28 March 2006

On giving and receiving

A simple and clear document like this has been needed for a long time. I hope it gets wide circulation.
On Giving and Receiving

Approved, Quaker Peace Network—East Africa
March 19, 2006, Tororo, Uganda

I know that I am corrupt, but who is corrupting me?
Sese Seko Mobutu, former President of Zaire (Democratic Republic of the Congo)

The issue of wealthier Quakers from the northern countries giving funds to Quakers in the Kenya, Uganda, Tanzania, Rwanda, Burundi, and the Democratic Republic of the Congo (DRC) is fraught with difficulties. Too often these funds have been unaccounted for, misused, and/or stolen. Traditionally the blame has been put on the African implementers, but the northern donors who have so quickly written off these losses as “that’s the way Africa is” are also part of the problem. There are more than enough Quaker organizations led by honest African Quakers that receive, spend, and account for their funds with scrupulous honesty that there is no need to “excuse” those who are unaccountable and dishonest. Each time funds are misused in Africa, it is the honest Quaker implementers who are hurt the most since the errors of the few tarnish the image of all. Money can lead to conflict so the proper use and accountability of funds is a peace-making activity.

There are various levels of corruption:
  1. Outright theft of funds for personal use.

  2. Misuse of funds for purposes other than those indicated in the proposal, including unauthorized “borrowing” of funds from another program.

  3. Waste of funds without using them as prudentially as possible because they are given by wealthy people from overseas.

  4. Lack of accountability for funds received which usually is used to hide one of the above misuses.

To rectify this situation guidelines for responsibilities of both donors and implementers are needed.

For Donors:
  1. Funds are given only to a recognized organization with a valid bank account. Funds are never sent to an individual’s bank account or given to implementers to carry back from overseas because this forecloses transparency. Even in the case of a scholarship, funds should be sent directly to the institution or routed through a dependable organization.

  2. In order to qualify for funding, the donor must receive a proposal from a recognized organization which has passed the proposal at a Board meeting of the responsible people. This proposal should include a detailed budget. Donors should have a clear format for the proposal. A neutral person, knowledgeable about the country and type of proposal, should review it with an onsite visit. Over-budgeting, currency transactions, over-pricing, hiking of salary beyond those normally accepted, and vague or unclear line items should be thoroughly questioned. The proposal including purpose, timeline, budget, and delivery of funds is public information.

  3. After funds are sent, monthly or quarterly program and financial reports should be regularly received. In these days this can easily be done by email anywhere in the region. No further funding should be sent until such reports have been received and accepted as proper.

  4. At the end of the proposal period, a final report and financial accounting must be submitted. There should then be another on-site visit by a neutral observer who should verify the accounting by looking at the bookkeeping and receipts to back it up. This protects not only the donor but also protects the implementer from any charges of mis-management of the funds.

  5. This implies that small donations are difficult to monitor and verify. Consequently it is advisable that those who are unable to make the appropriate site visits by neutral observers channel their funds through organizations that have this capability, allocating a proper amount for this administrative task.

  6. When theft, misuse, wastage, or unacceptable accounting is encountered, the donor must pursue these problems with the same diligence they would use for a similar case in their home country. Corruption cannot be excused under any rationale. If a donor is not willing and prepared to follow-up such mis-conduct, it should not accept proposals and disperse funds.

  7. When theft, misuse, wastage, or unacceptable accounting is uncovered, the donor organization will discretely tell the other donor organizations of such problems so that implementing organizations are not able to move from one donor to another with impunity.

For implementers:
  1. Funds are requested only by an established organization for one of its priorities and have been approved by the appropriate Board of Directors. The organization must have mechanisms for handling and reporting funds including checks and balances with a trained treasurer.

  2. The proposal will be transparent and shown to all who are concerned with it for their input and approval. No paid professional fundraisers should be used.

  3. Those who are dispensing the funds must be as careful with these funds as they would be with their own. They must receive receipts for all transaction (and have their own signed receipts when this is not possible) and keep an accurate accounting of all these funds.

  4. If it is necessary to substantially change the budget of a proposal (meaning more than 5% or as specified in the proposal), prior approval of any such changes must be received from the donating organization.

