Principles for Handling Money
This page has ideas about how to manage finances in our organization so as not to make it dependent on money; so that the success of the organization is not vulnerable to economic conditions, and so that the characteristics of the organization are not determined by our sources of funding.
We want to avoid institutional hypocrisy as much as possible. One of the most common causes of institutional hypocrisy is the shift towards an organization's operation being more important than its original purpose. Often, money drives, or is closely tied to this shift away from the organization's values, as the organization begins to compromise its values in response to financial constraints or goals.
Problems associated with the handling of money in organizations
There are many different ways that institutional hypocrisy or other problems can arise, in association with how an organization uses, raises, or handles money.
- Organizations can make decisions based on conditional contributions from large donors, thus allowing people to influence the organization with money.
- People in charge of the money in an organization may spend it in unethical ways
- Organizations can use unethical methods, or methods that contradict the organization's supposed values, to raise money, such as by pressuring or deceiving in attempts to raise money, or generating revenue for the organization by unethical means.
- Management of money may be wasteful or ineffective. In particular:
- Large organizations that have different subgroups with their own budgets can waste money because each subgroup tries to use up its budget each year, often with the understanding that groups that do not use their budget will not be able to save the money till next year, and will be given a smaller budget in subsequent years. This sort of behavior is common in universities and colleges, especially in student organizations, but can exist in any sort of organizations.
We have not raised or spent any money as an organization yet, but we have adopted the following principles:
- We accept only unconditional contributions.
- Our finances are completely transparent.
- Anyone can question a transaction, and possibly veto it.
- We are initially restricting expenditures to 50% of our assets. These are apportioned monthly, i.e. each month, 1/12th of the money in the total assets not yet able to be spent, is marked as able to be spent.
- Independently of this, we can raise money for specific expenditures, either individual items, or a collection of expenditures with a specified budget.
- For now, we are not taking on any recurring expenditures.
Special expenditures or budgets
In order to facilitate larger expenditures or events, we allow raising money for specific expenditures or sets of expenditures with a specified budgets. The budgets are not fixed, and the donations are still treated as unconditional: the use of the funds is still subject to the consensus of our group and can be changed by consensus.
In the event that the expenditure is cancelled after some money has been raised, or the expenditure is carried out with extra funding left over, the excess can be either put into Why This Way's general fund, or donated to charity. Before raising any money, we decide where any excess or unused money will be donated.
These special expenditures must have at least one person in charge of the raising of funds.
- We plan to eventually restrict our spending to a smaller (10%-25%?) portion of our assets, in order to be independent of even long-term economic fluctuations in society.
- We have been discussing a principle of not taking out loans.
- We can take on recurring expenditures when needed to sustain activities that we deem worthwhile and we have more stable finances
Explanation of these principles
Unconditional contributions only
Our organization accepts only unconditional contributions. This restriction is intended to protect our consensus process and protect our organization against institutional hypocrisy, by protecting our organization against the corrupting influences of money. Because this policy is different from the practices in some organizations in society at large, where large donors are given special influence over decisions about how their money is spent, we emphasize clarifying this policy when fundraising, so that potential donors fully understand this policy before making a donation.
We anticipate that, because of how our organization is run, there will be less demand for people to make conditional contributions than there is for most religious or non-profit organizations. People usually only make conditional contributions when they do not fully trust the decisions made by a group, and when they wish to influence the decision making process or the way the group uses money. Because our consensus process gives full say to all people involved in the group, a donor giving an unconditional donation to our group will have much more influence over how their money is used than a donor giving a conditional donation to an organization run by conventional methods.
People who wish to give conditional contributions can make donations of resources for use with a specific project that our group has already decided to do, or they can join our group as a participant and influence decisions through our consensus process.
Complete financial transparency
We want our organization to operate on a model of complete financial transparency. This means that our entire finances are easily viewable not only by anyone in the group, but by anyone in the public at large. To be more specific, anyone can see every transaction that has been made with the organization's money. Furthermore, by easily viewable, we want our finances to be viewable on a plain website, with a small number of clicks, rather than buried in complex documents that require a detailed or difficult process to access.
No taking out loans? (discussed)
We have been discussing, but have not fully agreed upon the principle of not taking out loans. One of the reasons for this is that a loan creates a relationship in which some external entity has a say in what our organization can do, giving this external organization some financial and legal power over ours. Loans necessarily involve risk, as there is always the possibility of default on the loan. An example of how such risk can affect organizations would be if an organization had taken out a mortgage on a new building during the height of the real-estate bubble in 2006-07, when salaries were high and the economy was booming. The organization might then face decreased donations as donors' incomes drop, and be left with a building worth less than the outstanding loan balance. This circumstance could create financial pressure that could create an incentive for the organization to compromise its values.
One of our group's beliefs is that "Acting in accordance with our values is always more important than the growth, financial prosperity, and reputation of the organization. " The justification for taking out loans is usually to allow more rapid growth, such as by purchasing or renovating a building sooner than the organization would be able to solely by saving and raising money. The restriction on loans is a highly risk-averse principle, and may seem extreme, but we have been considering it because it may help protect the integrity of our organization. In support of the prohibitions against taking out loans is the idea that the possible risk of having the organization's values compromised cannot be used to justify the goal of greater growth of the organization.