Avoiding Ethical Pitfalls in Nonprofit Fundraising

Fundraising success relies on trust. With competition for donor dollars increasing and pressure to meet goals rising, questionable decisions can happen. Even minor ethical missteps can damage donor relationships and an organization’s reputation.

October is designated as Ethics Awareness Month by the Association of Fundraising Professionals (AFP), so this is an ideal time to review your fundraising practices.

Ethical fundraising requires consistent, thoughtful choices. The following common missteps and practical solutions will help nonprofit professionals stay aligned with best practices.

Overpromising Outcomes

Common Misstep: Making exaggerated claims about donation impact.

Donors expect results. Promising guaranteed outcomes or inflating impact numbers can disappoint supporters and create long-term credibility issues.

What to Do Instead: Share realistic goals. Use data and stories that demonstrate actual progress. Explain how contributions support the mission without creating false expectations.

Misleading Financial Information

Common Misstep: Hiding or minimizing administrative expenses.

Fundraising messages that claim all donations go directly to programs may sound compelling but often mislead. Unless specific funding covers operations, such statements fall short of the truth.

What to Do Instead: Be upfront about how donations support the work. Donors respect honest financial communication, especially when explained with clarity.

Ignoring Donor Restrictions

Common Misstep: Using restricted funds for other purposes.

When a donor gives to a specific program or purpose, that contribution must remain designated accordingly. Even temporary diversions create risk.

What to Do Instead: Track restricted gifts accurately. Use funds according to the original intent. When circumstances change, always request permission from the donor in writing before taking further action.

Commission-Based Compensation

Common Misstep: Paying fundraisers a percentage of the funds raised.

Percentage-based pay creates pressure to prioritize dollars over relationships. This practice violates the Association of Fundraising Professionals (AFP) Code of Ethics.

What to Do Instead: Offer salaries or flat-rate fees. Link performance to progress on strategic goals rather than direct fundraising totals.

No Internal Accountability Process

Common Misstep: Failing to create a way for staff to report ethical concerns.

Without a system for addressing concerns, problems may go unreported or unresolved.

What to Do Instead: Provide clear guidance for raising ethical questions. Offer anonymous reporting options. Review ethical practices regularly with leadership and the board.

Final Thought

Ethical fundraising supports trust, clarity, and long-term relationships with donors. Every decision reflects the values of the organization. Take time during Ethics Awareness Month to review policies, identify gaps, and commit to ethical practices that build lasting support.

Cheers,

Michelle Crim, CFRE

Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.

https://www.dynamicdevelopmentstrategies.com/