Reading summaries - week five, Spring 2018

Class theme was The Ethics and Accountability Challenge, Self-Regulation and the Nonprofit Sector

Table of contents

Chapter 2, Managing Nonprofit Organizations, Tschirhart and Bielefeld (2012)

  • what makes a good nonprofit?
  • stakeholders can pull a nonprofit in different directions and lead to compromises that keep it from excelling
  • which stakeholders’ interests should have the greatest priority and how to handle conflicts of interest
  • nonprofits have a heightened responsibility to operate in an effective and ethical manner
  • Scandals can raise concerns about the nonprofit sector as a whole
  • Multiple Dimensions for Evaluating Effectiveness
    • In the simplest terms, effective organizations are the ones that accomplish their mission
    • difficult to judge the effectiveness of some nonprofits in the short term
    • Assessment of nonprofit organizational effectiveness requires multifaceted approaches that acknowledge the challenges of achieving complex, difficult, long-term missions
    • also need to recognize that effectiveness assessments may come from multiple stakeholders with different perspectives:
      • The first, the goal accomplishment approach, examines organizational output
      • resource acquisition approach (sometimes called the system resource approach) focuses on inputs needed
      • internal processes approach, assesses the health and efficiency of internal dynamics
      • the stakeholder approach, looks at the satisfaction of stakeholders inside and outside the organization
      • how well the organization adapts over time (could be called adaptation approach)
  • Goal Accomplishment
    • Unlike the business sector, which can comfortably use profit as a metric for success, the nonprofit sector should be careful to treat the amount of revenue generated or donations received as an input, not a goal.
    • Achievement of goals may not indicate achievement of mission
    • A nonprofit should set goals that are highly likely to align with its mission.
    • We recommend that goals be:
      • Measurable
      • Time bounded
      • Accepted
      • Challenging but feasible
      • Prioritized
  • Resource Acquisition
    • a nonprofit can evaluate effectiveness in terms of the extent to which it has acquired the inputs needed to accomplish its mission
    • examples of types of inputs:
      • Human resources
      • Financial resources
      • Capital resources
      • Knowledge resources
      • Program resources
      • Community-based resources
    • this type of evaluation is best used when the level of a resource brought into an organization can be linked to its actual results
    • It is often easy and expected for a nonprofit to count and report inputs
    • Tracking inputs can reveal trends that leaders may want to investigate further
    • inputs provide a useful but limited perspective that can be complemented with other approaches
  • Internal Processes
    • nonprofits may be judged on the efficiency, harmony, and ethics of their internal operations
    • Evaluation using internal process criteria may be especially useful when a nonprofit relies heavily on teamwork or has complicated technology.
    • A close look at the internal operations of a nonprofit can uncover areas for improvement as well as opportunities for praise.
    • In addition to revealing ethical concerns, internal reviews can reveal opportunities for improving efficiency
    • it is important to see efficiency not as an end in itself but rather as something that should be pursued to carefully steward resources
    • Nonprofit leaders who wish to demonstrate their nonprofit’s effectiveness on this dimension should focus on highlighting good internal management practices.
  • Stakeholder Satisfaction
    • stakeholders have varying degrees of legitimate claims and power to influence the organization’s behavior.
    • relative level of satisfaction of these stakeholders is an additional gauge of an organization’s effectiveness
    • Some nonprofits’ primary function is to provide an outlet for participants’ ideas and beliefs
    • For these nonprofits, having high internal efficiency may undermine this part of their purpose.
    • For these types of nonprofits, stakeholders’ satisfaction with their involvement in the nonprofit can be a highly relevant effectiveness criterion.
    • Using a stakeholder satisfaction approach for evaluating effectiveness becomes more complex as the number and diversity of stakeholders that need to be considered grows
    • Stakeholder mapping is a technique nonprofit leaders can use to identify and strategize about stakeholders
  • Growth, Learning, and Adaptation
    • evaluation can also focus on a nonprofit’s ability to respond to internal and external changes
    • Survival is a crude measure of effectiveness
    • The ability to adapt in order to capture new opportunities and reduce vulnerabilities and inefficiencies is a better indicator, but is more challenging to measure
    • With this approach, criteria include readiness for change and an ability to learn, making continuous improvements in quality and efficiency, and taking advantage of innovations
  • Taking a Balanced Approach
    • One simple model is a triangle that identifies three components of an organization: mission and mandates, internal capacity, and external support
    • There are many tools to help nonprofits keep the triangle in balance
  • Ethics in Nonprofits
    • Unethical behavior is not always premeditated or understood to be wrong by everyone involved
    • Ethical minefields within the nonprofit sector have led to calls for greater accountability, government regulation, protection of whistle-blowers, and codes of conduct
    • four levels of ethics:
      • Personal ethics
        • to an individual’s demographic and personality characteristics. Ethical behavior tends to be linked to an individual’s demographic and personality characteristics
        • Locus of control refers to how much control and responsibility individuals believe they have over what happens to them
        • leaders should not assume that because someone is involved with a nonprofit he or she is trustworthy
        • moral codes of the organization should be made clear to all to whom they apply, and organizational systems should be put in place
        • The work context can affect individual ethical conduct, so it is important for nonprofit leaders to explain and reinforce what is and is not acceptable behavior.
        • nonprofit leaders should evaluate the work setting to see if unethical behavior is being encouraged by overly high demands on workers that lead them to take inappropriate shortcuts, poor role models for ethical decision making, or compensation systems that make them feel it is OK to take resources from the organization because the pay is too low or because others do so without being sanctioned
        • likelihood that employees will behave unethically increases when they perceive that the reward system is unfair, they are under excessive pressure to meet performance objectives, they are part of a group that is benefiting from acting unethically, or they think their leaders do not have a commitment to ethical standards
        • Reminding workers and board members of professional, organizational, and societal standards and codes can help keep unethical behaviors in check.
        • The goals of training should be to:
          • Build moral awareness
          • Frame moral decision making
          • Clarify moral intent
          • Encourage moral action
        • three general questions
          • Is it legal?
          • Is it balanced and fair to all concerned?
          • How will it make me feel about myself?
        • If an employee can give positive answers to these questions, the action has passed a very basic ethics test.
      • Professional ethics
        • In the case of certified professionals, breaking professional codes may cause them to lose their credentials
        • As more certified professionals trained in ethical conduct for their professions enter the nonprofit sector, we may see professional norms and standards spilling over to other job functions
        • By integrating professional standards for ethical conduct into their organization’s behavioral codes, they can avoid conflicts
      • Organizational ethics
        • One of the most influential methods may be to use values-based leadership
        • five core attributes of ethical nonprofit managers:
          • integrity
          • openness
          • accountability
          • service
          • charity
        • If leaders reflect these values, and encourage others in their organizations to do the same, they can build and maintain trust
        • A variety of organizational structures and systems can be used to encourage ethical behavior and signal accountability
      • Societal ethics
        • Societal pressures encourage nonprofits, and those working within them, to go beyond the letter of the law in the ethical level of their governance and operations.
        • The legal environment for nonprofits also serves as a check on unethical behavior
        • There is continued debate about the need for more regulation to encourage nonprofit accountability.
        • enthusiasm and capacity for self-regulation by members of the nonprofit sector is mixed.
        • Nonprofit leaders operating in diverse cultural contexts are likely to find a variety of interpretations of the ethics of situations and should be sensitive to cross-cultural differences.

