Accepting Charitable Donations: Who Decides & How?
A health care organization inquired the other day about ethical practice in gift acceptance policies, specifically relating to the cannabis industry. Cannabis can be associated with what are known as “sin” or “vice” industries—including alcohol, tobacco and e-cigarettes, gambling, adult entertainment, and weapons—often labeled as immoral or unethical for “exploiting human weaknesses and frailties”. More recently, fossil fuels have also been linked with such businesses for the environmental harm their can cause.
Which naturally leads to the subject of tainted money, defined by philanthropy pracademic (practitioner-scholar) emeritus Eugene Tempel as a charitable donation that raises moral concerns and may be blemished by the “source” or the “circumstances” of the contribution. Meaning that such funds have either been garnered through questionable means or they represent a “values conflict” for an organization, both of which can cause reputational risk.
In a course I co-teach on applied ethics in fundraising with philanthropy historian Dr. Kathi Badertscher, we introduce the topic of tainted money by referring to the origins of the term. In 1905, social justice reformer Rev. Dr. Washington Gladden from the First Congregationalist Church in Columbus, OH gave a sermon denouncing John D. Rockefeller, Sr. and his $100,000 gift to the American Board of Commissioners for Foreign Missions, a missionary society serving the religious denomination. (Today, such a gift would be equivalent to ~$3.65 million.) The billionaire founder of Standard Oil Company, Rockefeller was a man of faith who practiced tithing and ultimately donated over $540 million during his lifetime to nonprofit causes. But he had long been accused of monopolistic and anti-trust practices to attain his wealth (and his corporate monopoly was ultimately dissolved by Supreme Court order in 1911). Gladden called the donation “tainted” and demanded its return…and thus the term entered our lexicon.
The late 19th/early 20th century playwright, critic, and activist George Bernard Shaw felt that all money is connected to some form of extracted or ill-gotten gain, and dismissed as “impractical” the idea of separating good money from bad.
Whether you lean towards Gladden’s or Shaw’s viewpoint, Tempel advises following the law, establishing and implementing ethical policies, and doing no harm when considering tainted funds—with respect to your organization and your community. Heeding this counsel, the health care organization might first consider the legality of medicinal and recreational use of marijuana in their state, recognizing that the latter remains a crime under federal law. (A case study from Colorado published last year, however, found that a majority of individuals from the 300+ organizations surveyed did not view cannabis-related businesses to be tainted.) The nonprofit might also review the known benefits and harms of the drug as part of an overall ethical decision-making process.
When it comes to gift acceptance policies, there is no one size fits all. Guidelines should be tailored to your organization, reflective of and resonant to your mission, institutional values, constituents, and programs. And tainted money is only one small aspect. To develop or refine such policies, start by examining some good examples from your field. Here’s a sample from the National Gallery of Art. Here’s one from Emerson College. And here are two more, one from Carnegie Hall and the other from the Boston Public Library. Or ask your favorite AI chatbot to share some appropriated wisdom to get you started. In all cases, you can see that some of the language is generic and some specific to the organization and its public purpose.
Charge development leadership with drafting the policies and then assemble a small task force representing diverse perspectives to fine-tune them for your organization. Make sure to include fundraising, marketing, public relations, and other externally facing staff who deal directly with the community; also include a senior administrator and financial officer, select trustees, the best people on your team who understand the mechanisms and ethics of nonprofit governance, and a few engaged community members. Together, discuss what should be emphasized in your policies and what is feasible to administer, and then work your way through the various elements before presenting them to your board for approval.
Standard policies detail the following:
The purpose of such policies to provide guidance to board, staff, volunteers, and donors on what constitutes acceptable contributions to your organization;
The need for compliance with applicable federal, state, and municipal laws and regulations;
The types of gifts accepted (e.g., cash, securities, cryptocurrencies, real estate, artwork, other tangible property, in-kind gifts, pledges, endowment gifts, planned gifts, etc.), how they are handled, and at what level written gift agreements are required;
Who within the organization has the authority to solicit and, separately, to approve donations and at what thresholds, including a gift review committee to adjudicate opportunities that test the boundaries of your policies;
Donor privacy obligations, as well as recognition guidelines, especially for naming gifts; and
Any gift restrictions, an ethical review process for risk mitigation, and the right to decline or return gifts and why.
Ethical gift acceptance policies reflect legal and social considerations. They more they embody the best interests of your community, the easier they are to fulfill.
Image credit: John D. Rockefeller, Sr., c. 1914, by Pach Brothers Studio. Courtesy of National Portrait Gallery