I respond to Michael (his comment is below) that we don’t disagree, that it’s just a difference in vocabulary.
My reference to nonprofits being public institutions is a matter of perspective, not legal language. Nonprofits are required/supposed to serve the needs of the “community,” and I write from the perspective of the “community’s” right to know how effective a nonprofit is that serves them – how cost effective and how effective at addressing the issue it was created to address.
Organizations (like AFP) that serve/represent staff and consulting fundraising professionals use language that refers to nonprofits as being “publicly owned.” The intent of that language being to maintain awareness among fundraising professionals and the organizations they serve and keep us/them focused on what is and isn’t “ethical.”
Where that language may differ from the legal language of the IRS, the intent is the same – to protect the rights of the community/public.
In that context, “Ethics” is all about doing what’s best for the community/people being served. To word it in a way that addresses a common problem: “Ethics” is about doing what’s best for the community/people being served, not what’s best for the board and staff members of the nonprofit. “Ethics” is also about using contributions (only) as the donors intended, and letting those donors know such is the case.
Excerpt from Michael’s comment:
“Hank and I are old friends and colleagues, so my disagreements
with him are always respectful – and I admit the possibility of error!
“I take issue with the assertion that charities are, in effect, public
institutions due to their tax-exempt recognition and “tax subsidy”.
In fact, legally as well as functionally, charities are explicitly private
entities run for a specific defined “public benefit purpose” (to use
IRS language).
“If favorable tax treatment alone defined whether a US institution is
public, than there would be *no* private institutions. Every taxpayer,
whether individual, partnership, or corporate, receives favorable tax
treatment to reduce or eliminate their Federal income tax burden.
“Charities, as private entities, receive favorable tax treatment in
exchange for their explicit promise to operate in a certain way and
comply with applicable parts of the IRS Code.
“I would never argue that charities and nonprofits should act without
accountability. However, nonprofits serve a valuable societal function,
recognized in law and regulation, that is collective, but explicitly not
public.” Michael Wyland — michael@sumptionandwyland.com
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Have a comment or a question about starting, evaluating or expanding your fundraising program? Email me at AskHank@Major-Capital-Giving.com. With over 30 years of counseling in major gifts, capital campaigns, bequest programs and the planning studies to precede these three, we’ll likely be able to answer your questions.
Hank Lewis with Development Consultant Associates has over thirty years as a fundraising consultant and is a specialist in Board and Leadership Development, Capital Campaign, Bequest Program and Major Gifts.