Ebrahim - The Many Faces of Nonprofit Accountability (2010)

  • what does it mean to be accountable?
  • At its core, accountability is about trust
  • The challenge for leadership and management is to prioritize among competing accountability demands. This involves deciding both to whom and for what they owe accountability.
  • purpose of this chapter is to provide an overview of the current debates on nonprofit accountability while also examining the trade-offs inherent in a range of accountability mechanisms.
  • Numerous definitions of accountability have been offered. four core components:
    1. Transparency
    2. Answerability or justification
    3. Compliance
    4. Enforcement or sanctions
  • For many observers, it is enforceability that ultimately gives any accountability mechanism power or “teeth.”
  • accountability is not just about responding to others but also about “taking responsibility” for oneself
  • has both an external dimension in terms of “an obligation to meet” and an internal one motivated by “felt responsibility”
  • Most discussions about the concept thus also pose two further questions: accountability to whom? and accountability for what?
  • nonprofits are expected to be accountable to multiple actors:
    • upward to their funders or patrons
    • downward to clients
    • internally to themselves and their missions
  • to whom one is accountable varies with organization type
    • Membership organizations are largely oriented toward serving the interests of their members
    • Service organizations - key accountability challenge lies in increasing “downward” accountability from funders to the nonprofit, and from the nonprofit to clients
    • Policy advocacy networks - mechanisms of accountability available are advocacy-oriented (voice), including lobbying, litigation, protest, negotiation, fact-finding, and demanding transparency in the reporting of information and events. Accountability is collective in the sense that it depends on reliable coordination and pooling of resources among key players.
  • demands of accountability “to whom” are multifold and can seldom be reduced to simple terms
  • Accountability is a relational concept; it varies according to the relationships among actors, and it also varies across different types of organizations
  • accountability is also about power, in that asymmetries in resources become important in influencing who is able to hold whom to account.
  • Accountability for What?
    • nonprofit organizations are expected to be accountable for different things to different people. Expectations may be broken down into four broad, but far from comprehensive categories. accountability for:
      • finances
        • Accountability in this context is constituted as coercive or punitive, with an emphasis on disclosure and a reliance on legislative or regulatory oversight
      • governance
        • has often centered on the role of the board of directors
        • The board’s fiduciary responsibilities typically focus on its financial oversight role
        • The basic premise is that boards are responsible for oversight of internal controls and legal compliance
        • boards are increasingly also expected to be accountable for the broader purposes of the organization
        • These functions require much more than fiduciary oversight, demanding that boards play a more “generative” role, particularly in the development and maintenance of mission
      • performance
        • purpose ofsuch accountability is to demonstrate “results.”
        • often uses tools such as logic models
        • This kind of accountability relies on a range of technical and professional skills
        • This type of accountability is encouraged by funder reporting requirements that reward clear outputs and outcomes.
        • critical observers have cautioned, however, that an overemphasis on measurable outcomes can lead to a push for quick fixes
        • they stress a need to examine long-term effectiveness and less easily measurable goals related to political and social change
      • mission
        • fourth and more emergent type of accountability
        • might describe this as a mission-centered variant of performance-based accountability, which it extends in two respects
          • First, it embraces a long-term view of performance measurement by emphasizing iteration and learning. This suggests there are no panaceas to social problems, but instead that social problem solving requires an ability to cope with uncertainty and changing circumstances. Also indicates a critical role for nonprofit boards in internalizing the mission.
          • Second, organizational goals and strategies are themselves subject to adaptation. A central managerial challenge becomes putting in place processes that can engender systematic critical reflection and adaptation while remaining focused on solving social problems
    • These four “whats” are not mutually exclusive but are instead integrative
  • Accountability How?
    • what then are the mechanisms of accountability actually available to them?
    • five broad (but far from comprehensive) types of accountability mechanisms used by nonprofits in practice
    • helpful to differentiate between mechanisms that are “tools” (discrete devices or techniques) and those that are “processes” (emphasizing a course of action)
      • reports and disclosure statements
        • Disclosure statements and reports are among the most widely used tools of accountability
        • On the one hand, such legal disclosures enable some degree of accountability to donors, clients, and members; also serve as means for nonprofit boards to fulfill their fiduciary responsibilities
        • On the other hand, donors and clients of a nonprofit organization in the United States generally have very limited legal standing to challenge an organization for falling short of legal requirements
        • At the same time, legal requirements can also be abused by governments to keep tabs on organizations that challenge them
        • not uncommon for nonprofit staff to complain about multiple reporting requirements
        • are significant tools of accountability in that they make available basic data on nonprofit operations. Their distinct and tangible nature makes them easily accessible.
        • Although no doubt important as deterrents, these external approaches have limited potential for encouraging organizations and individuals to take internal responsibility
      • evaluations and performance assessments
        • Funders commonly conduct external evaluations of nonprofit work near the end of a grant or program phase, and are increasingly employing mid-term assessments
        • typically aim to assess whether and to what extent program goals and objectives have been achieved
        • can be pivotal to future funding
        • may focus on short-term results, or medium-and-long-term results
        • evaluations often run into conflicts among nonprofits and funders over whether they should be assessing activities, processes, outputs, or outcomes and impacts (accountability for what)
        • nonprofit leaders have expressed concern about the difficulty, reliability, and expense of such measurement, particularly in accounting for causal factors well beyond their control
        • question of what should be evaluated may vary according to different stakeholders (accountability to whom)
          • When an organization’s work is fairly straight forward to measure, a simple logic model can be helpful in clarifying results
          • When performance criteria vary among stakeholders, nonprofit leaders face the challenge of prioritizing and coordinating among multiple interests and constituents
        • Control over evaluations thus remains a central tension between nonprofits and their stakeholders
        • funders can come to somewhat different conclusions about the same set of nonprofits as a result of how they frame their evaluations
        • related concern raised by small nonprofits is that their limited staff and resources are stretched too thin by evaluation and reporting requests
        • concerns notwithstanding, the strength of evaluation as a mechanism of accountability lies in its explicit attention to results
      • industry self-regulation
        • Nonprofits have also increasingly turned to industry-wide accountability standards
        • the term refers specifically to efforts by nonprofit networks to develop standards or codes of behavior and performance, establishing norms around quality
        • standards and certification are most ubiquitous in the education and health care sectors
        • past two decades have seen the emergence of an array of voluntary codes of conduct and third-party certification standards across nonprofit industries
        • Some standards systems are inclusive in nature, seeking to improve governance across a spectrum of nonprofit
        • Others are exclusive in nature, seeking to screen organizations and professions
        • 1990s also saw the rise of state-level nonprofit associations adopting and promoting codes and certification standards
        • Whether and how the adoption of such self-regulation actually improves nonprofit accountability remains to be empirically tested
        • self-regulatory efforts face at least two challenges
          • First, as the number of such standards has grown, it has become difficult for donors and citizens to compare them
          • Second, although most self-regulatory efforts have focused internally on the governance and operations of their members (accountability for what), few have been explicit about accountability to key constituents (accountability to whom)
      • participation
        • As an accountability mechanism, participation is quite distinct from disclosure reports
        • helpful to distinguish between four levels or kinds of participation
          • At one level, participation public meetings or hearings, surveys, or a formal dialogue on project options. In this form, participation involves consultation with community leaders and members, but decision-making power remains with the project planners.
          • Second level of participation includes public involvement in actual project-related activities, and it may be in the form of community contribution towards labor or funds, possibly in the maintenance of services or facilities
          • Third level, citizens are able to negotiate and bargain over decisions with nonprofits or state agencies, or even hold veto power over decisions.
          • Fourth tier of participation, are people’s own initiatives that occur independently of nonprofit- and state-sponsored project. Examples include social movements
        • There have been a number of innovations in this area since the year 2000, especially in combining participation with evaluation to involve communities in evaluating nonprofits, or nonprofits in evaluating funders.
        • There have also been innovations in participatory budgeting, pioneered by citizens in municipalities in Brazil, and social audits and public hearings in which citizens assess the work of NGOs and governments
      • adaptive learning
        • Another process mechanism is adaptive learning, in which nonprofits create regular opportunities for critical reflection and analysis in order to make progress toward achieving their missions.
        • requires at least three sets of building blocks:
          • a supportive learning environment
          • concrete learning processes
          • supportive leadership
        • As an accountability mechanism, adaptive learning focuses internally on organizational mission
        • also offers a way for nonprofit leaders to address a common myopia—the focus on immediate short-term demands at the expense of longer-term and more sustained results
        • easier said than done
        • a number of global nonprofit organizations have been experimenting over the past decade with building learning into their work.
        • especially true of multisite organizations seeking to share knowledge across teams in dozens of countries
        • there has been a burst in the development of participatory tools for evaluation and learning such as outcome mapping, constituency feedback, and most significant change techniques
  • although traditional approaches to improving accountability enable a degree of upward accountability, they are of limited use for enhancing downward accountability
  • more balanced approach thus requires a greater role for nonprofits in evaluating funders and for clients in evaluating nonprofits.
  • emergence of feedback tools such as grantee perception reports and constituency voice suggest that it is possible to find low-risk ways for nonprofits to express their views on funders
  • key point is that downward accountability mechanisms remain comparatively underdeveloped
  • improving accountability within nonprofits themselves also needs attention to a range of mechanisms
  • In many cases the inducements are external
  • The key point here is that although externally driven mechanisms matter, the legitimacy and reputation of the social sector needs to be buttressed by internally driven mechanisms.
  • for a sector that views itself as largely mission-driven, there is an urgent need for nonprofit leaders to take performance assessment seriously in order to justify activities with substantiated evidence
  • Funders that want nonprofits to measure impacts, but at the same time are unwilling to fund management capacity building and overhead costs for performance measurement, end up undermining both the nonprofits and themselves.
  • third implication concerns the primary type of organizational response that a mechanism generates—whether it is:
    • Compliance-driven accountability - a reactive response to concerns, about doing what one has to do
    • Strategy-driven accountability - a proactive approach, focused on improving performance and achieving mission
  • The most common mechanisms of accountability mainly serve a compliance purpose
  • The complex nature of nonprofit work suggests, however, that attention to more strategic processes of accountability are necessary for lasting social and political change
  • A strategy-driven accountability requires building internal capacity in nonprofits for adaptive learning
  • In the end, accountability is both about being held to account by external actors and standards and about taking internal responsibility for actions
  • nonprofit leaders face multiple, and sometimes competing, accountability demands from numerous actors for varying purposes, requiring various levels of organizational response.
  • current emphasis on the upward and compliance dimensions of accountability is problematic, skews organizational attention toward the interests of those who control critical resources
  • predominant emphasis on compliance-driven accountability tends to reward nonprofits for short-term responses with quick and tangible impacts, while neglecting longer-term strategic responses or riskier innovations that can address more systemic issues
  • inescapable that nonprofits will continue to face multiple and competing accountability demands
  • critical challenge for nonprofit leaders lies in finding a balance between upward accountability to their patrons while remaining true to their missions.
  • four key insights for practice:
    • Nonprofit leaders must be deliberate in prioritizing among accountabilities.
    • Nonprofits are expected to be accountable for multiple purposes: finances, governance, performance, and mission.
    • There are many mechanisms of accountability available to nonprofits
    • The broader conclusion is that accountability is not simply about compliance with laws or industry standards but is, more deeply, connected to organizational purpose and public trust

