The Covid-19 pandemic has led to severe operational and fundraising challenges for non-profit organisations. The fragility within the sector has seen some NPOs accepting funds from donors they may not have partnered with otherwise. Philanthropy and advancement consultant Shelagh Gastrow considers how NPOs can navigate such ethical dilemmas while remaining resilient enough to serve their beneficiaries in the long term.
Do you think the governance and ethical standards of non-profit organisations slipped as they struggled to survive and respond quickly to the pandemic?
The pandemic has revealed many existing governance shortcomings. In the non-profit sector, board members are volunteers and therefore play only a minimal role in the affairs of the organisation as their full-time occupations are always a priority. Many organisations find it difficult to ensure a quorum at board meetings, and the recruitment of board members is difficult when there is no payment. There has been little
board training in the sector, so many board members do not really understand their governance role. The pandemic highlighted many of these issues, especially when organisations faced financial crises. The issue of risk and resilience was suddenly on the agenda and boards did not know how to deal with this.
Should NPOs accept money and other resources from any donor willing to give?
It is tempting for cash-strapped organisations to accept funding that may not align with their values, strategies or priorities to stay alive and pay staff. However, taking funding from publicly known tainted sources can undermine an organisation’s reputation and credibility. Furthermore, there are huge risks when an organisation is driven by a donor’s requirements or objectives as it can veer away from its core purpose. Shared values and ethics should be the basis for accepting funds, for instance, if an organisation is focused on climate change, should it accept funds from a fossil fuel company?
My recommendations are:
- Avoid donors with a criminal or corrupt record, or any association with companies that are involved in damage to the environment or health, child labour, state capture, arms dealing, gambling, illegal logging or fishing, and human rights abuses.
- Avoid accepting funds from foreign governments’ international aid budgets – many organisations appear to be unaware that these grants are made to further the foreign policy objectives of those countries.
- Check contractual issues around intellectual property, which some donors claim as their own, even when the organisation has been using specific material for years.
- Remain independent as donors’ demands can undermine your integrity.
How should companies in less desirable sectors such as tobacco, alcohol, arms, and gambling approach their giving?
They should not expect any marketing or public acknowledgement for their contributions and should perhaps focus on supporting the communities from which their own workers come, such as in the fields of housing, schooling and bursaries or health facilities.
How can donors be held to account and what conversations should we be having about philanthropy and ethics?
Philanthropy has come in for a great deal of criticism in the past few years, particularly regarding a lack of accountability. Large philanthropy has been singled out, as specific donors have funds that exceed the annual budgets of some countries. It is possible for a small group of people to influence political decision-making or to shift developmental priorities to their own preferences – in effect, they can try to create a world in their own image. It is important for donors to understand that they are part of a continuum of activity, not the driver of the activity. The best way to resist dominance and to insist on dialogue on equal terms, is to say no. Once a country or organisation has accepted the funds, it is really too late to complain.
How should NPOs think about funding to deal with future crises?
As with any business, establishing an NPO requires a business plan to ensure sustainability and a level of longevity. There are various sources of funding for non-profits, including start-up seed donors, grants from a diverse source of donors – corporate, private, international, lotteries, government – and some form of income generation through services offered for fees. NPOs should diversify their income streams and build reserves to ensure resilience or, at the very least, a retrenchment fund.
In what way can the non-profit sector be strengthened to make it more resilient in the long term?
Resilience can be enhanced by good governance, social leadership to ensure that the organisation has developed a wide safety net of stakeholders to provide support during times of crisis, ongoing succession planning to provide for a pipeline of new leaders, and consciously innovating and refreshing the organisation’s offerings in line with the fast-changing context. One of the weaknesses of the NPO sector is duplication and competition. Where possible, there should be collaboration, absorption or mergers to reduce overhead costs and lessen the pressure on the donor community.