  5. Written reports and financial reports will be sent on a regular basis as indicated in the proposal.

  6. The implementers of these funds will be welcoming and open for all on-site visits by anyone sent by the donating organization. All written and financial accounting will be open for inspection.

  7. If anyone in the implementing organization is financially irresponsible, the implementing organization will notify the donor and take whatever appropriate action is necessary with the offending individual.

If these guidelines of responsibility for both donors and implementers are faithfully adhered to, many of the problems which have been encountered in the past will be rectified. In the long term, this will build a much healthy relationship between donors in the North and implementers in Africa. The result should be not only a much more prudent use of the funds available, but a larger flow of funding.



Many thanks to Eden Grace for passing along these guidelines, which emerged from a meeting she participated in last week. She says that the first draft of these guidelines came from David Zarembka.

My own commentary (do not blame the writers of the document above) ...

I remember a meeting of Quaker partner organizations that one of my Friends United Meeting colleagues held at a retreat center in Africa, where a similar set of guidelines for FUM work was being discussed. As my colleague reported, the main resistance to the guidelines came from Western representatives, who felt that such rules were colonialist. One of the African participants pointed out that avoidance of such rules was a plague in Africa, from the central governments on down. Honesty and transparency in financial relationships were not colonialist impositions, but actually the only hope for progress. (I might add that they were also the only hope for recovering the middle-class intelligentsia among African Quakers, many of whom seem to have distanced themselves from Friends in disgust at the corruption and government enmeshment that had become far too common.)

My own additions to the guidelines, from a North American's point of view:
  1. Don't play the tired old game of simplistically choosing "good Africans" who can do no wrong, and "bad Africans" who can do nothing right, among ministry partners and constituency members. How do you know? Do you treat your personal circle of friends and colleagues this way at home? Africans have just as many complicated mixtures of ideals and compromises as anyone else! And that "good African" for whom you will collect money without proper safeguards, will become just as corrupt as you would become under the same circumstances. Genuine friendship can never be purchased, nor can you atone for colonialist atrocities of the past by lazy sentimentality today.

  2. Part of a more mature and egalitarian vision of donor/implementer relationship includes being willing to examine very carefully when money or materials are the right form of resource transfer. Money and equipment can change power relationships and create new inequalities, not to mention increasing the "metabolism rate" of a local economy to an unsustainable level. On the other hand, don't go too quickly to the sometimes insulting notion that your technical expertise is what's needed, since many local cultures already have far more indigenous wisdom and expertise than political space or financial resources to use it. There's no simple formula for any of these dilemmas; what I'm calling for is taking the time to build relationships and trust and spiritual integrity before letting those relationships become monetarized and bureaucratized with the language of "projects" and "proposals."

  3. Rule 5 for donors in the document above includes a huge principle that many individual donors apparently do not understand. We donors need to get it through our thick skulls that strong, ethical administration costs money and is worth it. To treat an organization as your private, cost-free bank, to transmit your precious, special money 100% to its destination as if by magic, is either ignorant or insulting. What makes your money so much more special than that of the others who must cover the costs of doing ethical business? Do you think that, without dedicated administrators, accountants, bankers, translators, etc., there would be a hope in hell of your money being useful? (I feel as if I've waited far too long to get that off my chest!)

  4. The organizational corollary: Don't appear to donors and potential donors to be a black box! Issue annual reports, make your financial reports easily available to the partner organizations as well as donors, report governance issues honestly and provide easy access to minutes of meetings. Model the practices you expect to see from your implementing partners. When I was at FUM, I felt that historically, we had not done much better than the groups who received our funds. My colleagues and I did our best to change that.

10 comments:

Robin M. said...

Wonderful. Although, as a paid professional fundraiser, I worry that my work would not be considered as valuable as the other dedicated administrators, accountants, bankers, translators, etc. I know there have been plenty of ethical lapses among fundraisers as much as any other profession, but like anyone else, that doesn't mean there aren't good fundraisers..

Johan Maurer said...

I'm married to a wonderful, gifted, dedicated fundraiser. I have no excuse for leaving fundraisers out of that list, except perhaps as they are included among the administrators. There are definitely wonderful fundraisers, many of whom, in my experience, have very good pastoral skills.

Appreciatively,

Johan

Robin M. said...