Woods Nonprofit Accountability and Ethics: Rotting from the Head Down (2012)

  • Arguably, the public holds nonprofits to higher ethical standards than government or businesses
  • Do nonprofits listen to stakeholders?
  • Based on Ethics Resource Center comprehensive data on ethics in nonprofits, nonproifts generally have a strong ethic culture compared to business or government. The difference, however, while statistically significant, is not impressive. Clearly, there is more work to do, even at the top of the scale.
  • Although nonprofits may believe they have a strong ethical culture, this does not always translate into better ethical behavior or better reporting of unethical behavior.
  • A sense of autonomy easily leads to a disregard for actively seeking input from stakeholders
  • Formally, nonprofits are answerable to state attorneys general, but they ought to feel answerable to the people they serve and the public as well.
  • Most nonprofit organizations may not discern the general public as a major actor, let alone the dominant one, yet it is the ultimate source of every privilege they enjoy
  • It behooves all nonprofit organizations-but public charities particularly-to have a felt sense of obligation toward their constituents and toward the public
  • Three markers of a responsible organization:
    • Responsible organizations are true to their missions
    • Responsible organizations act as if outcomes matter
    • Responsible organizations are candid.
  • Four Trends Already Shaping Future Ethical Standards for Nonprofits
    • Small donors will demand that charities pay the same deference to their wishes and expectations that these charities have always accorded large donors.
    • Courts will become less tolerant of sweeping generalizations and vaguely misleading statements made by charities in the course of fundraising.
    • “The nonprofit community in the United States (and increasingly elsewhere) has begun to shift its attention from measuring outputs as indicators of progress to measuring outcomes.’’
    • More regulation. A minimal ethical standard is obedience to the law.
  • In some ways, our financial models are a setup for irresponsibility because they often have us paid by one stakeholder to provide service to another.
  • nonprofits have a greater power advantage relative to the people they serve than for-profit businesses have relative to their customer
  • More and more often, however, perhaps aided by social media, stakeholders are realizing that they can protest unaccountability.
  • A strong culture features four major components:
    1. ethical leadership
    2. supervisor reinforcement of ethics
    3. peer commitment to ethics
    4. embedded ethical values

Rhode & Packel Ethics and Nonprofits (2009)

