Rules of Business Ethics and Practice

Prepared by the Association of Direct Response Fundraising Counsel (ADRFCO) (Mal Warwick & Associates, Inc. is a founding member of ADRFCO and adheres to these Rules.)

Members of the Association are companies or divisions of companies that provide consulting services to nonprofit organizations with respect to direct response fundraising. Members do not solicit funds from the public.
Services provided by members include offering advice and counsel; conducting feasibility studies and tests; designing and managing campaigns; developing and producing solicitation materials; and providing mailing lists.
All those enjoying membership in the Association subscribe to the following standards and requirements as a condition of that membership. All provisions of these Rules may not pertain to services provided by members to for-profit organizations or certain political or religious organizations.


1. ACCOUNTABILITY OF MEMBERS

The Association recognizes special obligations of public accountability due to the status enjoyed by the client group it serves. Accordingly, upon the request of a member of the public, a member will:
a) Divulge the existence of a client relationship.
b) Provide a copy of the contract governing its employment as fundraising counsel or inform the inquirer where the contract may be obtained.
c) Provide a list of the member's owners and/or principals.

2. ACCOUNTABILITY OF CLIENTS

A member of the Association will not knowingly serve an organization that fails to meet minimum standards of public accountability. A member will take reasonable, affirmative steps to assure that a client organization meets these standards. An organization must:
a) Maintain an independent, functioning board of directors (or other governing body).
b) Provide detailed information on its finances upon request.
c) Provide detailed information on its programs upon request.
d) Not permit self-dealing or material conflict of interest on the part of its officers, directors, or employees.
e) Operate consistently with its stated purposes.

3. OBTAINING CLIENTS

Nonprofit organizations deserve an extra degree of care when approached by a business offering fundraising services. Accordingly, a member of the Association will not:
a) Exaggerate its performance record or lead a prospective client to a false conclusion that a given result is guaranteed.
b) Offer any kind of compensation to an officer, director, employee, or advisor of a prospective client for aid in obtaining the client's business.
c) Enter into the business relationship without reasonable assurance that the client understands the economics and processes of direct response fundraising.
d) Enter into the business relationship without first stating in writing the reasonable expectations for fundraising income.
e) Perform work for compensation for a client without a written contract.
f) Execute a contract with any party other than one reasonably appearing to have the authority to commit the client.

4. CONTRACTS

For the protection of both members of the Association and nonprofit clients, contracts must contain minimum safeguards. Therefore, any contract entered into between a member and a nonprofit organization will contain provisions that:
a) Clearly describe the services to be provided and the compensation to be paid.
b) Specify the period for which the contract has effect.
c) Allow the nonprofit organization ten days from the date of the contract's signing in which to cancel the contract without obligation.
d) Require final approval from the client for list selection, copy, and cost projections.
e) Promise prompt, detailed reporting of results upon the campaign's conclusion, upon the close of the client's annual accounting period, or upon the client's reasonable request.
f) State that the client bears financial responsibility for all services procured in execution of the campaign.
g) (i) Clearly state the terms and conditions, if any, for relieving the client of its contractual obligations before the time specified as the contract duration; and (ii) give the client fair notice of any continuing obligations that may exist after a termination by the client.

5. FEES

A member of the Association must base its fee on actual services to be provided at a prearranged, reasonable level of compensation. Necessarily, "reasonable" can only be determined by all the factors involved, including: the time and type of labor involved, the nature and duration of the professional relationship between provider and client, and the ability and experience of the people performing the services.
Fees based on a percentage of fundraising proceeds, however stated, are not favored. A member may enter into such an arrangement only if it is based on an actual, demonstrable, and fair allocation of risk and if the resulting compensation remains within reasonable bounds.

6. DONOR LISTS

The acquired donor list is the essential product of a direct response campaign. Its primary value for the nonprofit client lies in future fundraising from donors who are now identified and have a relationship with the organization. The donor list has secondary, but considerable, value due to its potential as a commodity in the direct response marketplace.

The economic justification for direct response fundraising rests on the future management and control of this resource by the nonprofit organization. As an ethical principle, it follows that the donor list is inherently the property of the nonprofit. At the same time, we recognize that the list resource can afford the means by which a nonprofit, especially a new or undercapitalized organization, can sustain a fundraising program.

