No nonprofit wants to turn down donations — particularly if they’re large. Nevertheless, you need to consider the source of gifts and potentially refuse those attached to controversial donors. Bad publicity, particularly if it hits social media and goes viral, can be far more expensive for your organization in the long run.
A look at both sides
What’s the risk of accepting a possibly tainted donation? Some of your nonprofit’s most loyal and longstanding supporters may be strongly opposed to it and reduce, or even end, their donations. Any uproar or backlash could divert attention from your positive accomplishments and leave behind reputational damage that takes years to repair.
There can be arguments can be made to accept controversial donations, though. After all, not every donor is operating from purely altruistic motives. Mother Teresa purportedly accepted donations from dictators and crooks, arguing that the good the money could do outweighed its origins.
She’s not alone in believing that tainted money is better spent on charitable purposes than, say, another yacht or mansion for the donor. Money given to a nonprofit, generally benefits society as a whole, particularly when the recipient does social welfare work. If you turn away funds you need, you could have to cut programs, dip into your endowment or sell other assets.
Formal guidelines
These decisions are more easily rendered when you’re working from a formalized framework. Rather than making decisions on the fly, write and follow a gift acceptance policy. Begin by establishing a “Know Your Donor” process for prospective donations above a certain amount. Some preliminary due diligence can help ensure your donor’s past or current actions don’t conflict with your mission.
It's important to take some time to think through potential scenarios. Most organizations refuse donations of stolen funds or funds generated by illegal means, but what about donations that are “clean” but obviously given to further the donor’s public relations? What about anonymous gifts? Some nonprofits find them too risky.
If you accept a donation from a controversial donor, you’ll likely need to explain your decision. So, develop communications guidelines, as well. Determine who will speak for your organization, which communication channels will be used and how much information will be shared, with a preference for transparency.
Be prepared to stop
Finally, realize that mistakes happen. Identify a process for dealing with gifts that turn out to be controversial after receipt. You should evaluate these gifts through an ethical prism that takes into account your nonprofit’s values and the perspectives of your stakeholders.
How HoganTaylor Can Help
The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