  • Unethical behavior remains a persistent problem in nonprofits and for-profits alike
  • 2008 Brookings Institution survey found that about one third of Americans reported having “not too much” or no confidence in charitable organizations, and 70 percent felt that charitable organizations waste “a great deal” or a “fair amount” of money.
  • Only 10 percent thought charitable organizations did a “very good job” spending money wisely; only 17 percent thought that charities did a “very good job” of being fair in decisions; and only one quarter thought charities did a “very good job” of helping people
  • a 2006 Harris Poll found that only one in 10 Americans strongly believed that charities are honest and ethical in their use of donated funds
  • public perceptions are particularly troubling for nonprofit organizations that depend on continuing financial contributions
  • Addressing these ethical concerns requires a deeper understanding of the forces that compromise ethical judgment and the most effective institutional responses
  • Causes of Misconduct
    • common ethical problems involve gray area
    • four crucial factors that influence ethical conduct:
      • Moral awareness
      • Moral decision making
      • Moral intent
      • Moral action
    • Cognitive biases can compromise these ethical capacities.
    • A related bias involves cognitive dissonance: people tend to suppress or reconstrue information that cases doubt on a prior belief or action
    • In-group biases can also result in unconscious discrimination
    • A person’s ethical reasoning and conduct is also affected by organizational structures and norms
    • In charitable organizations, employees who feel excessive pressure to generate revenue or minimize administrative may engage in misleading conduct
    • perceptions of unfairness in reward systems increase the likelihood of unethical behavior
    • A variety of situational pressures can also undermine moral conduct
    • In real-world settings, when instructions come from supervisors and jobs are on the line, many moral compasses go missing.
    • influence of peers on individual decision making: people are more likely to engage in unethical conduct when acting with others
    • especially likely when organizations place heavy emphasis on loyalty and offer significant rewards to team players
    • Once people yield to situational pressures when the moral cost seems small, they can gradually slide into more serious misconduct.
    • Moral blinders are especially likely in contexts where people lack accountability for collective decision making.
    • Other characteristics of organizations can also contribute to unethical conduct
    • Large organizations facing complex issues may undermine ethical judgments by fragmenting information across multiple departments
    • Work may be allocated in ways that prevent decision makers from seeing the full picture
    • Another important influence is ethical climate - organizations signal their priorities in multiple ways
    • Workers also respond to moral cues from peers and leaders. Virtue begets virtue, and observing integrity in others promotes similar behavior.
  • Ethical Issues in the Nonprofit Sector
  • organizational dynamics play out in distinctive ways in the nonprofit sector.
  • six areas in particular where ethical issues arise in the nonprofit sector
  • Compensation
    • Salaries that are modest by business standards can cause outrage in the nonprofit sector, particularly when the organization is struggling to address unmet societal needs.
    • also the perks that officers and unpaid board members may feel entitled to take because their services would be worth so much more in the private sector.
    • The Panel on the Nonprofit Sector recommends in its Principles for Good Governance and Ethical Practice that organizations establish clear written policies about what can be reimbursed and require that travel expenses be cost-effective
  • Conflicts of Interest
    • arise when an organization offers preferential treatment to board members or their affiliated companies
    • In a recent survey, a fifth of nonprofits (and two-fifths of those with more than UO million in annual expenses) reported buying or renting goods, services, or property from a board member or an affiliated company within the prior two years.
    • Despite the ethical minefield that these transactions create, many nonprofits oppose restrictions because they rely on insiders to provide donations or goods and services at below-market rate
    • quid pro quo relationships can jeopardize an organization’s reputation for fairness and integrity in its financial dealings
    • nonprofits need detailed, unambiguous conflict of interest policies
    • policies should also demand total transparency about the existence of potential conflicts and the process by which they are dealt
  • Publications and Solicitation
    • nonprofits need to pay particular attention to transparency.
    • disclose in a clear and non-misleading way the percentage of funds spent on administrative cost
    • Transparency is also necessary in solicitation materials, grant proposals, and donor agreements.
  • Financial integrity
    • Recently, many corporations have been attempting to “green” their image through affiliations with environmental organizations, and some of these groups have been entrepreneurial in capitalizing on such interests.
    • There are no easy resolutions of these issues, but there are better and worse ways of addressing them.
    • Appearances matter, and it sometimes makes sense to avoid affiliations where a donor is seeking to advance or pedigree ethically problematic conduct
  • Investment Policies
    • In its strongest form, this strategy calls for investing in ventures that further an organization’s mission
    • In its weaker form, the strategy entails divestment from companies whose activities undermine that mission
    • Many nonprofit leaders have resisted pressure to adopt socially responsible investing principles on the grounds that maximizing the financial return on investment is the best way to further their organization’s mission
    • To have one set of principles for financial management and another for programmatic objectives sends a mixed moral message
    • to compartmentalize ethics inevitably marginalizes their significance
    • About a fifth of institutional investing is now in socially screened fund
  • Accountability and Strategic Management
    • nonprofit organizations are not subject to the checks of market forces or majoritarian control.
    • independence has come under increasing scrutiny in the wake of institutional growth
    • public role also entails significant public responsibilities
    • responsibilities include fiduciary obligations to stakeholder
    • accountability requires a well-informed plan for furthering organizational objectives and specific measures of progress.
    • Money held in public trust should be well spent, not just well-intentioned.
    • Although in many contexts objective measures of progress are hard to come by, it is generally possible to identify some indicators or proxies
    • The effectiveness of evaluation is likely to increase if organizations become more willing to share information about what works and what doesn’t
    • What nonprofit wants to rain on its parade when that might jeopardize public support? But sometimes at least a light drizzle is essential to further progress.
  • Promoting Ethical Decision Making
    • nonprofits can take three steps that will make it more likely:
      • Ensure Effective Codes of Conduct and Compliance Programs
      • Promote Effective Financial Management
      • Institutionalize an Ethical Culture
  • Leaders face a host of issues where the moral course of action is by no means self-evident.
  • although there may be no unarguably right answers, some will be more right than other
  • leaders should strive for a decision making process that is transparent and responsive to competing stakeholder interests.
  • Nonprofit executives and board members also should be willing to ask uncomfortable questions
  • Not only do leaders need to ask those questions of themselves, they also need to invite unwelcome answers from others.
  • people in positions of power should actively solicit diverse perspectives and dissenting views
  • Our global economy is paying an enormous price for moral myopia, and we cannot afford its replication in the nonprofit sphere.

Better Business Bureau - Wise Giving Alliance Standards for Charity Accountability

  • BBB Wise Giving Alliance Standards for Charity Accountability were developed to assist donors in making sound giving decisions and to foster public confidence
  • standards seek to encourage fair and honest solicitation practices, to promote ethical conduct by charitable organizations and to advance support of philanthropy
  • Organizations that comply with these accountability standards have provided documentation that they meet basic standards:
    • In how they govern their organization
    • In the ways they spend their money
    • In the truthfulness of their representations
    • In their willingness to disclose basic information to the public.
  • overarching principle is full disclosure to donors at the time of solicitation and thereafter
  • As voluntary standards, they also go beyond the requirements of local, state and federal laws and regulations
  • In addition to the specific areas addressed in the standards, adopt the following management practices to further the cause of charitable accountability:
    • Initiate a policy promoting pluralism and diversity
    • Ensure adherence to all applicable local, state and federal laws
    • maintain an organizational commitment to accountability that transcends specific standards
  • Governance and oversight
    • A board of directors that provides adequate oversight of the charity’s operations and its staff.
    • A board of directors with a minimum of five voting members
    • A minimum of three evenly spaced meetings per year of the full governing body
    • Not more than one or 10% (whichever is greater) directly or indirectly compensated person(s) serving as voting member(s) of the board.
    • No transaction(s) in which any board or staff members have material conflicting interests
  • Measuring effectiveness
    • Have a board policy of assessing, no less than every two years, the organization’s performance and effectiveness and of determining future actions
    • written report that outlines the results of the aforementioned performance and effectiveness assessment
  • Finances
    • Spend at least 65% of its total expenses on program activities.
    • Spend no more than 35% of related contributions on fund raising
    • Avoid accumulating funds that could be used for current program activities. Unrestricted net assets available for use should not be more than three times the size of budget
    • Make available to all, on request, complete annual financial statements
    • Include in the financial statements a breakdown of expenses that shows what portion was allocated to program, fundraising and administrative activities
    • Accurately report the charity’s expenses
    • Have a board-approved annual budget
  • Fundraising and Informational Materials
    • Have solicitations and informational materials that are accurate, truthful, and not misleading
    • Have an annual report available to all that includes:
      • organization’s mission statement
      • summary of the past year’s program service accomplishment
      • roster of the officers and members of the board
      • financial information that includes:
        • total income
        • expenses
        • ending net assets
    • Include on the website the same information that is recommended for annual reports, as well as the mailing address and most recent IRS Form 990
    • Address privacy concerns by:
      • providing in written appeals a means to inform that they do not want their name and address shared outside the organization
      • providing a clear, prominent and easily accessible privacy policy on the website, that states:
        • what information, if any, is being collected about them by the charity and how this information will be used
        • how to contact the charity to review personal information collected and request corrections
        • how to inform the charity that the visitor does not wish his/her personal information to be shared
        • what security measures the charity has in place to protect personal information
    • Clearly disclose how the charity benefits from the sale of products or services
      • the actual or anticipated portion of the purchase price that will benefit the charity
      • the duration of the campaign
      • any maximum or guaranteed minimum contribution amount
    • Respond promptly to and act on complaints brought to its attention

