Inside Philanthropy received numerous responses to my recent article about how fundraisers and other charity leaders “cook the books” to exaggerate the amount of money given to their organizations in capital campaigns and other revenue-generating efforts.
Some, like Barlow Mann, chief operating officer at the Sharpe Group, a Memphis planned-giving consulting company, cited numerous causes for inflated fundraising claims. Some universities, for example, have ignored revised standards for counting planned gifts, reporting such donations at full face value even though they should be discounted to more closely reflect their worth when an organization finally receives them.
In responding to my article, other fundraisers were downright disparaging. “Your publication has done substantial damage to the fundraising profession and to development professionals,” one angry fundraiser wrote last week, immediately after seeing the story.
The article, she continued, “will lead to greater public distrust of charities in general and school fundraising campaigns in particular. I was really dismayed to see your publication stoop so low.”
Others took the opposite view: “You have done a great service to the profession with this in-depth, comprehensive, and very accurate piece,” said Scott Nichols, the lead fundraiser at Boston University, now in a $1.5 billion campaign.
Does my article overstate the extent of false reporting in fundraising? “If anything, you have tilted toward the gentle side of the facts,” Nichols wrote in an email. ”Thousands of heads will bob in agreement with this article.”
“What you wrote is the truth, well documented and sourced,” added Kent Dove, a retired fundraiser quoted in last week’s article. “Talking about it, admitting it, is a big step toward dealing with it.”
The article highlights “an issue the profession should address directly in order to gain the public's confidence,” wrote Bill McGinly, president emeritus of the Association for Healthcare Philanthropy. “I hope your piece sparks some positive action among the pros and their organizations.”
Here are some steps nonprofits could take to resolve problems associated with inflated fundraising returns:
Adopt a single standard for counting donations. A step in the right direction would be replacing the four varying counting guidelines now employed by associations that represent fundraisers. That means a concerted, unified effort by national leaders Sue Cunningham (Council for the Advancement and Support of Education), Jason Lee (Association of Fundraising Professionals), Steven Churchill (Association for Healthcare Philanthropy), and Michael Kenyon (National Association of Charitable Gift Planners), and their respective boards.
An important part of the unified standard: stipulating how fundraising returns will be verified, whether that entails having each gift confirmed and endorsed by multiple development officers or using one or more other acceptable methods.
While it might be difficult to make the unified counting guideline mandatory, the associations could issue a seal of approval for organizations to use in their fundraising materials to signal they are in compliance. To ensure that organizations really are in compliance, the associations could agree to examine a randomly selected group of charities using the seal each year or every other year.
Audit capital campaigns. Given the ill will that’s generated when fundraisers and other officials congratulate themselves for raising donations that don’t exist, another valuable safeguard would be for charities to hire outside auditors to examine their completed capital campaigns and other big fundraising drives.
Charities routinely have auditors examine their financial accounts for annual reports and audited financial statements, so why not extend that practice to big fundraising drives?
Audits could go a long way to preventing falsified fundraising records. If development officers know their work will be subject to an audit later, the temptation to inflate contributions would be reduced. And so would the distrust of faculty members, medical staffs, and others who learn there is little or no money for the programs a campaign was supposed to support.
Agree on and communicate what gets counted. Even if a unified counting standard is adopted, it is still important to agree and communicate in writing how gifts will be tallied for board members, donors, and others.
Because the reputation of board members is on the line with big fundraising goals, trustees should be asked to sign off on what’s counted before, during and after a campaign, said Nichols at Boston University. “Encourage board members to ask tough questions, particularly with regard to estate gifts, government grants, long-term pledges and gifts in kind,” he said.
In cases where guidelines dictate a gift should be discounted rather than counted at face value—bequests and other planned gifts that take decades to realize, for example—there is nothing wrong in using two reports to track fundraising results, as long as both reports are openly shared.
A “face value” report on campaign returns could be shared with the public and donors, who might be disappointed to see that their future gift will be worth far less than if it were made today, and the public. A “discounted value” report would be used to convey the likely value of donations once they are fully realized.
For the good of the fundraising profession, charities should adopt transparent, comparable methods of counting contributions, Nichols said. “This profession is tough enough without snake oil,” he said. “Misleading totals erode trust. By addressing this issue, we utilize our best fundraising tool: the truth.”