Accountability and Ethics in the Nonprofit Sector
Remember the 1992 United Way excessive-compensation scandal? Or the tales of bribery that surrounded the U.S. Olympic Committee in 2002? More recently, the Boston Globe did a series of reports in 2004 on abuses in local foundations, including trustees who treated foundation assets as their personal bank accounts, taking huge salaries and luxurious benefits while spending limited funds on their ostensible charitable goals.
In response, the Independent Sector formed The Panel on the Nonprofit Sector in October 2004, at the encouragement of the U.S. Senate Finance Committee. Its interim report was released today, with a final report to come later this spring, and makes interesting reading.
Their recommendations include tightening and enforcing the reporting rules for IRS form PF-990, requiring regular audits; establishing and enforcing conflict-of-interest policies. The report also suggests that rules regarding in-kind donations, donor advised funds, and nonprofits that support just one organization (“friends of…”) should be better defined and enforced, and that penalties for self-dealing be increased. The panel’s not done yet, and is still examining issues including financial disclosure, governance and compensation, accreditation, and government oversight.
If your organization isn’t talking about this report and the changes it may need to make, it should be. Starting points for this discussion can be found at Nonprofit Ethics, which also has resources aimed at Canadian organizations, and the Ethics Resource Center, especially the October 10, 2003 issue of their newsletter, which focuses on nonprofits. Florida Atlantic University also offers a source list on nonprofit ethics. I’m sure many other nonprofit sites will be weighing in on the issue soon, if they aren’t already.
Finally, let me note one more thing. The report issued by the Panel on the Nonprofit Sector states “The vast majority of charitable organizations conduct their work in an
ethical, responsible and legal manner.” I can add my vote of confidence to this—I’ve been consulting to nonprofits for more than a decade now, and have worked for more than a hundred clients. None of them, ever, have left me unpaid (though a few have left me waiting a while). I doubt many consultants in the for-profit sector can say the same.
But perception is stronger than reality, and if the public starts seeing nonprofits as unethical and greedy, the money supply is going to dry up pretty fast. So let’s make sure our employers’ actions, and our own, are beyond reproach.