Ethical Scenario

Congratulations, you were recently hired by State University as its new Vice President for Institutional Advancement and charged with launching its $100 million capital campaign.

In the course of learning about the university’s fund raising history, you begin to review the institution’s previous campaign. While comparing the Institutional Advancement’s historical records with those from the university’s finance office, you notice that a major gift was posted by the Finance Department but not booked for the campaign.

You are about to draft the gift acceptance policies for the upcoming campaign. Should you draft the policies so as to include the previously received gift?

Some thoughts:

This scenario was more common in the “old days” when institutions did not have database software systems which automatically transferred information between the two departments. Institutional Advancement (IA) staff would receive gifts, book them into their proprietary software systems and send hard-copy information to the finance office. Finance would then post the gifts into their discrete system and hold the information over for audit. If everything was working well, the auditor would find both systems had the same information.

Today, many organizations use cross-department database software systems. When a gift is received by IA, it is booked into the donor’s file and a report is electronically generated and distributed to the Finance Department. Finance posts the gifts immediately and all files are reconciled electronically daily, weekly and often, quarterly. Some organizations even have all gifts being directed first to the finance office, posted, then distributed to IA. (We don’t recommend that. IA has time-sensitive actions it must take when a gift is received. In addition, there may be a need to contact the donor to confirm or modify the gift prior to its being posted.)

But, today’s scenario is still likely.

So what are the ethical issues which arise and how do we address them?

If the gift was posted by the Finance Department but not booked by Institutional Advancement, is the gift a new gift in that it never was recognized as part of the campaign?

Can you draft a campaign policy which “looks back” and captures a previously received gift?

Standard No. 20 of the AFPs Code of Ethical Principles and Standards, reads, “Members shall, when stating fundraising results, use accurate and consistent accounting methods that conform to the appropriate guidelines adopted by the appropriate regulatory body for the type of organization involved.” In the United States, that means members must conform to the guidelines adopted by the American Institute of Certified Public Accountants (AICPA).

Section a. of the guidelines for Standard 20 reads “Members recognize that fundraising results are recorded both for external financial and audited statement purposes, and for reporting and donor recognition purposes. Recording for external audited financial purposes must be in accordance with the appropriate AICPA guidelines.”

In other words, not only do we post gifts for the “soft” purpose of acknowledging the generosity of our donors, but we must be aware that there is the “hard” purpose of financial auditing. Failure in accurately posting our gifts will either alienate our donors or put our organizations in trouble with the Internal Revenue Service. Or both.

Clearly, if a gift was recognized for a previous campaign, it cannot be recognized for a subsequent one. This type of double-dipping undervalues the amount of funds raised and will reduce the amount available to the institution for its stated campaign purposes. Such action violates Ethical Standard No. 1, “Members shall not engage in activities that harm the members’ organizations, clients, or profession.”

In addition, recognizing a gift in a subsequent campaign but received by a donor in an earlier campaign may raise confusion in the donor and may forestall a subsequent gift from the donor for the latter campaign.

Finally, such action will cause havoc between IA and Finance.

OK, so what about grandfathering gifts which were received before the campaign began?

Many organizations do this within established parameters. For example, some organizations will grandfather gifts one year as long as the gift was not recognized for any other purpose. This is especially useful for unrestricted bequest gifts.

What do you think? Would you include a gift to a current campaign which was received but not booked in the previous campaign? What about capturing gifts which were received before a campaign began?