How Ethical Is Your Nonprofit Organization?

Hi All….Listed below is a great article regarding nonprofit administration and ethics.  Yes,the article is an oldie, but goodie, so its well worth the read. Learn.Grow.Give Back!

November 2004

Almost every day, it seems, newspaper headlines shout out the details of another corporate scandal. Those of us in the nonprofit sector are tempted to think that we are above such shenanigans—and the accompanying headlines. We are, after all, do-gooders who are uncorrupted by the desire for profit. Our motives are so noble, how could anyone question our actions?

Unfortunately, nonprofits are run by people with the same range of ethical standards as the rest of society, and we have our share of bad apples. In recent years, the Nature Conservancy, the Red Cross, a handful of United Way chapters, and local foundations in several communities have found themselves the target of negative headlines. Such ethical lapses—or perceived ethical lapses—undermine the trust the public holds in the entire sector.

Procedural Responses

Most of the responses to these scandals have been procedural. The common reaction is to encourage nonprofits to develop a code of ethics and perhaps become certified as ethical organizations by the Maryland Association of Nonprofit Organizations or the Better Business Bureau.

Writing such a code will make you and your organization think through the issues, and if the entire organization is involved at an early stage, the resulting code is far more likely to be relevant to your day-to-day operations. Moreover, you can and should train your employees to follow the ethical precepts of your policy. This training allows you to reinforce values, explain the language of the code, and to discuss hypothetical and actual situations that others have faced. Codes of ethics and training are important procedural steps, but they are only a small part of the larger ethical picture.

The Buck Stops at the Top

Whatever a code says, the leaders of an organization—the executive director, his or her lieutenants, and the board—set the stage for the actual ethical behavior. Enron, for example, had adopted a 64-page ethics policy, which clearly did not prevent unscrupulous actions.

Better training may not have helped, either. Fully 99 percent of the chief ethical officers attending the Conference Board’s annual Business Ethics Conference in 2002 believed that the Enron scandal would have erupted even if senior management had received extensive ethical training (although almost half thought the behavior would have been stopped more quickly)1. A truly ethical organization can exist only when its leaders embrace ethical decision making and recognize the importance of values other than the bottom line.

Principles of Ethical Decision Making

Many nonprofit ethical principles, such as honesty and treating people with respect, are parallel to those in the for-profit world. In both the for-profit and nonprofit worlds, a good rule of thumb when making a decision is to ask whether you would want to be treated the same way and whether you would be comfortable seeing your decision on the front page of the local newspaper.

The nonprofit world has another guiding principle, however, that is irrelevant to the for-profit sector: no one individual is to profit from the organization. Losing sight of this principle has led to many of the scandals in the nonprofit world. In general, discussions about nonprofit ethics cover the topics of honesty, transparency, conflicts of interest, fundraising issues, and treating employees, volunteers, and clients with respect.

Honesty: Being honest is perhaps the most obvious ethical principle and the one that, when not followed, most quickly damages an organization’s reputation. In theory, honesty is easy; in practice, it is more difficult. A few typical nonprofit situations come to mind. Are you being truthful when you present a rosy picture on a grant application, knowing that your organization, like all others, faces some problems? How honest are you when you estimate the proportion of your budget that goes to fundraising and the percentage that goes to programs?

In both cases, being scrupulously honest might lose your organization some much-needed funding. Being less than honest, however, can be even more costly in the long run. All nonprofit organizations need to consider the truthfulness of their statements, avoid exaggerations and statements that have an air of untruth, and recognize that omitting a statement can be the same as telling a lie.

Openness: A corollary of honesty is transparency. Nonprofits can maintain the public trust by being particularly open about their operations. By law you must make your Form 990 available to the public, but you can and should do more to let the public know about your organization.

Your Web site and your fundraising appeals should clearly articulate your mission, values, scope of activities, and uses of revenue. You should also release audited financial statements and your annual report, if you have them, and you should provide information about your goals and accomplishment to GuideStar, which will post the information on its site. Your CEO or executive director and board should be fully informed about the organization’s finances, and their reports to the public should be scrupulously honest and consistent.

Conflicts of Interest: Conflicts of interest appear with regularity in the nonprofit sector. Board members are often chosen because their professional abilities can provide a service to the nonprofit. Moreover, they are likely to be involved with several boards in the same community. Volunteers, employees, and even clients can also face conflicts of interest.

