In its everlasting quest to receive funding, a nonprofit organization may be faced with various ethical concerns. Three areas that are particularly liable to ethical issues are:

1. The Sources of Funding
2. The Socio-Political Location where funds are applied
3. The Specific Causes that receive collected funds

1. The Sources of Funding
In an attempt to increase community goodwill and gain good P.R. points, a private company may choose to donate money to a nonprofit. It is important to the stability and success of the nonprofit to screen the monies received from corporations – as opposed to accepting all incoming donations.

Example: Gold Rush Casino donates money and forms a strategic partnership with the local Counseling Center for Gambling. The deal turns sour for the Counseling Center when the casino is accused of defrauding and taking advantage of slot machine users. The local community may very well correlate the Casino’s actions with the reputation of the well-intending Counseling Center for Gambling. The Center then stands to lose it’s members’ support – then sponsorships – then operating funds – and the rest is history.

2. The Socio-Political Location where funds are applied

While conducting fund raising rallies and drives, nonprofits must consider the possible adverse effects of cultural misconceptions. Failure to realize the receiving community’s cultural values, norms, literacy rates, religious beliefs, and other sensitive topics can be disastrous to the organization’s operations. It is important to be as diplomatic as possible so as to avoid community resentment; furthermore, it is crucial to conduct well-rounded market research to confirm the viability of serving any particular community or cause.

3. The Specific Causes that receive collected funds
Another issue that can create an ethical dilemma is the allocation of donated funds without proper planning. Some corporations may want their contributed funds to be used solely for a particular purpose and possibly in a manner that is not in line with the nonprofit’s mission. Such a case requires special attention from the nonprofit’s officers – it is vital to the organization’s sustainability to remain ethical and maintain the integrity of the organization’s mission. Improper allocation of funds will create discontent sponsors and donors and as a result funding becomes compromised.