Independent Sector- Checklist for Accountability (2018)

Checklist for Accountability

  • The steps listed below will help every charitable organization reassure its stakeholders of its commitment to upholding the public trust
    • Develop a Culture of Accountability and Transparency
    • Adopt Code of Ethics and Statement of Values
    • Adopt a Conflict of Interest Policy
    • Ensure that the Board of Directors Understands and Can Fulfill Its Financial Responsibilities
    • Conduct Independent Financial Reviews, Particularly Audits
    • Ensure Accuracy and Make Public Your Organization’s Form 990
    • Be Transparent
    • Establish and Support a Policy on Reporting Suspected Misconduct or Malfeasance (“Whistleblower Protection Policy”)
    • Remain Current with the Law

Independent Sector - Principles for Good Governance and Ethical Practices (2015)

Principles for Good Governance and Ethical Practice

  • Charitable organizations have long embraced the need for standards of ethical practice that preserve and strengthen the public’s confidence
  • The pages that follow set forth a comprehensive set of principles
  • purpose is to reinforce a common understanding of transparency, accountability, and good governance for the sector as a whole
  • Among the earliest efforts to self-regulate date back to 1918, when a coalition of nonprofits established the National Charities Information Bureau
  • 33 principles of sound practice that should be considered by every charitable organization as a guide for strengthening its effectiveness and accountability.
  • Self-regulation begins with embracing good governance
  • The 33 principles that follow are organized under four main categories
  • Strengthening ethics and accountability is an organic process that requires an ongoing commitment by boards and staff of individual organizations and by the entire nonprofit community
  • Legal Compliance and Public Disclosure
    • comply with all applicable federal laws and regulations. If the organization conducts programs outside the United States, it must also abide by applicable international laws, regulations, and conventions.
    • formally adopt a written code of ethics
    • adopt and implement policies to ensure that all conflicts of interest (real and potential) are appropriately managed
    • establish and implement policies and procedures that enable individuals to come forward with information on illegal practices or violations of organizational policies (“whistleblower policy”)
    • establish and implement policies and procedures to protect and preserve the organization’s important data
    • board should ensure that the organization has adequate plans to protect its assets
    • make information about its operations, including its governance, finances, programs, and activities, widely available to the public
  • Effective Governance
    • have a governing body that is responsible for reviewing and approving the organization’s mission and strategic direction, and fiscal and governance policies
    • the board should meet regularly enough to conduct its business and fulfill its duties
    • the board should establish its own size and structure and review these periodically. Generally a board should have at least five members
    • board should include members with the diverse background, experience, and organizational and financial skills necessary to advance the organization’s mission.
    • A substantial majority of the board should be independent
    • The board should hire, oversee, and annually evaluate the performance of the chief executive officer of the organization
    • board should ensure that the positions of chief staff officer, board chair, and board treasurer are held by separate individuals
    • The board should establish an effective, systematic process for educating and communicating with board members
    • Board members should evaluate their performance as a group and as individuals no less frequently than every three years
    • Governing boards should establish clear policies and procedures setting the length of terms and the number of consecutive terms a board member may serve.
    • The board should review organizational and governing instruments no less frequently than every five years.
    • The board should establish and review regularly the organization’s mission and goals
    • Board members are generally expected to serve without compensation
  • Strong Financial Oversight
    • A charitable organization must keep complete, current, and accurate financial records and ensure strong financial controls are in place
    • board must institute policies and procedures to ensure that the organization manages and invests its funds responsibly
    • should not provide loans to directors, officer, or trustees
    • should spend a significant amount of its annual budget on programs that pursue its mission
    • establish clear, written policies for paying or reimbursing expenses
    • should neither pay for nor reimburse travel expenditures for spouses, dependents or others who are accompanying someone conducting business
  • Responsible Fundraising
    • Solicitation materials and other communications addressed to donors and the public must clearly identify the organization and be accurate and truthful.
    • Contributions must be used for purposes consistent with the donor’s intent
    • must provide donors with specific acknowledgments of charitable contributions
    • should adopt clear policies, based on its specific exempt purpose, to determine whether accepting a gift would compromise it
    • should provide appropriate training and supervision of the people soliciting funds on its behalf
    • should not compensate internal or external fundraisers based on a commission or a percentage of the amount raised.
    • respect the privacy of individual donors

Charities Review Council - Accountability Standards (2014)

  • The Accountability Standards® serve as a framework for building trusting, productive relationships between nonprofits, donors, and the general public
  • Public Disclosure
    • Annual Report & Communication
      • The nonprofit annually keeps the following information available to the public via its website and/or a written report:
        • Mission statement
        • Definition of geography and populations served
        • Description of each major program with related accomplishments
        • Description of outstanding outcomes and/or significant unexpected events/incidents
        • List of the Board of Directors
        • List of key employees/volunteer staff
        • Financial information including:
          • Income statement (including income and expenses)
          • Functional expense allocation
          • Total expense for each major program
    • Impact on the Community
      • The nonprofit describes on an annual basis, using specific objective information, its accomplishments in the previous year in relation to its mission and its community impact. The nonprofit also states its goals for the current year.
    • Financial Transparency
      • The nonprofit is independently audited as required by state law and receives an unqualified opinion
    • Legal Compliance
      • To the best of its knowledge, the nonprofit does not violate any federal or state laws or regulations
  • Governance
    • Monitoring Mission and Strategy
      • The Board of Directors at least annually reviews the nonprofit’s mission and supporting strategies, which connect to a longer-term plan
    • Governing Document Review
      • The Board of Directors reviews the nonprofit’s bylaws and other governing documents at least every three years.
    • Diversity, Equity, and Inclusion
      • The nonprofit’s board and key staff:
        • Collects information about its participants
        • Reviews information comparing its internal composition and practices to its external composition
        • Identifies related goals, opportunities, gaps, and progress
    • Board Orientation and assessments
      • The Board of Directors meets at least four times per fiscal year with a quorum and maintains written minutes
    • Separation of Roles
      • Not more than one voting member of the board is paid staff. No paid staff person serves as board chair, and no board member serves as both board chair and treasurer simultaneously
    • Voluntary Board Service
      • The nonprofit does not compensate board members for board service other than reimbursement of reasonable expenses directly related to their board service.
    • Chief Executive Assessment and Compensation
      • The Board of Directors annually sets performance goals and assesses the individual against those goals and other relevant criteria
      • Only individuals free of a conflict of interest in the compensation decision may participate. The compensation deliberations are documented in meeting minutes.
    • Federal Tax Filing Review
      • The board conducts a timely review of the complete IRS Form 990 and all attachments.
    • Conflict of Interest Policy
      • The nonprofit consistently addresses director, officer, and key employee conflicts of interest through a written policy
      • Additionally, the nonprofit does not provide loans to or relieve debts of any of its directors.
    • Whistleblower Policy
      • The nonprofit maintains a policy and communicates procedures for the reporting and investigation
      • The policy provides for the confidentiality of the individual who reports the complaint and protects him/her from
  • Financial Activity
    • Board Fiduciary Oversight
      • The Board of Directors approves an operating budget prior to the beginning of each fiscal year and receives financial reports, at least quarterly, comparing actual to budgeted revenue and expenses.
    • use of Funds
      • At least 65% of the nonprofit’s three-year average annual expenses are used to directly support programming
      • On an annual basis the board monitors this ratio and, if necessary, develops a plan to address any shortage
    • Financial Health Management
      • The nonprofit organization manages revenue and expenses to demonstrate financial sustainability.
    • Balanced Reserves
      • Unrestricted net assets (for current use) are not more than three times the current or next year’s budgeted operating expenses.
    • Travel and Entertainment Reimbursement Policy
      • The nonprofit maintains a board and staff policy that describes acceptable travel and entertainment expenses, sets reasonable limits, and sets procedures for reimbursement. Fundraising
    • Fundraising Disclosures
      • Print, email and electronic solicitations identify the nonprofit that will receive the contribution and clearly describe the purpose or program
    • Donor Financial Information Security
      • provides a secure environment for collecting donations and maintains internal controls governing the safekeeping of all confidential donor financial and personal information.
    • Donor Privacy
      • The nonprofit provides a privacy policy on its website or by request that describes how donor information is collected and used. It allows donors to “opt-out”
    • Soliciting Practices
      • If the nonprofit is engaged in cause-related marketing or its name is used in connection with an event or the sale or marketing of goods, they provide accurate information about the percentage of gross revenue that the nonprofit receives.