Should a lawyer on the board offer to do legal work for the nonprofit? Does it matter if the lawyer offers the services on a reduced basis or for free? Should the headmaster of a private school in a market with very high housing costs obtain a loan from the nonprofit to pay his or her mortgage? Should a major donor be given special privileges? Should a client/board member receive the organization’s services before other clients? Can an employee ever accept a gift from a client?

The first step in answering these questions is to recognize that a conflict of interest exists. In some states, the answer to the conflict is obvious. In New York, for example, it is illegal for nonprofit officers and directors to accept loans from the nonprofit.

In other situations, such as when a board member can provide a service for less cost than the nonprofit could obtain otherwise, the answer is less obvious. Some argue that it is important to keep the interests separate in all instances. Others argue that it is all right to provide such services, so long as the conflict is fully disclosed and the conflicted person does not vote on whether he or she should provide such services.

Each organization handles such cases in its own way, assuming state law or its umbrella organization has not already dictated a decision. At the very least, these situations call for full disclosure and a disinterested vote. (For a fun test of your ability to spot conflicts of interest, try the site that Mentoring Canada has created.)

Privacy: Some types of nonprofits have always been particularly sensitive to privacy issues. Medical organizations, for example, must protect patient confidentiality, and libraries fiercely guard their patrons’ information. The rest of us should also consider whether to protect our clients’ and customers’ privacy, even when the fact that they use our services is less sensitive.

Donor lists create their own privacy issues. Although many nonprofits rent or sell their donor lists without asking the contributors’ permission, codes of ethics increasingly forbid doing so without at least giving the donor the ability to remove his or her information from such lists. The Internet adds another layer to this discussion, as donor addresses, credit card numbers, and other personal information can easily be sent to many unscrupulous people.

Fundraising Issues: Nonprofit fundraising raises special ethical issues. Among them is whether it is ever ethical to pay a fundraiser a percentage of the money raised. The Association of Fundraising Professionals (AFP) forbids this practice among its members, reasoning that donors who contribute to a nonprofit deserve to see those funds go to the organization. Complaints about this practice make up by far the largest number of complaints AFP handles2.

But fundraising has other ethical issues. Not only should the fundraising materials and solicitations be honest3 but the organization should use the funds for the purpose specified before the donation was made. Sometimes, especially when situations change, it becomes difficult to keep these promises, but they should be kept unless the donor agrees to the change.

What if a donor makes unreasonable demands on an organization, such as asking for benefits not accorded to other donors? Should you accept a large gift from someone for a purpose that veers from your mission? What if the donor will give money only if you forego funds from a different source? These are not easy questions, but they are ones that nonprofits deal with frequently, and they should be considered before such situations actually arise.

Treating employees, volunteers, and clients with respect: Finally, it should go without saying that employees, volunteers, and clients should be treated with respect. Nonprofits should never engage in discrimination or harassment. These are not difficult ethical issues; unfortunately, they are sometimes difficult for ordinary humans to follow.


All nonprofit organizations need to pay attention to ethical issues, for an organization without a clear ethical compass can lose the trust of the community, damage its clients’ interests, and indirectly hurt the entire nonprofit sector. A nonprofit with a clear code of ethics, on the other hand, can concentrate on its mission and complete the good works it is set up to do.

Our goal should be to have all our employees be as naturally honest as the one in a Grantland cartoon. This character turned down a gift, refused to divulge customer information, and kept competing bids confidential but thought he had not been confronted by any ethical situations4. He just knew the difference between right and wrong.

Sources Cited

  1. Taub, Stephen, “Crisis of Ethics,”, June 19, 2002.
  2. The AFP will answer questions relating to the ethics of fundraising., select “Ethics” from the subject drop-down box, and type your question in the comments box.
  3. Grant Land.



What Works Best in Seeking Gifts From a Friend?

By:  Holly Hall

Many charities are experimenting with online fund-raising campaigns that motivate their supporters to ask friends, family members, and others to contribute, as my colleague Raymund Flandez notes in a detailed article in The Chronicles latest issue. offers some hints about what works best in such campaigns, based on ananalysis of millions of donations made through its site from 2007 through 2010. The company—which allows both charities and individuals to create online fund-raising pages—has raised $1-billion online from more than 13 million people who have directed gifts to 8,000 charities.

