How ethical is your organization? Be Sure to Document It

Whether it’s in the business, government or nonprofit sector, ethics seem to be on everyone’s minds these days. To ensure your supporters and community understand your organization’s values and the policies that uphold them, a formal code of ethics is essential.

Rules of conduct

You probably already have a mission statement that explains your values and goals. So why would you also need a code of ethics? Think of it as a statement about how you practice ideals. A code of ethics not only guides your organization’s day-to-day operations but also your employees’ and board members’ conduct.

The first step in creating a code of ethics is determining your values. Start by reviewing your strategic plan and mission statement to identify the ideals specific to your organization. Next, look at peer nonprofits to see which values you share with them, such as:

  • Fairness and justice,
  • Commitment to the community,
  • Public accountability, and
  • Adherence to the law.

Also consider ethical and successful behaviors in your industry. For example, if your staff must be licensed, you may want to incorporate those requirements into your written code.

You may also want to include practical standards that address current issues or behaviors common to your workplace, such as cooperativeness and promptness. Although these principles aren’t ethical in nature, they’re relevant to your nonprofit’s image.

Formalizing policies

Now you’re ready to document your expectations and the related policies for your staff and board members. Most nonprofits should address such general areas as mission, governance, legal compliance and conflicts of interest (such as paying board members for their services).

But depending on the type and size of your organization, also consider addressing the responsible stewardship of funds; openness and disclosure; inclusiveness and diversity; program evaluation; and professional integrity (including in fundraising and grantwriting). For each topic, discuss how your nonprofit will abide by the law, be accountable to the public and responsibly handle resources. When the code of ethics is final, your board needs to formally approve it.

Communicate and train

Next, it’s time to communicate and implement the code. Training employees and board members can be particularly helpful, because every nonprofit faces issues that may result in illegal or unethical behavior. With a thorough understanding of the code, your staff and board members will find it easier to make the right decisions.

Be sure to present examples of situations that they will encounter. For example, what should an employee do if a board member exerts pressure to use his or her company as a vendor? You can integrate your ideals in your policies and procedures by addressing real-life scenarios and how your organization handled them. And if your nonprofit doesn’t already have one, put in place a mechanism, such as a confidential tip-line, that staff, board members and others can use to raise ethical concerns. If multiple complaints suggest that your nonprofit has some serious ethical issues, create an open forum for stakeholders to discuss them without repercussions.

Review and revise

Your nonprofit should review and revise its code of ethics once a year. Ask board members and employees how they think policies are working, and then brainstorm ideas for improving policies that aren’t. Also ensure that your nonprofit continues to follow the law and act ethically by asking staff and board members to read and sign the code every time it’s revised.

Resources for ethical fundraising

Ethics should play a role in every area of your nonprofit, but proper conduct is particularly critical when conducting fundraising activities. Several organizations provide ethical fundraising guidance:

The Association of Fundraising Professionals. The group’s Code of Ethics covers such issues as transparency, stewardship, and confidentiality. Its 10-point Donor Bill of Rights helps fundraisers understand their responsibilities to financial supporters. For details, go to http://www.afpnet.org and search for “code of ethics” and “donor bill of rights.”

National Association of Charitable Gift Planners. This network offers standards for professionals engaged in fundraising for planned or legacy gifts. See https://charitablegiftplanners.org/about.

The IRS. In its Publication 1771, Charitable Contributions: Substantiation and Disclosure Requirements, the IRS explains recordkeeping and substantiation rules for donors and disclosure rules for nonprofits. Visit https://www.irs.gov/pub/irs-pdf/p1771.pdf.

The National Council of Nonprofits. This nonprofit network offers advice on how to acknowledge contributions, including what’s required by law and effective “thank you” practices. See https://www.councilofnonprofits.org and search for “gift acknowledgments.”

Finally, talk with your CPA if you have specific questions about ethical fundraising or need help writing ethical guidelines for your organization.

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