Dear Nonprofiteer, For whose benefit, exactly?

Dear Nonprofiteer,

I have an ethical dilemma that I need help sorting out. I’m really bothered by this and I want to know 1. if I am seeing this from the wrong perspective and 2. what you would advise doing.

I am a wardrobe stylist and I make custom dress shirts & suits. Fairly often, when approached, I donate gift certificates for custom shirts to silent auctions, which raise a nice amount of money for fund-raising organizations.

Here is the issue: In the Fall of 2009, I donated a gift certificate to a well-known organization that runs after-school and extra-curricular programs for children. I was told that the gift certificate was for the silent auction that coincided with an annual fund-raising event. Obviously, I was told proceeds from this event & auction would go to support the local children’s organization.

Last week, I got a call from the former President of the Board of Directors of this organization. He was really excited to finally have his custom shirts made. The organization had given a gift certificate to him while he was on the board, as a thank you gift for his service.

I was a little fuzzy on the gift certificate details, had completely forgotten that I had donated a certificate to the auction, and couldn’t remember anyone buying a gift certificate as a gift…but went the next day to fit him and thought it would all be clear once I saw the certificate.

I only realized at the end of the 60 minute appointment that HIS gift certificate was the one I had DONATED to raise money for THE KIDS and the facility. It apparently was not auctioned off at all, but was given to a Board member as a gift! (Now, it might not have had any bidders in the auction, but this is sort of unlikely, has never happened yet.)

So now I am out-of-pocket, a lot, for a board member’s gift, as opposed to the organization buying something for him (which is tax-deductible for them!) This is a $700 retail value gift. I feel deceived—this money was for kids, not the board president.

Thoughts? Advice? I’ve heard both sides. Someone from non-profit told me I was stuck, that it was perfectly legal & someone else said that I am not accountable to fulfill this certificate.

I would really appreciate your experience/thoughts on this matter.

Signed, Tailor-Made

Dear Tailor:

1) You are not seeing this from the wrong perspective.
2) But it’s hard to know what to do.

There’s no question about it: if you donated a gift certificate to be auctioned off for the benefit of the agency, you wuz robbed if instead it was used instead as a personal gift to an agency Board member. Nonprofit Board members aren’t supposed to be compensated for their services, though they may be recognized: I would argue that a $700 gift starts to sound more like the former than the latter. (I’m presuming the agency knows the value of the certificate.)

You’re not actually stuck: no one can make you make these shirts, and neither agency nor Board member would be likely to sue you to secure them (or equivalent reimbursement). But you have a business reputation to protect, and so the question is which will cost the least to you: telling the Board member you can’t honor the certificate because it’s not being redeemed according to its terms, or telling the agency you want to be reimbursed for their misuse of your gift.

It’s a matter of strategy: if the Board member is likely to become a regular customer, you’d rather not piss him off by refusing to honor the certificate. (Obviously you can only guess about that, but you’re a savvy person: your guess is probably correct.) If you’re likely never to see him again, then say you CAN’T (not you won’t) honor the certificate because its terms called for it to be auctioned, not given away. If he protests that no such “terms” appear on the face of the certificate, explain that those were your arrangements with the agency, and advise him to return to the agency and explain that its gift is unredeemable. You can say or merely imply that what the agency did was exactly like passing counterfeit money: giving him something valueless while pretending it was valuable. Smile when you say all this, but say it and repeat it as often as necessary to get the guy out of your shop.

If, however, he’s a likely future customer, then your only choice is to go to the agency and tell them what you’ve told the Nonprofiteer: that you were told the certificate was to be auctioned off for the benefit of the agency and it wasn’t; that you were willing to donate to the agency but not to its individual Board members; and that you’d like to be reimbursed for the $700 value of your misused gift. If you want to sound lawyerly (which is all the Nonprofiteer got out of her three years in law school), say that you won’t take the $700 out of the hide of the Board member because he’s an innocent “holder in due course,” that is, someone who was given something worthless while believing in good faith that it had worth. Do all this in person with the Executive Director, and then (unless s/he hands you $700 on the spot) reiterate it in a letter to the entire Board.

Getting the $700 out of the agency won’t be easy: they know you’re as unlikely to sue them as they are to sue you. But if they fail to cooperate, do two things: include in the aforementioned letter a statement that you will never donate goods, services or money to the agency again; and include an express or implied intention to make the agency’s misdeed public. You can say, “and I intend to post this on my Facebook page,” or “and I intend to tell alll my business colleagues to do likewise [withhold support] or “I intend to mention this to my friend the New York Times reporter;” or you can simply say, “I know the agency’s reputation for uprightness and am sure you would not wish to have it stained by any accidental misuse of a donation,” and let them infer that the stain on its reputation will come from you.