The study found that:

  • The size of typical donation is $15 higher when it is made to personal fund-raising pages created by individuals than similar pages created by charities.
  • The size of average gifts in response to December online fund-raising campaigns created by individuals ($69.96) and directly to a charity ($140.34) through FirstGiving is higher than at any other time of year.
  • People give the most when somebody they know marks a major milestone, such as a wedding ($89.95), christening ($73.40), or anniversary ($72.97) rather than in response to pitches from people participating in walkathons ($50).



Does Your Donation Page Put Me to Sleep?

By: Derrick Feldmann

It was only a postcard, but it caught my eye. A direct mail piece from a nonprofit organization, its sharp graphics and design enticed me to read it. Its well-written copy invited me to visit the organization’s Web site to donate. Impressed, I decided to check out the organization.

Let’s start the timer: After reading the postcard (45 seconds — yes, I scanned it), I’m intrigued enough to go to the organization’s Web site for more information. So, I fire up the Internet (5 minutes — login to computer, open the browser, etc.) and type in the Web address (something like “”) and wait for the window to open (1-2 minutes). Please note: Normally, I would circumvent this step by entering the organization’s name into Google and accessing the site through the search results, but this time I decide to follow the organization’s rules. (FYI to development directors: not all donors follow your rules.)

At this point, I’ve invested a little less than ten minutes in the exercise, and I’m waiting to be rewarded with something spectacular. But, before the screen pops up, I get a call from an Achieve staff member with a question that needs to be answered right away, and then I’m briefly distracted by a growing to-do list (5 minutes). But I’m committed to seeing this site. I mean, this postcard was wonderfully crafted, which means the site ought to be even better…right?

Finally, the page pops up and this is what I see (excluding graphics):


Thank you for your commitment to the cause. To make a contribution, please fill out the form below. If you have any questions, please call the development office at [phone number].

And that’s all.

My first reaction is, “There has to be more.” I poke around the Web page, thinking maybe I’ve missed something. I mean, the postcard message was good, and I expect it to be backed up with something impressive. It isn’t. Just dry, boring copy. In the blink of an eye, I bail out, log off, and move on to something else. Total time invested: roughly fifteen minutes. Pay-off: zero.

I wish I could say I was as surprised as I was disappointed, but I can’t. The truth is, many nonprofits’ Web donation and support pages focus first on completing the transaction, and second — if at all — on continuing the story. That’s a big mistake.

It’s unfortunate because a donation page offers the perfect opportunity for sharing the story of need, impact of gifts, profiles of donors, and more. A well-crafted page will help seal the deal; one that focuses solely on the transaction will be transparent and uninspiring. Consider my chain of events: I committed close to fifteen minutes and then walked away without taking action.

How do you avoid this mistake? By considering a few key factors when designing your donation page.

Tell the story. Provide visuals, links to video, and graphs of impact on your donation pages. Provide ongoing support materials to guide the donor through the process of gifting. Reassure the donor throughout the process, letting him or her know how a gift will be used and the impact it will make. Remember: These people are online and might not have experienced your work in person. Bring your work and mission to life through your Web site.

Highlight donors. Let existing donors tell stories about your organization and its work. Videos or testimonial statements that focus on donors’ support and explain the work of your organization will help prospective donors connect with the impact their gifts can make.

Make impact visual. Create visuals on your site that explain where the money goes and promote the transparency of gifts. Accompany these visuals with information about opportunities for donors to get involved in volunteer opportunities, advocacy work, and more.

Define donor communication. On the donation page, tell donors how your organization will continue to communicate with them. For example, explain how they can find updates on programs via social media, describe the communication processes surrounding volunteer opportunities, and highlight specific communications for donors.

Be specific. Donors like specifics; provide them. Be creative and describe where a $500 gift will go and how it can be used. Provide links throughout the donation pages — including the transaction pages — that allow a donor to get an idea about what a $500 gift can do in each program. Extend this idea even further by having an existing $500 donor describe what his or her gift is doing for your organization. This form of peer modeling can influence the thinking about gifts.

