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Sophie W. Penney, PhD

About Sophie

It Was a Dark and Stormy Night: Fundraising in Troubling Times

Oh, What a Night?!

“It was a dark and stormy night...” Oh, wait a minute. Isn’t that the line Snoopy uses when beginning his epic novel? I invite to you to think about the types of dark and stormy times that sometimes visit those of us in the nonprofit world.

I know from experience that it is far too easy for nonprofit leaders to believe that their organizations are somehow immune from suffering the sorts of issues that plague their for-profit counterparts. However, history has borne out that nonprofits are no less immune to corruption, greed, mismanagement, natural disasters, theft, and other challenges.

Speaking with a group of conference attendees at the just-held conference of the CT Community Nonprofit Alliance, I had an opportunity to discuss the topic of leading through crisis. I focus on this topic because I lived and worked in Happy Valley, home of Penn State University, when our community become the stage for doom and gloom during the Jerry Sandusky scandal. I also recently completed a two-year term as the chair of the board of a small nonprofit and felt a duty to be prepared should anything happy to our long-term, highly respected executive director who held much organizational knowledge and history in her head.

Let me begin with a story:

Imagine yourself waking during an era when the newspaper still arrived on your doorstep. Still somewhat sleepy, you take that day’s edition to the table, unfurl it while taking a sip of coffee, then cough and sputter as you read. The lead article indicates that a former Penn State football coach and founder of a large, well-respected nonprofit that serves children has been charged with forty counts of molesting boys. What’s more, the article alleges that this behavior had been going on and known about by key university officials for decades.

It was just such news that rocked the world for Penn State and all of us living and working in “Happy Valley.” We who were members of what is a small, collaborative, and caring community found the university and, by extension, all of us vilified by the evening news. Each of us was in some way considered to have been culpable for having failed to recognize or report these heinous acts. I recall vividly still not wearing Penn State garb outside of our community for quite some time.

So, too, the University of Virginia found itself in the midst of a maelstrom when Rolling Stone magazine alleged that the University had mismanaged sexual assault cases.

Wounded Warrior project came under fire when donors complained that executives were spending lavishly on retreats and other travel.

Even a billionaire, Louis Bacon, found his charity challenged as the potential victim of a multimillion-dollar fraud.

The list goes on and on.

Those are large organizations, universities, and nonprofits with millions of dollars, large staffs, and huge constituencies – surely this kind of thing can’t happen at our small- or medium-sized nonprofit, can it?

Yes, yes, it can!

Your Nonprofit is in Crisis. What to Do?

Following the Sandusky scandal and for years since, I have recommended that organizations first think about what constitutes a crisis. I have been a board chair so realize this is hardly an item that anyone would relish placing on the agenda. However, understanding what constitutes and defines a crisis is critical to eventually developing policies and procedures and a plan that will enable your organization and those responsible for it to act accordingly should crisis or scandal strike.

So how might one determine what rises to the level of a crisis? As an instructor and consultant I find myself turning often to Harvard Business Review. The article “When Your Company Has a Problem It Can’t Ignore” speaks to this topic. There you will find explanation of what the authors call “unignorable moments” or what I call elements of a crisis. Such events often:

  • Are public
  • Are irreversible
  • Are systemic
  • Challenge the identity of the organization
  • Are dramatic
  • Are disruptive
  • Demand the attention of whole organization

How have or might these moments play out? They may be:

Public

A story might break locally, nationally, or even internationally. Both the Sandusky scandal and the Rolling Stone article received national attention. While a crisis at a small nonprofit might not make national evening news, you might ask yourself, what would we do if a reporter from a local station broke a story about us on the 6 o’clock news?

Irreversible

As you might surmise, accusations, terminations, and other potentially damaging statements cannot necessarily be taken back. Even if people are exonerated, your nonprofit might live in the shadow of an accusation for years to come.

Dramatic

As noted above, a story might break locally, regionally, or nationally. It is now just as likely that a dramatic video might be recorded by a client or staff member, uploaded onto Facebook, and go viral within hours. While video viewers might not be familiar with your nonprofit, they will not forget the dramatic video and how it made them feel about your organization.

Disruptive and Demand the Attention of Whole Organization/Institution

Should a story receive such attention, you could find your day-to-day routines, the ability of your clients to access your facility, or other operations disrupted by the ongoing presence of television crews or reporters. I think it important to note that you simply can’t be simultaneously putting out a fire and moving your strategic plan forward.

Systemic

Even if you have only one person who is found to have been a “bad actor,” is it possible that some in the broader community will believe that key figures within your organization have been systemically hiding knowledge of events for years, shielding administrators, etc.

Challenge the Identity

A crisis may well threaten the very identity of your organization, your founder, board members, or the organization.

You Are the Nonprofit Organization’s Leader: What Do You Do?

I challenge you to imagine yourself caught up in such events, potentially with little to no prior knowledge of the alleged behavior. Because anyone is now a reporter, it is possible that you could wake up one day to find on your smart phone a viral video of an employee accusing another staffer of theft, sexual harassment, or some other form of misconduct.

