The Ethics of Fundraising with a Government Property Prize

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 February 15, 2012; Source: Missoulian | Here is an interesting case of government ethics rules colliding with the good intentions of a nonprofit. According to the Missoulian, Western Montana’s Bitterroot Cross-Country Ski Club has invested $10,000 in cash and volunteer time to maintain and groom the Chief Joseph Ski Trail System at the Beaverhead-Deerlodge National Forest for some two decades. The club prints 4,000 ski trail maps annually and makes them available to the public for free and provides free instruction to cross-country beginners. Also, the club raised $100,000 in cash and materials to build the Gordon Reese cabin, which serves as a warming hut on the trail system. To raise money for activities such as the above every year, the club conducts a raffle at its annual fundraiser. The grand prize is a night’s stay at the Gordon Reese cabin and a gourmet meal. After the club had already started selling tickets for the raffle this year, it heard from the U.S. Department of Agriculture’s (USDA) Office of Ethics that the cabin must no longer be offered as its raffle prize.

The USDA ethics office contends that the private ski club cannot use government property for a private organization’s fundraising —even though, in the cabin’s case, the government property was built and paid for by a private club. Why raise this issue after nearly two decades of such ski club fundraising? A USDA spokesperson told the newspaper that the U.S. Forest Service previously didn’t have a dedicated ethics office.

The club might have mishandled this situation. It went ahead with the raffle even though it had already heard from the USDA, and only notified the raffle winner after the fact. A club spokesperson explained that they hoped the Forest Service would work something out in an effort to avoid “end(ing) up with egg on their face.”

No one seems to doubt that the USDA was trying to do the right thing in terms of ethics, potentially protecting unsuspecting Forest Service personnel who might otherwise stumble into governmental ethics infractions.  But it could have been handled differently, and while hindsight is 20-20, here’s how:

•         Because of the long history of the Forest Service’s partnership with the club, the agency should have attempted to work out some sort of arrangement with the club that would continue the raffle of the cabin, perhaps dedicating part of the raffle proceeds (prorated for the cabin versus the gourmet meal) to the government rather than the club.

•         If the agency was not disposed to any negotiations with the club—and after two decades of this fundraiser—it could have at least waited until after this year’s fundraising event since the club had proceeded with the raffle in good faith based on past practice.

•         Since the club paid for the cabin, it could have negotiated a rental of the cabin for that one raffle-winning night. The transaction is a rent payment to the government with some appropriate restrictions to prevent potential ethical abuse.

The ski club has an ethical duty to its members and donors. If there is a material change in the circumstances of the organization in terms of its fundraising commitments, that should be revealed to the people who might be affected—in this case, club members and purchasers of raffle tickets. The club might have been blindsided by the surprise Forest Service ruling, but the raffle winners were certainly no less blindsided by the club’s surprise announcement after the event that the cabin was no longer part of the deal. Maybe the U.S. Forest Service and the Bitterroot Cross-Country Ski Club should have consulted NPQ’s Nonprofit Ethicist. –Rick Cohen

  • shirley kressel

    It is unfortunate that it took a minor email blunder to bring this problem to the public’s attention. The Conservancy has been hiding its information since 2004. It is taking huge amounts of public money, and controlling fifteen acres of public space, all the while concealing information about where it is actually spending millions of dollars a year. Its “culture of transparency” consists of revealing only IRS Form 990’s, and audits and annual reports that reveal little more, while ignoring state and citizen demands for specific details. Please recognize that Nancy Brennan’s handling of this information request is just a warning alert for the more fundamental problem: private non-profits have different transparency and accountability obligations than those of public agencies, and therefore should not be given power over public assets.

  • rick cohen

    Dear Shirley: While there seems to have bee problems with the Conservancy’s practices regarding transparency, I don’t think I would agree with your conclusion. Nonprofits that have the responsibility of administering government programs do have greater responsibilities for transparency, but that doesn’t mean that nonprofits shouldn’t play those roles. Given the questions that came from the agencies responsible for overseeing the Conservancy AFTER the problems hit the Boston press, it seems like government was a little laggard in its oversight responsibilities.