Provide Updates. Create a section on your donation pages for ongoing — at least quarterly — updates to donors on the use of gifts and the state of the cause. This form of stakeholder communication will keep existing and prospective donors aware of potential opportunities to continue their support.

Sure, you want your donation page to facilitate the gift, but first you’ve got to inspire the giver. Use the tips above to engage a prospective donor, provide an experience rather than a transaction, and see if you can not only close the deal but also encourage more and larger gifts. Do all that, and the transaction will take care of itself.


Derrick Feldmann is CEO of Achieve, an Indianapolis-based consulting firm for nonprofits.


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Annual Fund Giving & Getting Guidelines for Trustees

By: Tony Poderis

All of your organization’s fund-raising campaigns must have the leadership and the financial support of your Board of Trustees. The most important of those development efforts should be the raising of funds necessary to maintain and enhance your organization’s programs and services year after year. This is accomplished through the Annual Fund Campaign. The annual fund provides the “bedrock” of reasonably predictable renewed support and is the entry-level for larger gifts possible for future endowment, capital, sponsorship and underwriting campaigns and planned giving programs. Thus, the annual fund especially requires that your trustees be in the forefront as they contribute their own funds and as they personally raise other money. To successfully raise money externally, you must first raise money internally, and that starts with your board.

Principal Guidelines

  1. Know the giving capability of each of your trustees. Each trustee should be rated and evaluated for his or her best giving potential in the same way other non-board individuals are rated and evaluated for their suggested giving to the annual fund campaign. You always seek a realistically large—hopefully the maximum—potential gift from each of your trustees.
  2. A minimum gift requirement to be a trustee is usually not a good idea. The minimum amount could be more than some trustees are capable of giving who can provide other, non-financial, benefits to your organization. It is necessary to have as many trustees as possible on your board who have the potential to to make significant financial contributions. However, you should also encourage and accommodate a select and controlled number of others who, while they are not as financially able as the other trustees, have special skills enabling them to contribute their valuable expertise and leadership to your organization’s marketing, finance, law, accounting, etc., activities.
  3. The minimum amount might be much less than some trustees could actually give. Being asked for donations well under what they could provide usually means your trustees will settle at those lower amounts. In those instances, when you ask small, you get small from trustees who have the capability to give you much bigger gifts.
  4. A “give and get” minimum requirement combination of personal giving and personal raising of funds to be a trustee, is also not a good idea. The minimum total amount “quota” you set for them could be far less than some trustees might account for in total by way of their own gifts and from what they could personally raise from other sources. As a result, they will most likely relax their efforts when meeting their lower “goal.” They will, in effect, have done the job as you asked—and chances are they will not do more.
  5. A “give and get—something”—or go off the board, is a good idea. Even those trustees with limited resources should be able to contribute some modest amounts of money. As well, they should be in position to provide their endorsements and participation to assist in solicitations of prospects assigned to other volunteers.

General Guidelines

External giving to your annual fund will be positively influenced if you can demonstrate to non-board prospects that your trustees support the campaign with their 100% participation. The philanthropic spirit is infectious. Giving is definitely influenced by the example of others—and your board is capable of setting the very best example for others to follow.

  1. You should not readily accept from any trustee—one capable of making a sizable cash contribution but does not choose to do so—the idea that the giving of his or her time is the same as the giving of money.
  2. Try to have each trustee personally solicited by the board president, rather than by his or her peers. Trustees were brought on the board by the president, and that is where the accountability lies. If this is not practical due to a large number of board prospects, other officers of your organization may assist the president with the solicitations.
  3. It would be desirable to have the trustees’ total gift amount represent 20% to 33% of the total annual funds raised.
  4. Look to other similar size and/or similar-mission organizations for their trustees’ average gifts to their annual fund campaigns which could justify setting a higher average level donation for your own trustees to target. This could help to reinforce and rationalize your individual ratings of the trustees. The premise of comparing favorably with organizations similar to yours is usually a compelling selling point with boards of trustees.

When it comes to successfully conducting your annual fund-raising campaign, you need an attainable goal, a plan for getting to that goal and the tools to execute that plan. But in the end, the success or failure of that campaign hinges on leadership and pace-setting contributions, and that governance responsibility and financial commitment starts on your Board of Trustees.