What is as likely is that your organization might find itself the victim of financial fraud. Financial malfeasance, not quite of the type that George Bailey rants about in the film “It’s a Wonderful Life,” can happen almost anywhere. In 2016 I read a chilling New York Times piece that spoke about rampant theft of funds occurring in nonprofit children’s sports leagues. As is sometimes the case with very small nonprofits, one person was typically handling the finances. It became all too easy for the treasurer, who found himself out of work and unable to pay the mortgage, to dip into the till.

Fundraising in a Crisis

There is of course another major area that I should address here, fundraising. Through my experience and research, I have learned about just some of the legal and ethical issues that can arise with donors and between institutions and donors.

In some cases, the issues are with the donors themselves. Years ago I worked for an organization which assiduously attempted to contact a major company to ask for a capital campaign gift. The prospects seemed to be a perfect fit for the project, but no one could manage to get anyone to answer a call to set up a visit. Well, there but for the grace of God went we; it turned out that not long after our attempted contacts the founders, who were the officers of the company, were indicted and eventually went to prison for fraud. Nonprofits which accepted money from people like Bernie Madoff surely have stories to tell on this front.

The Gift Agreement is a Contract and a Charitable Trust

As well, you must consider the relationship between you and the donor. The reality is that the gift agreement is much more; it is not only a contract between you and the donor, but it creates a charitable trust with the organization as the trustee. And don’t allow yourself to think that if a donor has died, the obligations to honor the terms of the gift agreement are no longer binding.

I have written a chapter called Lions, Tigers, and Bears: Legal and Ethical Issues in Fundraising which will appear in Raising the Bar: Student Affairs Fundraising, to be published by the National Association of Student Personnel Administrators in the spring of 2019. In that chapter I touch on issues related to donor intent and even provide a case study for readers to work through. Also addressed are topics such as deceptive fundraising practices and misleading donors about the deductibility or fair market value of a gift. You can find more information on these topics on the IRS website and in IRS Publications such as 506 Charitable Contributions and 526 Contributions from Which You Benefit (in this case you refers to the donor).

Another helpful resource is an article by Kathryn Miree and Winton Smith, “The Unraveling of Donor Intent: Lawsuits and Lessons,” Miree and Smith, published by Partnership for Philanthropic Planning (now National Association of Charitable Gift Planners.)

Other extremely helpful resources include Kim Klein’s book, Fundraising in Times of Crisis (Chardon Press, 2014) and Fraud and Abuse in Nonprofit Organizations a Guide to Prevention and Detection, by Gerard M. Zack (Hoboken, John Wiley & Sons, 2003).

What Are the Key Takeaways?

Here is what I think is important to take away from my article:

  • Crises come in many forms, such as those that I have mentioned here, but might include fires, floods, vandalism, and, unfortunately, having an active shooter at your site.
  • Communication is critical. Rod Kirsch was the VP of Advancement at Penn State when the Sandusky Scandal unfolded. Rod first communicated with his staff, stating that he intended to walk through the fire with them, then offering information about counseling. Mark Luellen, who was assistant VP of Advancement of UVA when the Rolling Stone article hit, said that the university developed a list of ways in which alumni could be of assistance during this challenging time.
  • Policies and procedures should be created well in advance of a crisis. That includes having a crisis management plan. As a former board chair, I also encourage you to ensure that your board chair or leadership know where and how to access information should something happen to the executive director. You will also want to have a crisis communication plan and related items.
  • Policies and procedures such as a gift acceptance policy, use of the Donor Bill of Rights and reference to principles of ethical practice are similarly critical for fundraising. I am of the belief that every nonprofit should review such policies annually, both in case new forms of giving begin to be employed by donors (think about use of donor advised funds) and simply to remind everyone of their responsibility to act in accordance with such policies.

When I speak on this topic, I often refer to another Harvard Business Review article, “When to Resign, and When to Clean Up the Mess,” (Rosabeth Moss Kanter, June 2, 2014). I mention this topic, having known individuals who raised funds for the Second Mile and Penn State during these challenging times. In some cases, there may not be a choice about what to do because the organization shutters its doors. In this situation such professionals may need to work with their network to find employment because even if they were not part of the problem they might be perceived negatively by potential employers. Seniors at Penn State who were interviewing for jobs during the height of the scandal found prospective employers uncertain about whether they wanted to take a chance on someone affiliated with the university.

Such events can have “long tails,” as Kirsch noted. A Google search about the Jerry Sandusky case bears this out. I highly recommend that that both for their own sake and that of their organizations, leaders learn about resilience. I was fortunate to be tutored about this topic by a supervisor and have found the lessons learned invaluable whether during times of concern on the job or in life. As the saying goes, while we cannot control what happens around us, we can control how we act and react. You will find some helpful information on this topic in “How Resilience Works,” Diane Coutu, Harvard Business Review, May 2002.

May you find this piece helpful in preparing you to act before and able to react to a crisis should you find yourself confronted with such a crisis.

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