Tackling Nonprofit Ethics Head-On

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America’s charitable nonprofits rely on the public’s trust to do their work. That trust attracts volunteers who are committed to the cause, and donors who contribute to the mission. The public trust is the heart and soul of what keeps a charitable nonprofit’s mission alive.

In an environment where more than half of nonprofits surveyed reported that they didn't expect to have resources to meet the increased demands for their services in 2013, individual charitable nonprofits can ill afford mismanagement of precious resources. Nonprofit leaders know that even one dollar diverted through fraud or mismanagement from a nonprofit's mission is too much, and that when one would-be volunteer or donor loses confidence in a charitable nonprofit because of unethical conduct, that’s one too many. What’s worse, whenever there are media stories or investigations about alleged mismanagement, or even about charitable nonprofits falling victim to fraud, theft, or embezzlement, every charitable nonprofit is tarnished by the suggestion that “charities can’t be trusted.” So, ethical conduct is something we all have to deal with head-on.

That’s why the National Council of Nonprofits is taking this opportunity to showcase resources to help more charitable nonprofits adopt and demonstrate core ethical values, such as accountability and transparency.  Let’s assume your nonprofit is committed to being accountable and transparent – that’s terrific in theory. But what does it mean in practice? 

As a starting point, while unfortunate, we need to accept that there will always be people who try to defraud others, even charitable nonprofits. So, we can't assume that "it won't happen here," because it can happen anywhere. The key is prevention. After all, isn’t it better to stop the harm before it happens? All board members and staff members of charitable nonprofits must demand (and model) accountability, earning their supporters’ trust through transparent and ethical conduct.

So, what are the practices that ethical and accountable nonprofits follow to ensure that they earn the public trust, such as a conflict of interest policyprudent financial management policiesaccountability practices in fundraising, and good governance policies?

In addition to the links above, here are three more suggestions:

First, is your nonprofit aware of accountability programs, such as the Principles and Practices and Standards for Excellence® programs that are offered by many state associations of nonprofits across the country? These programs not only address state specific legal requirements, but equip nonprofits with best practices tools and educational programs that promote effective and ethical nonprofit governance.

Second, just like you conduct fire drills, what about drilling to prevent fraud from occurring at your nonprofit?

We’ve posted resources including this nice checklist from Venable, a law firm with expertise in charitable nonprofits, that describe internal controls that your nonprofit can adopt to help prevent (or more quickly uncover) fraud, theft, and embezzlement. (Remember: it’s a myth that independent audits prevent fraud!)

Third, nonprofits’ work to promote ethical conduct and prevent fraud is never done. The nonprofit community must earn the public’s trust every day, not only by complying with the law, but also by modeling and promoting integrity, transparency, and accountability, and it starts at the top with the leadership of your nonprofit. We’ve posted resources to help your leadership team adopt a “code of ethics” or “statement of values,” that include some stellar examples from around our state association network to inspire your nonprofit’s own journey in good governance and ethical practices.

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