Includes Best Practices for Accountability in Fundraising and Fundraising Costs
July 11, 2013, Washington, DC —The DMA Nonprofit Federation (DMANF), through its Ethics Committee and its Advisory Council, has adopted new Fundraising Principles & Best Practices for Accountability in Fundraising. The DMANF asks its members to review the principles to ensure their adherence to the standards set forth in the document and when working with any third parties or agencies that provide fundraising support. The DMANF asks its members to hold themselves and the industry to the highest standards of accountability.
“Donors expect nonprofits to be accountable and transparent. The new principles serve as key reminders to organizations that they hold a public trust,” said Senny Boone, DMANF General Counsel. “Legitimate organizations already hold themselves and others accountable when fundraising; they explain their fundraising process to their donors; and they use donated funds wisely. Legitimate nonprofit organizations seek to fulfill their missions using the highest ethical fundraising standards, and these principles are meant to provide the appropriate guidelines.”
Fundraising Principles Highlighted:
a. Nonprofits must have a well-defined mission statement describing what they do and why. Clear articulation of mission helps donors choose whether or not to support a particular cause or organization.
b. Nonprofits must act in a way that furthers their mission. This includes responsible use of resources consistent with their stated mission objectives.
c. Messaging to donors must be accurate and transparent. A nonprofit organization must accurately describe how it spends its money, and must do what it promises to do.
d. Nonprofits must apply good faith effort to comply with relevant federal and state laws and regulations.
Use of Funds/Cost of Fundraising
Fundraising to the general public is a key function of nonprofits because, in most cases, this is the primary source of unrestricted financial support. Without donors, and without fundraising activities to acquire and retain these donors, nonprofits could not remain active and their mission delivery would no longer be viable. Fundraising is both a short- and long-term investment in the mission of the organization.
a. Management and fundraising costs are a normal part of doing business.
b. Investment in fundraising strategies may not pay off until future fiscal years. Therefore, efficiency measures of a fundraising program can only be based on the organization’s overall program and not on a discrete campaign’s cost ratio. Analysis should be conducted over a financial reporting period or longer. Reporting metrics may include, as examples: the cost to raise a dollar, cost to acquire a donor, long-term donor value, and net revenue available for the organization to spend on mission delivery.
c. Most donors give unrestricted financial support, and funds will be used to best meet the needs of an organization. When donors give restricted or designated funds, a nonprofit organization must ensure the donor’s intent is honored and manage the funds accordingly.
d. Most stable organizations have diversified sources of funding — each with its own cost of fundraising ratio. Taken in total, in accordance with generally accepted standards, a nonprofit should spend a majority of its annual revenue on program. A nonprofit’s effectiveness is best measured over time and on a combination of mission, impact, financial stability, and growth.
e. In order to provide the most accurate understanding of how contributions are used, circumstances may compel a nonprofit to allocate joint costs that include fundraising and/or to perform valuation of gifts in kind. These are legitimate and commonplace aspects of financial reporting, are subject to audit and GAAP accounting standards, and are reported on a nonprofit’s IRS 990.
Contracting with Agencies, Consultants and Suppliers:
Contracting with external agencies, consultants, and suppliers is often the most cost-effective means of accessing fundraising expertise. Written agreements need to be in place. At minimum, these should include documentation about payments due, what the nonprofit is getting, and the ownership rights of donor information and materials produced for a fundraising campaign:
a. The nonprofit organization must always — both by terms of the agreement and in practice — be in control of the program, message delivery, and the collection of funds.
b. The nonprofit must always be in control of, and have immediate access to, all donor names and contact information generated from efforts on its behalf. There should be clear understanding of whether and how the commercial entity will use the donor names generated from campaigns.
c. A nonprofit should avoid all actual and perceived conflict of interest between nonprofit/client and partner/vendor. This includes organizational conflicts of interest, as well as those that may exist for any staff or board member. For example, a principal within the vendor company should not also serve on the nonprofit organization’s board of directors.
d. A contract needs to include a clearly defined, reasonable payment schedule for services and materials to avoid real or perceived conflict of interest. A conflict occurs when proceeds are tied to payment terms and the beneficiary of such proceeds (donations) is not in fact the nonprofit as the fundraising appeal states, but is the vendor.
e. It is incumbent upon the nonprofit to understand contract terms before signing an agreement — including payment requirements — and ensure contract terms will not hinder the nonprofit’s ability to execute and further advance the mission of the organization.
f. A commercial entity partnering with a nonprofit organization should not knowingly or carelessly hurt or endanger the financial health and/or the good work or good reputation of the organization. For example, a savvy and unscrupulous vendor should not take advantage of inexperienced staff at a nonprofit to enter into what would be an ill-advised agreement if adequate legal and fundraising marketplace advice were brought to bear.
g. The commercial partner should meet all federal and state requirements for working with nonprofits on fundraising, and all required filings should be complete and up-to-date.
The DMANF will host ethics compliance webinars and training for its members on the Fundraising Principles in the coming months to ensure compliance, and members will be asked to adhere to these standards in addition to DMA’s current Ethical Guidelines. For questions or comments, please contact DMANF General Counsel Senny Boone at SBoone@the-dma.org.
The DMA Nonprofit Federation is:
· The leading source for nonprofit marketing and fundraising professional education and industry advancement.
· The premier agent for improving public awareness and receptivity to direct and interactive market driven philanthropy.
· An aggressive and effective advocate for charitable organizations in postal, regulatory, legislative, and accountability issues at the federal, state and local levels.
· The ‘top brand’ among all associations and advocacy groups working on behalf of nonprofits that utilize direct and interactive marketing to communicate with donors, members, and the public.
· One of the largest member segments of the Direct Marketing Association with nearly 400 members.
The Nonprofit Federation’s full-time staff is located in Washington, DC and is supplemented by the resources and professional staff of the DMA and outside legal counsel. For questions or comments, contact DMANF General Counsel Senny Boone at SBoone@the-dma.org, or Membership & Communications Director Alicia Osgood at AOsgood@the-dma.org. See www.nonprofitfederation.org to learn more.
About Direct Marketing Association (DMA)
The Direct Marketing Association (http://www.thedma.org) is the world’s largest trade association dedicated to advancing and protecting responsible data-driven marketing. Founded in 1917, DMA represents thousands of companies and nonprofit organizations that use and support data-driven marketing practices and techniques.
In 2012, marketers — commercial and nonprofit — spent $168.5 billion on direct marketing, which accounts for 52.7 percent of all ad expenditures in the United States. Measured against total US sales, these advertising expenditures generated approximately $2.05 trillion in incremental sales. In 2012, direct marketing accounted for 8.7 percent of total US gross domestic product and produces1.3 million direct marketing employees in the US. Their collective sales efforts directly support 7.9 million other jobs, accounting for a total of 9.2 million US jobs.
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