I wasn't so much worried about your list, as about point #2 for implementers that says specifically that paid professional fund raisers should not be used.
For me, there is a distinction between people who know how to write and manage a fundraising appeal and who are paid appropriately for their work and the charlatans who use this knowledge to bilk donors and implementers out of their rightful funds.

One of my favorite books on fundraising is Growing Giver's Hearts, by Thomas Jeavons and Rebekah Birch Basinger. It is about how fund raising is both a pastoral ministry to donors and a necessary part of the ministry of good works. One of my favorite chapters is on the Apostle Paul, who they liken to the Church's first fundraising executive. Asking not for himself, but helping those who have money to find ways of helping those who are suffering.

Johan Maurer said...

I had originally interpreted that to mean that implementers should not use professional fundraisers as intermediaries between themselves and their sponsoring agencies. However, maybe my optimistic assumptions are wrong and I should raise this question with the writers.

When I first joined the FUM staff as general secretary in 1993, we were using a professional direct mail agency in New York. I ended that relationship and wrote my own appeal letters and developed systems to bring that whole function back into the FUM staff. On the other hand, we also began issuing attractive annual reports with program summaries and financial reports, something that apparently had not been done for years, if ever. And later on, we contracted with a Quaker fundraiser, Henry Freeman, to help with our fundraising. We would not have contracted with someone who did not share our values.

Although at FUM I would not have wanted a disinterested fundraiser mediating relationships with our implementing partnerships, I definitely approved of those same organizations learning good, ethical fundraising for their own local situations. Our own hospitals in the USA are constantly raising charitable funds; why shouldn't Friends Lugulu Hospital do the same among the considerable number of middle-class Kenyans? (Among all Kenyans, for that matter.)

Johan Maurer said...

Eden gave me permission to post her reply here:

Dear Johan,

I would, of course, be very interested in your ethical guidelines. I think this whole subject needs as much discussion as possible, and I'm always eager to see how others have tried to put it in writing.

As for the "professional fund raisers" bit -- I was a bit surprised by how the final wording came across. What we intended to caution against was the way that African "professional grant-writers" take advantage of grass-roots organizations in Africa. They typically convince the organization that grant-writing is a terribly complicated science, and that their professional skills are necessary. They then take 30% of the grant as their fee. I have seen projects fail because of this skimming. I have also seen a project fail because the original grant proposal, written by a "professional," was based on ludicrous market data (of course, the donor bears some responsibility for having funded the project in the first place!). So the point was that the actual community that intents to implement the project should be the ones to state, in their own words, what they want to do. It's OK for project proposals to be simple. It doesn't have to be rocket science. And we are highly suspicious of "mercenaries" who are taking advantage of Africans in this way. So, that was the caution that led to that phrase being inserted in the guidelines. I'd be very interested in whether there
is other wisdom on this point.

Johan Maurer said...

I originally proposed these guidelines as part of my Cary Lecture for Baltimore Yearly Meeting in 1995. The financial guidelines which follow are the fourth section of a larger set of guidelines. This version includes some revisions and were the guidelines I presented to the Friends United Meeting board and used among staff:

FRIENDS UNITED MEETING WILL COLLECT AND SPEND MONEY ETHICALLY

(Here I acknowledge my gratitude for some of these ideas to Richard Foster and his Renovaré organization, to the Evangelical Council for Financial Accountability, and to Thom Jeavons for the relevant sections of his book, When the Bottom Line is Faithfulness. - JFM)

1) FUM will obtain an independent audit of its finances annually. The most recent audited financial report will be made available to anyone who asks for it, and to all members of the General Board and Trustees. All recipients of FUM funding, including mission partnerships, are entitled to full information about FUM finances and are expected to submit audited accounts of their own finances.

2) FUM financial reports will clearly show what has been spent on fundraising. These expenses will not be concealed under educational or other categories. When an appeal has a legitimate educational component, or when an educational item has a fundraising component, a good-faith effort will be made to cost out the division accurately.

3) FUM will accept unrestricted donations to its whole program, and will accept restricted donations for specific parts of its program. FUM will not accept donations which are to be forwarded to organizations unaffiliated to FUM and unrelated to FUM's mission. All donations which are accepted will be acknowledged except when the donor requests otherwise.

