Has Your Nonprofit Taken Money from Someone It Wishes It Hadn’t?

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A wealthy donor can be a boon to a nonprofit’s fundraising efforts, both for his or her direct contributions as well as the access the donor can give to other members of the elite. But what if a high-profile donor turns out to be someone the organization does not want to associate with? How should the organization respond?

The Jeffrey Epstein scandal is the latest story to highlight the problem. Epstein, a convicted sex offender, frequently donated significant sums of money to colleges and universities. Now those institutions are coming under scrutiny for accepting donations from someone that they knew was accused or, in some cases, convicted of serious crimes. M.I.T. even had Epstein on their list of disqualified donors, but he continued to be allowed to give anonymously despite that policy.

The Epstein case and its fallout offer a number of lessons for nonprofits to consider:

  • Be slow to tie the organization’s fortunes to a donor. At least one person at M.I.T. has lost their job over the Epstein scandal, but it’s safe to assume that the school itself won’t suffer much setback in terms of its fundraising appeal. Most nonprofits can’t afford the kind of reputational hit that comes from being closely associated with a person who turns out to be a criminal—especially a criminal who has done something particularly abhorrent, as Epstein did. Before promoting a particular donor’s involvement with the organization, the nonprofit needs to conduct a due diligence process.
  • Enforce a clear policy. A large gift from an unseemly donor can deter others from giving and harm the organization’s ability to do its work. A nonprofit’s fundraising policy needs to include a mechanism for refusing gifts from sources that are inconsistent with its values and mission. Among other things, nonprofits should avoid taking gifts from people who it knows are in significant legal or reputational trouble.
  • Respond to controversies. If a large, high-profile donor does wind up in a public scandal, it’s important for the nonprofit’s board to discuss how it will respond. In some cases the organization may not need to do anything. In others, unwanted media attention may be turned toward the organization. In still others, the organization may want to return a gift that it feels could be more harmful than helpful.

The Church Law Center of California counsels secular and religious nonprofits on matters of risk management and governance. We can help your organization examine its fundraising policies and practices to ensure it is protecting itself from avoidable controversies. Call us today at (949) 892-1221 or reach out through our contact page.

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