If the agency offers you refund of half the price or more, take it and walk away. If not, make the shirts for the Board member and do them so brilliantly that he’ll be on your doorstep demanding more–for which you can overcharge him with a clear conscience.

What a shame you’ve had this experience–it seems to validate the old saying, “No good deed goes unpunished.” But plenty of other charities will use your gift correctly, so please try not to be embittered.

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10 Responses to “Dear Nonprofiteer, For whose benefit, exactly?”

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  2. Anita Bernstein Says:

    But what if the agency tells Tailor-Made that nobody bid on the gift–or, what might be more probable, that they vaguely *think* nobody bid on it?
    I ask because I don’t think Tailor-Made wants to confront anyone inside the agency. As I read the question, it’s about whether Tailor-Made has a formal or legal obligation to honor the certificate. I don’t think s/he cares about pissing off the former Board president. Because, as you say, nobody is going to sue Tailor-Made for not making the shirts, I think a flat refusal to deliver–explaining that the certificate will not be honored unless it was bought at the auction–would work fine.

    • Nonprofiteer Says:

      You may be right–just scissor the Gordian knot and say no. Tailor-Made is in a position to say, “Nobody bid on it? That never happened before, so I doubt it,” but as you say I suspect she’d rather not confront the agency directly. Pissing off the Board president may be the less costly option.

  3. Carly Smith Says:

    How about this: at the auction, a member of the Board bid on and won the gift certificate, and then donated it back to the agency to give as a gift to the retiring Board member, who he knew would love the item? You are making an assumption without all of the facts. Call the Executive Director and set up a time to meet with him or her. Explain your concerns. If indeed the agency misused your gift, you should be compensated for the value of the certificate. Instead of charitable donation, the certificate would then be considered a sale.

    • Nonprofiteer Says:

      Fair point–virtually any combination of circumstances is possible. But on the principle of Occam’s Razor, I went straight to the one that requires the least inferences, namely, that for whatever reason they failed to dispose of the certificate at the auction and therefore gave it to the Board president as a way of disposing of both it and the obligation to honor him.

  4. stew Says:

    There was an interesting law suit in Minnesota on this very subject. Apparently the Schubert Club, an arts promotor, hired Joko Sutrisno a music teacher from indonesia. Mr. Sutrisno also worked at a local college. when the college dismissed Mr. Sutrisno for sexual improprieties his supporters tried to supplement his diminished income. they enlisted the the Schubert Club to solicit additional funds from donors WITHOUT informing the donors of the sexual improprieties that created the problem.

    http://dockets.justia.com/docket/minnesota/mndce/0:2010cv02288/113849/

    • Nonprofiteer Says:

      Both involve securing contributions under false pretenses, and/or using contributions in ways whose connection to the mission is debatable; but I think there’s an argument to be made that the Board’s decision in the Sutrisno case is a personnel matter about which donors have no right to ask: you either trust the agency with your money or you don’t. But they are clearly parallel in that they involve first and foremost the reputation of the agency, which is a nonprofit’s greatest asset, and so both offer an object lesson in what happens if that reputation gets sullied somehow.

  5. Anita Bernstein Says:

    “How about this: at the auction, a member of the Board bid on and won the gift certificate, and then donated it back to the agency to give as a gift to the retiring Board member, who he knew would love the item?”

    You don’t need Mr. Occam to toss out that possibility. Tailor-Made wrote that the former board president had said that “[t]he organization had given a gift certificate to him while he was on the board, as a thank you gift for his service.” The former Board president is saying that he got the certificate from the ORGANIZATION, not as an individual’s gift.

    In your scenario a Board member bid successfully on an item and then gave it to the agency to give to the former president. Why wouldn’t the Board member give it to the former president directly, if the bidder knows the former president so well that he knows the guy would love to get felt up across the chest with a tape measure? Unless it wasn’t really a personal gift but an institutional grabbing of a donation–in which case I don’t think Tailor-Made has to make the shirts.

  6. Joeventures Says:

    It seems to me the best course of action is the straightforward one. There’s no guilt in that, and if either the board president or the ED get upset, they really don’t have much recourse. This is not so much a legal issue as it is an ethical issue. There should be no feelings of guilt whatsoever on Tailor-Made’s part.

    The straightforward course of action does not need to go directly to punishment, either. Start out by assuming everyone had the best intentions, but perhaps acted out of naivete. Rather than schedule an appointment with the board president, let him know you need to get back in touch with him. Call the ED and ask how the auction went. It should not be incumbent upon Tailor-Made to make up a story on behalf of the ED.

    This is the ED’s opportunity to come clean. If the ED doesn’t come clean, that would be the time to ask the ED to call the board president to let him know there was a mistake.

    • Nonprofiteer Says:

      Very clear and straightforward, indeed. Thanks for getting us out of over-thinking the situation and therefore over-planning the response.

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