This is an archive of CharityVillage NewsWeek.
To find a word on the page, use your browser's "find" feature (CTRL-F or CMD-F).
To view other articles in the archive, use our Chronological Index.
Please note: While we ensure that all links and e-mail addresses are
accurate at their publishing date, the quick-changing nature of the
web means that some links to other web sites and e-mail addresses may
no longer be accurate.
Ethics Q & A
September
27, 2004
By Jane Garthson, Garthson Leadership Centre
The dilemma:
How do I do ethical procurement for my charity? I recently became Executive Director and have little experience with major purchasing.
Jane says...
That's a big topic! Purchasing has become professionalized for those who specialize.
I suggest you read the Purchasing Management Institute of Canada's Code
of Ethics at www.pmac.ca/about/ethics.asp.
Some issues to consider at a charity:
- You are seeking the best value for your organization, in relation
to serving your mission. When comparing products or services, a low
initial price is not sufficient indication of value. Consider lifetime
costs, including non-monetary ones, such as implementation/set-up,
training, upgrades, support, and time until replacement. Free is not
always best value, as there may be insufficient support, major maintenance
costs, or an inadequate fit with your needs. Don't be afraid to turn
down well-meaning offers of 'free' equipment that would quickly end
up in your crowded supply room, or 'free' services that would waste
the time of staff and volunteers.
- Remember that lifetime costs include environmental stewardship. Excess packaging
fills up landfill sites. Pesticides and many cleaning products contaminate
water and could harm children, pets, and wildlife. If you have a choice,
buy green.
- If a relative or friend of an employee might become a supplier, make sure that employee declares a conflict and stays completely outside of the decision process.
- One of your volunteers may operate a related business. If so, let
them bid but make sure they are providing best value and that you
document the selection process with extra care. For close bids, I
would reward the volunteer with the purchase order.
- One of your leadership volunteers may in the business of providing what you need, and that is much trickier. Directors of Ontario charities cannot receive any direct or indirect remuneration from the charity where they serve as directors, and therefore cannot be a contractor or professional service provider even if they are paid below fair market value. Elsewhere, trust law may imply a similar restriction for charity directors.
- In other nonprofits, directors may be able to declare a conflict
of interest and remove themselves from all involvement in the decision.
However, other suppliers are likely to suspect unfair treatment, insider
information, and other inappropriate purchasing. Be VERY careful to
document how their written bid compares to written bids
from other qualified suppliers. Even with such care, it will simply
stink to have a director providing an ongoing service. Directors can
remove themselves from a quick decision on a new communications system.
It is much, much harder to remove themselves from evaluating major
ongoing services such as association management. It may be easier
in a large organization than a very small one, but how many Executive
Directors could feel comfortable telling a board member that their
paid services are unsatisfactory?
- Speaking of fairness to suppliers, your charity status does not
give you the right to pick the brains of consultants for free on the
pretext of a subsequent contract. And just because $2,000 worth of
services looks large in your budget does not justify a request for
proposal process that costs consultants $5,000 in lost time to participate
in. Be reasonable - a quote for a short contract can be done in a
short e-mail and/or a telephone interview.
- Similarly, you should not waste the time of suppliers getting quotes
for your files if you have already decided where to buy. Be open to
better deals, or don't call.
- Do not allow suppliers to make buying from them a condition of a
donation. A donation must be made without expectation of return, otherwise
their tax receipt could be invalid. If the company is using the marketing
budget and is a sponsor rather than a donor, they still have to meet
the test of providing the best value for the organization on this
purchase. Consider the total value of the sponsorship if bids are
close.
- If a cause-related marketing offer includes some kind of monetary return to your charity, make sure it is a legal one and not something that could be perceived as a kickback.
- Minimize socializing with suppliers, especially if a decision is pending. Have a gift policy that indicates what you can accept. Nominal items like a coffee may be fine but tickets for a flight or major league baseball game are not. Consider how it will look to a competing supplier! Have a hospitality policy about when you can host, and buy your own meal at the restaurant unless there is an exchange of hospitality.
- Buy in your community when you can. Local businesses can be wonderful supporters,
particularly for your events, and I would not bypass them to save
a few dollars buying books or supplies from major chains. You will
get back that investment the next time you need an event publicized,
advertisers for your program book, or timely service calls.
- Choose suppliers who invest in their community and whose values match those
of your organization. If you value inclusiveness, are they committed
to employment equity? If there is a corporate board, what percentage
are women? Do they make gifts to charities at which their employees
volunteer and provide flexible work arrangement to support volunteering?
Are they IMAGINE members (in Canada)? Ask questions and do research
before major purchases.
- Look for opportunities to do group purchasing with other nonprofits. It could save money, and give the supplier more incentive to be attuned to nonprofit needs.
In summary, apply your organization's ethical values to purchasing. If you value treating clients, members and staff with respect, honesty and fairness, find suppliers who share your values and treat them the same way. Make prudent use of your organization's valuable resources, and think broadly and long-term when comparing costs.
***********
Because nonprofit organizations are formed to do good does not mean
they always are good in their own practices. Send us your ethical questions
dealing with volunteers, staff, clients, donors, funders, sponsors, and
more. Please identify yourself and your organization so we know the questions
come from within the sector. No identifying information will appear in
this column.
To submit a dilemma for a future column, or to comment on a previous one,
please contact help@charityvillage.com. For paid professional advice about an urgent or complex situation, contact Jane directly.
