZ law, and your donation will usually be tax deductible. There are however times when donating to a business or an individual is appropriate, for example some social enterprises are structured as businesses, and some charities have business arms like second hand shops.  But, if you are considering donating to a business or an individual, do extra homework and have a few good conversations to ensure that you know them, you trust them and you can clearly see how donations are used for a genuine good cause which aligns with your values.
  • For not-for-profit organisations: If you are considering setting up a new not-for-profit organisation, it is worth taking some time, ideally with legal input, to ensure you have the appropriate structure. For example:
    • A registered charity is often a good option for the reasons above, and you get a tax exemption. However starting and maintaining a charity requires ongoing time, energy, and money.  Charities Services has useful information about choosing structures – see this webinar or contact them for advice through one-on-one clinics.
    • A fundholding service like the Gift Collective is a good option for smaller or short-term projects. A fundholder is a registered charity which holds and administers funds on your behalf.
    • Social enterprises are usually partly charitable and partly commercial, so the structure can be a bit tricky. Sometimes this is handled by setting up a charitable trust which owns a business, enabling both donations and trading income.  Other possibilities include B Corps and charitable companies.

Principle 5: Do your homework before giving or receiving funds

For individual donors and philanthropic funders, how much homework do you do before you provide some funding?  And what are the considerations for a not-for-profit receiving funds?  The concept of ‘fit-for-purpose’ is important here – less effort for small donations and a more thorough due diligence process for large grants.

  • For smaller donations, check out websites, social media, and search for the organisation on the Charities Register to get a feel for the people involved and the organisation’s finances. See also the donation advice provided by Charities Services.
  • For large donations and grants, do your due diligence, but without burdening your grant applicants. This is a balancing act – we don’t want to impose funding burden, but we do need to ensure funding goes to legitimate causes genuinely serving the public good.   It is useful for funders to do most of the investigation themselves, rather than relying on complex application forms.   And some considerations which are not often part of funders’ assessment processes but which can be useful include:
    • Consider the ‘first do no harm’ principle and any vested interests, as already described.
    • Nothing about us without us – does the organisation represent the communities they serve? Those closest to issues are usually best placed to  find solutions.
    • Consider a hate speech policy, like this one from the Gift Trust.
  • For not-for-profit organisations: Fundraising should be ethical and transparent and the Fundraising Institute of NZ’s excellent code of ethics provides a useful guide.   Additionally, if possible avoid asking for money from people you know can’t afford to give, and avoid accepting money from funders with questionable values, vested interests, or hidden agendas.

Principle 6: Be generous

Most of the above is about minimising risks, but the last thing we want is to refrain from engaging with and/or donating to good causes because we are worried that we might get it wrong.  If we have considered the above principles, if our head and heart are aligned, let’s get involved by working in, volunteering in and/or donating to good causes.

 

So, back to the recent protests and occupation of Parliament.  It seems to me that much of this activity failed the ‘first do no harm’ test, there were alleged vested interests at play with at least one of the organisations collecting funds, and the organisations and the individual collecting donations were neither charitable nor transparent.  Perhaps worst of all, significant amounts of money seem to have been obtained from those who could least afford it.

Let’s be generous, let’s actively support good causes, but let’s also use a little caution to avoid the darker side of fundraising and philanthropy.  I hope the principles above provide practical guidance for this process, whether we are individual donors, not-for-profit organisations or funding organisations.   The contribution that our community sector makes is critical for our collective wellbeing, so let’s get right in behind genuine organisations making positive change in Aotearoa NZ.

 

Thanks to Michelle Berriman from the Fundraising Institute of NZ, Sue McCabe from Philanthropy NZ, Charles Devenish from the Department of Internal Affairs, the Gift Trust and Charities Services  for input into this blog.

2 Comments

  1. I’m in Ireland at the moment and listening to news, conversations etc about the Ukrainian refugee crisis. The idea of developing a no hate speech policy seems very timely for everyone involved in business and/or community.
    As always, love hearing your thoughts Kate.

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