Haiti’s earthquake in 2010 struck the heart of its capital, Port-au-Prince. In the immediate aftermath, the American Red Cross raised nearly half a billion dollars from donors, with the ambitious goal of rebuilding the shattered country. Five years after the fundraising campaign, an investigation by ProPublica and NPR revealed that the organization had failed to deliver on its promises. A meagre six permanent homes were built. As questions about the charity’s transparency and effectiveness emerged, the trust between the American Red Cross, its funders, and the public was shaken to its core.

One employee described the American Red Cross’s perspective on the crisis in Haiti as “a spectacular fundraising opportunity,” enlisting celebrities like Michelle Obama to join the campaign to build 700 homes with finished floors, toilets, showers, and rainwater collection by 2013. But what the American Red Cross exceeded at in fundraising, they couldn’t deliver on programming. Instead of seeking help and unveiling their struggle, they slowly dismantled the project and moved funds to other areas, until the exposure forced public accountability and showed that over a quarter of what was raised went to internal expenses.

Now, consider the story of Greg Mortenson, the author and founder of the Central Asia Institute, who was accused of fabricating stories and misusing funds meant to build schools in Afghanistan and Pakistan. As a result, the organization’s credibility crumbled, and the communities they aimed to serve were left disillusioned. After years in the wilderness, the Institute has shown a remarkable comeback.

These tales underscore the crucial role ethics play in partnerships and the devastation that can be caused by even one bad actor. The good news is that organizations can learn and get better – think of it as their “Rocky” moment of bouncing back stronger than before. But it shouldn’t take an ethical breach on this level to make change happen, and the reality is that most organizations don’t get a second chance when the failures are this large.

How do organizations avoid these traps? There are simple best practices and policies that every organization can use to avoid these challenges. By implementing these suggestions, nonprofits and funders will strengthen their ethical foundations, safeguard their collaborations, and build greater trust with world-class partners:

Best Practices:

1. Adopt a robust code of ethics: A comprehensive, well-communicated code of ethics sets the tone for the entire organization and serves as a guiding light for all involved.
2. Emphasize transparency: Be open and upfront about financial dealings, project outcomes, and decision-making processes. Share data proactively, collaborate in non-transactional ways, look at trust as the currency of your organization. The more transparent an organization is, the more trust it builds with donors, partners, and the public.
3. Foster a culture of accountability: Encourage open discussions about ethics and hold staff members, volunteers, and board members accountable for their actions. Implement clear policies for reporting ethical concerns and ensure whistleblowers are protected.
4. Conduct regular audits and reviews: Keep a close eye on financial records and program outcomes. External audits and internal reviews can identify potential issues before they escalate into full-blown scandals.

Policies and Procedures:

1. Conflict of interest policy: Implement a policy that requires staff and board members to disclose potential conflicts of interest and provides guidelines for addressing them.
2. Ethical fundraising policy: Establish guidelines for fundraising activities that prioritize donor privacy and ensure funds are used for their intended purposes.
3. Gift acceptance and partnership policy: Determine the limits of who you will accept gifts from and what instances require scrutiny from the board, an oversight committee, and/or the executive director.
4. Procurement policy: Create a policy that ensures fair and transparent procurement processes, reducing the risk of corruption and favouritism.
5. Employee and volunteer screening: Conduct background checks and verify qualifications for all employees and volunteers, ensuring the organization is staffed by trustworthy individuals.

Philanthropic partnerships may sometimes feel like a minefield of ethical quandaries, but by following these best practices and implementing robust policies, nonprofits and funders can navigate their way to success. With ethics as their North Star, you’ll be able to create lasting, positive change in the world, turning potential pitfalls into triumphant tales of impact!