Minnesota Council on Nonprofits’ - Principles and Practices for Nonprofit Excellence (2014)

Principles and Practices for Nonprofit Excellence

  • In 1994 MCN became the first state association of nonprofits to develop a set of accountability principles and management practices
  • revised edition completely updates those original standards while remaining true to MCN’s longstanding goal of open access
  • Principles and Practices for Nonprofit Excellence are based on the fundamental values of quality, responsibility and accountability
  • 11 accountability principles distinguish the nonprofit sector from government and the business sector
  • 192 management practices provide specific guidelines for individual organizations to evaluate and improve their operations, governance, human resources, advocacy, financial management, and fundraising.
  • The Principles and Practices for Nonprofit Excellence are not meant for use by funders or government to evaluate nonprofit organizations
  • Given some blurring of the lines between the three sectors of the economy, this document is designed to support the effective functioning of our sector by recommending specific best practices.
  • Because of the sector’s diversity by size, region and activity area, each organization must determine whether or not an individual practice is appropriate for its current situation.
  • a large list of recommended practices presents challenges for small organizations with limited resources.
  • To make this task more practical and achievable, MCN provides additional tools and resources on its website to help organizations prioritize practices for different sizes and stages of organization. These tools address questions about why practices are recommended and the steps organizations can take to achieve them
  • The creativity and diversity of the nonprofit sector and the significant variations in local conditions means that some practices may not fit every situation
  • The Principles of Nonprofit Excellence:
    • Governance
      • Board Characteristics and Qualifications
        • Nonprofits should strive to have board members who are representative of the organization’s constituents
        • Board members should be committed to the mission and the success of the nonprofit
        • Board members should actively develop an understanding of the mission, ongoing activities of the organization
        • Board members should value diversity and understand the role of broad participation and the importance of including diverse groups of people
        • Board members are expected to volunteer their time, help raise external funds and make personal financial contributions
        • Board members should receive no monetary compensation for their board duties other than reimbursement for board-related expenses
      • Board Composition
        • Nonprofit boards should be made up of individual volunteers who are committed to representing the best interests of the organization
        • boards should seek out new potential board members from outside the organization’s traditional circles and should include board representatives from the communities the
        • nonprofit boards should consist of at least seven individuals.
        • Nonprofit boards must have a chair and a treasurer and should have a vice-chair and secretary
        • If staff membership on the board is deemed necessary, it should be limited to the executive director
      • Board Responsibilities
        • Board members should gain a full understanding of their board roles and responsibilities by being provided with:
          • a clear set of expectations and responsibilities
          • bylaws, articles and other key documents
          • an introduction to the work of the organization
          • ongoing opportunities to discuss and review responsibilities
        • Board members are responsible for fully understanding their legal and fiduciary responsibilities
        • Board members are responsible for the ongoing financial health of the organization and should understand the content and significance of the organization’s financial statements
        • Board members are responsible for keeping suitably informed in order to actively participate
        • Nonprofit board members are responsible to make decisions in the best interest of the organization and no other party, including themselves. should have a conflict of interest policy that includes a disclosure form
        • Nonprofit board members are responsible for upholding the organization’s mission and using its resources wisely
        • Board members should be willing to publicly advocate for the organization
      • Board Operations
        • Boards should have at least six meetings a year and expect regular attendance
        • term limits of no more than nine consecutive years
        • adopt practices that maximize participation, including accommodating remote or electronic participation in meetings
        • organize committees as needed
        • The board chair should pay particular attention to helping the board be aware of its obligations
        • annually evaluate its own performance and review the results with an eye toward improving
    • Transparency and Accountability
      • Accountability
        • comply with all legally required reporting procedures
        • organization’s board should approve its financial audits; the executive director and the principal financial manager should attest to the audit’s findings
        • establish clear performance measurements, compare results with other organizations when possible and share these results
        • adhere to the established industry and regulatory standards that apply to its particular activity area
      • Accessibility and Public Input
        • make information available to the organization’s constituents that describes the board’s decisions and decision-making processes
        • provide its constituents with ongoing opportunities to interact with the organization’s leadership about its activities and be responsive to raised concerns
      • Public Information
        • produce an annual report that contains information on its activities and performance. should include:
          • organization’s mission, activities, results and impact
          • how individuals can access its programs and services
          • financial information
        • make certain data available to the public, including:
          • IRS Form 990 for the previous three years
          • IRS Form 1023, Application for Recognition of Exemption
        • A nonprofit should provide multiple ways for constituents to request information or provide input.
      • Fairness and Equity Practices
        • ensure nondiscriminatory service to their constituents
        • disclose how constituent information will be used and ensure that the organization complies with an individual’s ex- pressed confidentiality and privacy preferences
        • Information regarding fees and services should be made readily available to the public, including available discounts and scholarships.
    • Financial Management
      • Functions
        • The board should annually review and approve a detailed written budget
        • Individuals responsible for an organization’s financial reporting should prepare and present to the board consistent, timely and accurate financial reports at least bimonthly
        • ensure separation of financial duties - a system of internal controls should be formally adopted by the board and appropriate to the size of the organization’s financial and human resources
        • adopt written financial procedures and have appropriate financial management software
        • be conscientious in negotiating contract terms to ensure that payment levels, conditions and reporting requirements are consistent with the mission of the organization and the interest of the people being served
        • periodically assess their risks, take appropriate actions to minimize these risks and purchase appropriate types and levels of insurance
        • use comparable market data to set compensation for the organization’s executive director and stay informed of compensation levels for other key personnel
        • strictly prohibit financial loans to board members, the executive director and other key personnel
        • Board members and key staff should clearly understand how to read and interpret financial statements
        • The board treasurer should take a leadership role in helping the board understand its duties with regard to financial management
      • Compliance
        • comply with all financial regulations
        • complete the relevant version of the IRS Form 990 annually
        • have its financial statements audited, certified and prepared in accordance with general accepting accounting principles (GAAP).
        • have systems in place, including a whistleblower policy, to protect individuals who report financial misconduct
      • Sustainability
        • openly communicate the annual reporting information contained in its IRS Form 990 for the previous three years
        • secure appropriate levels of funding to carry out their missions and activities and, when possible, diversify revenue sources
        • work diligently to avoid recurring deficits and aim towards building up sufficient operating reserves
        • spend funds in compliance with conditions attached to their funding
        • ensure that its assets are used solely for the benefit of the organization, have a clear conflict of interest policy
    • Fundraising
      • Policies
        • adopt a fundraising plan and systems to ensure that sufficient charitable contributions are raised
        • have a policy that sets out conditions under which it would decline funds or in-kind donations that would otherwise bring about adverse conditions
        • ensure that a high percentage of each dollar raised goes directly to funding its programs and services.
        • Compensation for fundraising personnel and contractors should not be based on a percentage of funds raised or other commission-based formulas
        • ensure that any outside individual or organization that solicits funds on its behalf meets the Minnesota Attorney General’s registration requirements and all other regulations
      • Accountability to Donors
        • comply with all federal, state and local laws concerning fundraising practice
        • conducting their fundraising activities in a manner that upholds the public’s trust
        • use funds consistent with donor intent and comply with specific conditions
        • strive for a balance between publicly recognizing charitable contributions and maintaining donor confidentiality
        • should respect donor preferences in the handling of their information and should implement systems and policies that secure this information
      • Communication with Donors
        • include clear, accurate and honest information about the organization, its activities, and when, where and for whom the funds will be used
        • send a written acknowledgment to all donors who make a “quid pro quo” donation in excess of $75. Also send a written acknowledgment to all donors who made contributions of $250 or more in the previous calendar year
        • honor donor preferences regarding how often donors are contacted and how they receive that communication.
        • regularly communicate with constituents regarding their activities
        • plan its communications to tell the story of the organization and maintain consistent, mission-focused and timely communication
        • establish a thorough understanding of their key audiences and regularly assess the effectiveness of communication strategies
    • Evaluation
      • Components of Evaluation
        • have a defined, ongoing, systematic and sustainable process for improving their services, programs and internal processes
        • take into account and respond to the experience, needs and satisfaction of the constituents
        • conduct program evaluations in ways that are culturally sensitive and appropriate
        • measurement systems should be practical and useful to improve ongoing processes
        • Performance measures should be realistic and appropriate to the size and scope of the organization
        • Measurement should include information on outputs, outcomes, impact and satisfaction with activities and services provided.
        • Performance measures should be specific and based on evidence