A nonprofit organization is free to dispose of its list resource -- like any other property -- in any manner it chooses. But, the fiduciary relationship of client and fundraising counsel creates a special case. The Association firmly believes that voluntary restraints upon dispositions of list rights to counsel are essential. These and other measures can only serve to protect the security and integrity of the donor list. Therefore:

a) A member may not acquire any right or interest from its client that precludes the nonprofit client's right to conduct fundraising with its donor file when and as it sees fit.

b) All income or financial benefit derived from the donor list's marketplace value must go to the nonprofit client unless the following conditions are met:

(i) an allocation to counsel, as part of payment of fees for services rendered, is clearly specified in the contract.
(ii) before entering into the contract, counsel must provide the nonprofit client with a written, full and fair disclosure of the marketplace value of donor lists.
(iii) any right of a member to income or financial benefit from the donor list (except for new names acquired during the member's tenure as counsel) must be terminated with the end, for any reason, of the member's services as counsel.

c) Notwithstanding the above, a member may retain a contingent security interest in a donor list's marketplace applications, provided:

(i) the interest is fully and clearly set out in the contract; and
(ii) the interest applies solely to the satisfaction of earned and overdue fees of certain amount and attendant direct expenses as set out in the client-counsel contract.

d) To protect the security and integrity of the donor list, a member firm shall use its best efforts to assure that:

(i) the nonprofit client has the right to veto list rentals or exchanges to mailers that it deems competitive or damaging to its fundraising interests. Included is the right to examine proposed mail packages or scripts.
(ii) the donor file is protected by a "decoy" or "seed" system, monitored by the nonprofit client, designed to track every transaction involving the donor file.
(iii) a regularly updated, duplicate copy ("fire file") of the donor file, readily accessible and obtainable by the nonprofit client, is maintained.
(iv) the nonprofit client regularly (ordinarily, at least once a year) informs its donors of the marketplace use of the donor file and affords them a reasonable opportunity to withdraw their names from such uses.

7. FUNDRAISING METHODS

Members of the Association owe obligations of truthfulness and integrity directly to the donating public. Accordingly, in conducting a campaign, members will not:
a) Knowingly misrepresent a nonprofit organization's mission, accomplishments, or plans for the future. A member will take reasonable, affirmative steps to avoid such a misrepresentation.
b) Knowingly impart expectations to the public that cannot be fulfilled. A member will take reasonable, affirmative steps to avoid creating such an expectation.
c) Knowingly create confusion between the nonprofit client's identity and that of any other nonprofit, governmental, or private organization. A member will take reasonable, affirmative steps to avoid creating such confusion.
d) Receive donations or exercise control over the expenditure of donations.
e) Perform work for a client when the member's reasonable judgement indicates that the undertaking in question will clearly jeopardize the client's existence.

8. CONFLICT OF INTEREST

Strong protections against even an appearance of conflict of interest are necessary. This is so due to the great public trust placed in nonprofit organizations and, by implication, in the businesses that serve them. Accordingly, a member of the Association shall assure that:
a) All decisions by the nonprofit client affecting its business dealings with the member shall be undertaken without the prospect of undue influence. No officer, director, principal, or fiduciary (or close relative of any of the preceding) of a member may serve a client organization as officer, director, or employee.
b) A client knows in advance of any material relationship between the member and a third party who provides services related to direct response campaigns. Even after disclosure, a member may not engage in an interested transaction that does not demonstrably benefit the client.
c) No credit or loans be extended to a client conditioned upon the continuation of the employment relationship between member and client.

9. CONFIDENTIALITY

All dealings between members of the Association and their clients are confidential, except:
a) as provided in 1, above;
b) where the subject matter is a public record; or
c) where a member is obeying the legitimate disclosure order of a lawful authority.


(Adopted May 1987, amended June 1988 and March 1992)

Contact: ADRFCO, Robert S. Tigner, general counsel.
1612 K St. NW #510, Washington, DC 20006, phone (202) 293-9640
e-mail: adrfco@aol.com