4) Restricted gifts will only be spent on the program area intended by the donor. When this is not possible, the donor will be contacted for permission to reallocate the gift and to be offered a refund if reallocation is not satisfactory. Tax-deductible gifts will not be used to pass money to any named individual for personal use.

5) Programs which are dependent upon restricted gifts, such as volunteer mission placements, may include administrative and fundraising costs in their budget. Such budget provisions must be limited to no more than is actually needed to ensure the integrity of the program.

6) FUM will make every effort to avoid accepting a gift from or entering into a contract with a prospective donor which would knowingly place a hardship on the donor or endanger the donor's future well-being.

7) When FUM sends incentives, premiums, gifts, etc., to donors in return for contributions, the fair market value of these items (when significant by U.S. Internal Revenue guidelines) will be reported to the donor and will not be represented as tax-deductible. Gifts in kind will be acknowledged with a receipt accurately describing the gifts without placing a monetary value on the gift; the latter is the responsibility of the donor. We will inform the donor of Internal Revenue reporting requirements for all gifts from USA donors in excess of $5,000.

8) FUM will attempt to live within its means, so that we don't have to turn to donors for emergency contributions or endanger our long-term ministry commitments to catch up with ourselves financially. As long as FUM is in operation, the principal balance of donor-designated endowments which have been accepted by FUM will not be spent, except by permission of the donor or of a court.

9) FUM will work with member meetings and yearly meetings to encourage good stewardship of all members, recognizing that Friends' first financial obligations are to family and local meeting, and to economically poor people, and also recognizing that the majority of FUM's funding comes through yearly meetings.

10) FUM will not exaggerate financial needs or create artificial emergencies to raise funds. We will be extremely careful in the use of photographs of people experiencing hardship in order to avoid stereotyping people or violating their privacy, and in order to avoid manipulating donors. We will not overstate what a particular donation can do in order to convince a donor.

11) FUM will always welcome donors and other visitors to its offices and program sites and will always respond honestly when anyone asks for details about our work.

12) FUM will endeavor to pay its staff according to reasonably comparable salary levels for similar jobs in the areas where staff live. FUM staff do not expect to maintain extravagant lifestyles. Transportation and hospitality costs for traveling staff are to be reported according to staff procedures, and are to be kept to a reasonable standard of modest comfort.

13) FUM's building construction and maintenance, office equipment and supplies, paper purchases, fundraising materials, waste disposal and other areas of economic and environmental impact will be overseen with a concern for a reasonable balance of simplicity, functionality and ecological stewardship.

Robin M. said...

Thank you Johan, these are nicely done. Another point I wanted to make is that ethical lapses are not restricted to Africa or any country, continent or group. I myself just left a U.S. based, non-Quaker job (today!) over what I perceived to be violations of your very reasonable standards. Nothing illegal, just unacceptable. And very sad.

Johan Maurer said...

Robin: Oh, my, this just happened! Thank you for your faithfulness; that can't have been a light or consequence-free decision.

After coming from Europe, I spent most of my growing-up years in Cook County, Illinois. Maybe that's why I'm not tempted to generalize that corruption is exclusive to other countries. In my teenage years, I remember WBBM ("where the news is no sooner done than said") broadcasting intriguing interviews with the secretary of state about why certain voting-booth manufacturers were favored over others. This was the secretary of state whose closet was found, after his death, to contain shoeboxes of cash. Mike Royko wrote a book in which he explained, if I remember correctly, how the city's Latin motto of "city in a garden" could be changed by fixing just a few letters into the motto "where's mine?"

Chris M. said...

As another fundraiser, I just want to point out the Association of Fundraising Professionals' code of ethics forbids accepting compensation on a commission basis.

From AFPnet.org:
Compensation
16. Members shall not accept compensation that is based on a percentage of contributions; nor shall they accept finder's fees.

Also, Robin mentioned the wonderful book co-authored by Thomas Jeavons -- he is General Secretary of Philadelphia Yearly Meeting -- until TODAY, 3/31/2006! See the PhYM notice here. (Love his pazbart!)

Chris M.
Tables, Chairs & Oaken Chests

Johan Maurer said...

Thank you for the mention of Thom Jeavons! By the way, that book he wrote was mentioned in the preamble to the FUM financial guidelines. I still highly recommend it. I'm sure he's going to be an incredible resource at Indiana University--it sounds like an ideal position for him.