        • Measurements may include both qualitative and quantitative data.
        • Measurements should include data on efficiency and effectiveness.
        • strive to improve the evaluation skills of staff while contracting with other organizations or consultants to serve as external evaluators
        • include realistic evaluation expenses in all project budgets
        • Personal information collected from individuals through the evaluation process must be kept confidential
      • Uses of Evaluation
        • use evaluation results to gauge organizational effectiveness
        • share evaluation results with a broad range of constituents
        • evaluation should be ongoing for continuous improvement and should include input from a wide variety of stakeholders.
        • be open to receiving feedback from members of the public
    • Planning
      • Mission, Vision and Values
        • establish and regularly review mission, vision and values statement
        • mission statement should be linked to the values of the organization and its vision
        • mission, vision and values should be evaluated regularly by the board to determine if they still meet the evolving needs
      • Components of Planning
        • Plans should align with the organization’s mission, vision and values.
        • actively make adjustments to plans to ensure that assumptions and activities adapt
        • should be based on a careful assessment of the multiple resources necessary for implementation
        • create plans with evaluation in mind, assessing what processes and goals they intend to use and how they will measure their successful completion
        • should be informed by a review of the external factors that affect the organization’s operating environment
        • should be responsive to community needs and actively engage and gather input from a variety of sources
        • should confer with their counterparts to determine the need for services, the best practices in delivering them
        • provide timely notice of significant changes to partner organizations or constituents
      • Plan Types
        • Strategic Plans
          • establish a rigorous process of setting clearly defined, long-term goals and objectives
          • Strategic planning should articulate how the strategies chosen are expected to accomplish the organization’s stated goals.
          • Goals and objectives should be reasonably attainable
          • continually scan the environment for external factors that may impact the success of the organization’s strategies and make necessary adjustments
        • Operational/Annual Workplan
          • annually create a written operational plan
          • Operational plans should support the nonprofit’s strategic goals and objectives
          • should clearly define specific program, financial, personnel and evaluation activities; establish timelines; assign specific responsibility for implementation; and be tied to an approved budget.
          • should be used as a management tool for tracking and evaluating activities and outcomes.
        • Contingency Plans
          • develop contingency plans for appropriate areas of the organization
          • include instructions for overcoming potential challenges
          • have a plan for how to communicate with key stakeholders in the event of unforeseen events.
          • purchase insurance policies appropriate to entities of their size and activities to cover property and liability risks,
    • Civic Engagement and Public Policy Influencing public decision-making
      • Promoting Participation
        • Nonprofits should help their clients, members, volunteers and donors learn how relevant policies affect them
        • promote nonpartisan efforts to encourage voting
        • consider promoting awareness of elections and issues
      • Advocacy and Public Policy
        • consider taking organizational positions on policy issues that impact the mission of the organization
        • maintain a sound understanding of the current public policy environment
        • If engaged in public policy and advocacy activities, nonprofits should adopt a written policy that clarifies the scope of the work
        • join together in strategic alliances around policy issues
        • In situations where an organization’s mission is directly affected by a public policy, nonprofits should lead advocacy efforts
      • Lobbying
        • specifically authorized by federal law with mandatory reporting on IRS Form 990.
        • Nonprofits that engage in lobbying activities are subject to state and federal lobbyist registration and reporting requirements
        • Nonprofits that are engaged in lobbying activities must be aware of their funding sources’ limitation
      • Political Campaign Activity
        • 501(c)(3) organizations must not take positions or spend funds to support or oppose a candidate for political office
        • Nonprofit representatives should distinguish between their personal positions or endorsements and the nonpartisan stance of their organization
    • Strategic Alliances
      • Strategy for Creating Connections
        • be aware of ongoing developments and changes in their field
        • seek appropriate strategic partnerships and alliances to achieve organizational goals
        • Decisions regarding strategic alliances should be consistent with the strategic goals and advance the mission
      • Assessment/Decision-making
        • determine what resources would be required in a potential alliance
        • Alliance agreements should establish clear roles and responsibilities
        • assess on an ongoing basis whether resources are being used wisely
        • A charitable organization that participates in a business venture with a taxable entity must ensure that its assets do not improperly benefit the taxable entity
      • Coordination
        • Nonprofits should coordinate their activities with other organizations providing similar or complementary services
        • work to establish communication channels, mutual understanding and beneficial alliances
        • assist other nonprofits in the community through alliances and sharing of resources, connections and expertise
    • Human Resources
      • Employee Policies
      • comply with all federal, state and local employment laws
      • comply with employment mandates
      • adopt a set of board-approved policies and procedures for managing employees.
      • provide a safe and healthy work environment
      • establish a clear conflict of interest policy for employees
      • adopt procedures that allow employees the opportunity to rectify their grievances.
      • adopt a whistleblower policy to protect personnel when they report violations of organizational policy or applicable laws.
      • Recruitment and Retention
        • employ skilled individuals who are suitable for the positions they occupy
        • conduct background checks on employees
        • Background checks should be conducted in a uniform and consistent way
        • provide personnel with clear, current job descriptions, a comprehensive orientation, and the resources they need
        • define their compensation philosophy, balancing internal equity with market-based and livable compensation
        • provide employees with adequate benefits
        • create a culture of transparency and open communication
        • develop a plan for how vacancies in senior leadership positions will be filled
        • conduct exit interviews when employees depart
        • When employees are terminated, nonprofits should provide adequate notice and information about benefit continuation, unemployment compensation, references and job placement assistance
      • Diversity and Inclusion
        • strive toward creating a workplace that welcomes and supports employees
        • establish and abide by a broad and encompassing equal opportunity employment policy
      • Training and Development
        • promote staff education and development and provide opportunities for growth and advancement
        • budget for the professional development of staff
        • personnel should receive ongoing performance-related feedback and a formal performance evaluation at least annually
    • Volunteer Management
      • Volunteer Engagement
        • assess the capacity of their organization to engage, supervise and support volunteers
        • develop a volunteer plan that states how volunteers advance the organization’s mission.
        • allocate resources (including staff) to recruit, engage, supervise, recognize and retain volunteers.
        • put risk management procedures in place to assess, manage or lessen potential risks to volunteers
        • Board members should make an intentional distinction between their governance role as volunteer board members and any activities they conduct as program-based volunteers
        • abide by the distinctions between the legally allowed activities of volunteers and employees:
          • Employees of an organization may volunteer for the organization as long as the volunteer duties are outside of regular assignments
          • Financial and in-kind benefits to volunteers should be limited to reimbursement for business-related expense
      • Recruitment and Screening
        • organizations should develop a clear description of the scope of the work, necessary skills, expected time commitment and the impact and benefits of the volunteer’s service.
        • seek to match volunteer opportunities to the potential volunteer’s needs and interests.
        • conduct background checks if the volunteer will be working directly with vulnerable people.
        • incorporate a broad range of internal and external strategies to reach out to diverse sources of volunteers.
      • Engagement and Supervision
        • Volunteers should be welcomed and treated as valued and integral members of the organization’s human resources
        • Volunteers should be provided with an orientation
        • structure their volunteer program so that each volunteer has a direct connection with an identified supervisor
        • have clearly articulated and documented accountability and discipline procedures
        • provide formal and informal opportunities to recognize the impact and value of volunteers
        • receive ongoing performance-related feedback and a formal performance evaluation
        • volunteer program should be evaluated periodically to assess the impact
    • Leadership and Organizational Culture
      • Decision-making
        • make clear the decision making structures and processes of the organization
        • devote time and attention to analyze the changing environment
        • actively seek to understand underlying causes of mission-related issues
        • prioritize organizational goals and negotiate external relationships to buffer against excessive control
        • recognize and navigate the organization’s response to the sometimes competing interests
        • discern a sustainable business model for the organization
      • Communications
        • focusing the organization’s attention on timely mission-relevant issues and opportunities
        • Leaders should advocate for their organization and its mission
        • actively communicate how the organization’s activities produce the intended change in the community
        • ensure that sufficient time and energy is invested in the organization’s communication capacity.
      • Culture
        • continually develop the skills, knowledge and abilities of others at all levels of the organization
        • create and sustain an organizational culture that best advances the nonprofit’s mission and goals.
        • push the organization to make difficult and timely decisions,
        • foster a culture of information sharing and interaction between the board and others in the organization
        • identify and implement opportunities that enhance a positive working environment.
        • leaders should demonstrate the behaviors they expect of their colleagues.
        • encourage their organization’s staff and board to seek out, recognize and leverage the shared and different values of diverse cultures.
        • pay attention to and attend to their need for professional and personal renewal
        • allow for and encourage questions and reflections on the organization’s strategies, effectiveness and ability to change

Minnesota Council of Foundations’ - Principles for Grantmakers & Practice Options for Philanthropic Organizations (2009)

Minnesota Council of Foundations’ Principles & Practices

  • group of 15 members and staff took on the work of revisiting each idea and concept from the founding 1996 efforts. The result is a splendid new body of Philanthropy & Public Trust work: new Principles for Grantmakers that are more aspirational and less transactional than the earlier version
  • Principles:
    • Ethics and Law Principle
      • sustain public trust by adhering to the highest ethical principles and practices and abiding by all state and federal laws
    • Effective Governance Principle
      • achieve effective governance by ensuring performance in the areas of stewardship of assets, donor intent, fiduciary responsibility and sound decision-making
    • Mission and Goals Principle
      • be purposeful in our philanthropy by having a clearly stated mission and explicit goal
    • Engaged Learning Principle
      • foster continuous learning and reflection by engaging board members, staff, grantees and donors in thoughtful dialogue and education
    • Respectful Relationships Principle
      • build constructive relationships with applicants, grantees and donors by ensuring mutual respect, candor, confidentiality and understanding.
    • Transparency Principle
      • achieve transparency in our relationships with the public, applicants, grantees and donors by being clear, consistent and timely in our communications with them.
    • Diversity Principle
      • reflect and engage the diversity of the communities we serve
    • Self-Assessment & Commitment Principle
      • uphold the highest standards by regularly assessing ourselves against these principles
  • The Practice Options in this document are ever-changing. They represent good practices at a point in time and recognize that as an organization evolves so, too, should the choice of Practice Options it employs in its work
  • Governance
    • Board Compostion
    • Board Fiduciary Duties of Care, Loyalty and Obedience
      • Duty of Care
        • Mission and Strategy
        • Board Management
        • Board Learning
        • Donor Intent
        • Staffing
        • Evaluation
      • Duty of Loyalty
        • Conflicts of interest
      • Duty of Obedience
        • Self-dealing
        • Board Compensation
        • Public accountability
        • Whistleblower Policy
    • Accountability and Communications
      • Registration
      • 990 and Other Filings
      • Transparency
    • Program
      • Grantmaking
        • Grant Guidelines and Process for Application
        • Due Diligence
      • Public Policy Engagement
        • Funding Advocacy and Lobbying
        • Participating in Public Policy
      • Other Programs
    • Finance and Administration
      • Investments
      • Investments for Foundations with Endowments
      • Taxes
      • Expenditures
      • Financial Management
      • Records Retention & Management
      • Audits
    • Human Resources
      • For grantmanking organizations that hire staff
        • Staff Hiring, Management and Compensation
        • Staff Learning and Development
        • Whistleblower Policy
    • Fund Development
      • Community and public foundations only
        • Resource Development
        • Stewardship and Accountability
        • Donor Relations
  • Find more tools at mcf.org/publictrust
  • Working Toward Diversity
    • To be effective, all grantmakers must gain new competencies and experiences in diversity to guide them in doing the work of philanthropy.
    • This special chapter offers foundations and corporate giving programs some fresh ideas, good practices and current examples of diversity work in the field
    • In devising a framework for applying the diversity principle, the Minnesota Council on Foundations has identified four distinct grantmaker roles:
      • funder
        • wealth of opportunities to foster diversity
        • commitment to inclusion policies may trigger a whole new way of thinking about grantmaking and how best to reach a diverse constituency
      • employer
        • shapes its staff and can also determine the composition of its board
        • provides important opportunities to bring diversity, in all its meanings, inside the institution.
      • civic participant
        • contribute to the public good through involvement in communities, not just through funding.
        • earn about the needs and issues of diverse constituencies
        • act as facilitators and initiators of community action
        • offer technical assistance and draw upon resources that would be unavailable to many small nonprofits
        • become equal partners in their communities, gaining valuable insight and knowledge through firsthand experience.
      • economic entity
        • direct its financial activities in ways that amplify a commitment to inclusion and complement its grantmaking mission
        • Socially responsible investment policies are one way
        • Supporting businesses owned by marginalized populations is another strategy
Written on February 12, 2018