This issue has been even more timely to me personally as I was recently asked to participate in a terrific program sponsored by Editorial Integrity for Public Media as a representative of the Standards for Excellence Institute.  Editorial Integrity for Public Media is a joint initiative of public broadcasting Affinity Group Coalition the National Educational Telecommunications Association, and the Station Resource Group.

The group, which gathered local and national leaders in public radio, public television, and journalism, gathered in October in Madison, Wisconsin.  The group’s charge was to serve as a Roundtable Discussion of Emerging Recommendations for Principles, Policies and Practices. What an incredible group of experts!   In their discussions of Principles for Public Media, Developing a Code of Transparency, and the like, it struck me that the ethical topics and issues addressed by public broadcasting leaders are not unlike the ethical issues that nonprofit leaders across the board grapple with as they deliver services and strengthen our communities.  Conflicts of interest and transparency (just to mention a few!) were and continue to be issues of paramount concern.

For nonprofit leaders interested in getting resources and assistance for their own organizations in these areas, there is no need to look any further than the Standards for Excellence Institute.  Members of the Standards for Excellence Institute have free access to educational resource packets on subjects like Conflicts of Interest and Openness with models and samples than can be used right away.  The resources can help nonprofits interested in setting up their first conflict of interest policy or interested in strengthening a policy they already have in place. The resources can also pinpoint the items that nonprofits should be sure to include in their organization’s annual report.  To access these resources, click here.

For more information on joining the Standards for Excellence Institute, please click here.

The contract with Alan Khazei’s brother was not initially reviewed and approved by the board of directors of Be the Change. In fact, as reported by the Globe, members of the board of directors only learned about the  consulting engagement when it reviewed its annual tax filing, the Form 990.

Be the Change has a conflict of interest policy that states if officers have a financial interest “directly or indirectly, through business, investment or family,” the transaction would need to come before the board to determine whether the transaction constitutes a conflict of interest, and that individuals with a potential conflict should not be present during the review of the transaction.  As such, from all accounts, it appears that Be the Change has a standard conflict of interest policy.

Caught in a public relations scandal, the organization argued that the brother of a chief executive should not be considered a family member under the organization’s conflict of interest policy. In a memo drafted by Be the Change’s attorney, the organization argues that the contract with Lance Khazei was not in violation of the conflict of interest policy because Alan Khazei would not benefit financially from his brother’s income, a gross misinterpretation of the intent of the policy. Most conflict of interest policies address decisions that financially impact officers or related parties, thereby intending to prevent individuals or their family members from benefiting from the decision.

So, in effect, for this argument to hold, Be the Change is arguing that because “family” is not defined, that a brother would fall outside of the definition of a family member and therefore any financial benefit to him is outside the scope of the conflict of interest policy. Conventional wisdom is that a brother is actually a family member.  Personnel policies generally define a brother as a family member.  If you asked a person on the street if a brother would be considered a member of the family, chances are, they would answer in the affirmative.  Also, when looking at the IRS Form 990 (the informational form nonprofits file annually with the IRS), the instructions state, ““Unless specified otherwise, the family of an individual includes only his or her spouse, ancestors, brothers and sisters (whether whole or half blood), children (whether natural or adopted), grandchildren, great-grandchildren, and spouses of brothers, sisters, children, grandchildren, and great-grandchildren.”  However, under the same document’s definition of disqualified persons, and family members of disqualified persons, brother and sisters are not included:

“For this purpose, ‘family member’ includes only the individual’s spouse, ancestors, children, grandchildren, great grandchildren, and the spouses of children, grandchildren, and great-grandchildren.”

The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector states that “Nonprofits should have a written conflict of interest policy. The policy should be applicable to board members and staff, and volunteers who have significant independent decision making authority regarding the resources of the organization.  The policy should identify the types of conduct or transactions that raise conflict of interest concerns, should set forth procedures for disclosure of actual or potential conflicts, and should provide for review of individual transactions by the uninvolved members of the board of directors.”

For more information on the Standards for Excellence educational resource packet on conflicts of interest available to members of the Standards for Excellence Institute, please click here.  For access to the members only resources, click here.

For information on how you can join the Standards for Excellence Institute, please visit our website.

The Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector® clearly states that:

“Solicitations should be free from undue influence
or excessive pressure, and should be respectful of
the needs and interests of the donor or potential
donor.”

What does that mean for your organization? Do you rely on high pressure tactics or extreme guilt to encourage individuals and families to donate to your organization?

How do we ensure that our own solicitations are free from undue influence or excessive pressure?  How does this play out in our own organizations? The Standards for Excellence Institute encourages nonprofits to enact a board-approved fundraising and solicitation policy as well as a gift acceptance policy.  Such policies often provide the guidance needed by nonprofit staff members and volunteers to help ensure appropriate solicitations.

For more information on the in depth collection of Standards for Excellence educational resource packets on fundraising topics (Fundraising Practices, Fundraising Costs, Employment of Fundraising Personnel, and Solicitation and Acceptance of Gifts) available to members of the Standards for Excellence Institute, please click here.  For access to the members only resources, click here.

For information on joining the Standards for Excellence Institute, please visit our website.

There are many instances where individuals assume that a tax deduction exists even in places where it does not.  Did you know that each year, the IRS publishes a list of Dirty Dozen Tax Scams?  In this year’s 2011 edition, Don’t Fall Prey to the 2011 Dirty Dozen Tax Scams, the IRS included “Abuse of Charitable Organizations and Deductions” as one of the dozen tax scams, what the IRS deems to be the “worst of the tax scams”.  Nonprofit organizations should take care to ensure that they do not serve as a willing participant by allowing or setting up scenarios that allow its donors to misuse tax-exempt organizations and shield income or assets as a result.  The IRS Dirty Dozen Tax Scams report specifically calls out inappropriate and illegal situations where donations are overvalued and donors are even able to buy back the items at a price set by the donor! These are the “scams” that put ethical tax deductions at risk for the rest of us.

The Standards for Excellence: An Ethics and Accountability Code® for the Nonprofit Sector specifically states that “an organization’s fundraising program should be maintained on a foundation of truthfulness and responsible stewardship.”  The Standards for Excellence code goes on to state that “nonprofits must be aware of and comply with all applicable Federal, state, and local laws. . . ” which includes “complying with laws and regulations related to fundraising.. . .

Members of the Standards for Excellence Institute have access to more information on how you can ensure that your organization is in the best position to comply with fundraising laws and regulations, you may be interested in the Standards for Excellence educational resource packet on Fundraising Practices, which includes the helpful Standards for Excellence publication, “Disclose It: A Charitable Nonprofits’ Guide to Disclosure Requirements”

For information on how you can join the Standards for Excellence Institute, please visit our website.

Six months into 2011, the gyms that were so packed by well-meaning individuals with lofty New Year’s resolutions for getting in shape are now back to normal attendance levels. Many of us may also feel the year is now “old hat” and that we’ve lost the window of opportunity to start the exciting new initiatives and resolutions that are often geared toward the new year.

I’ve had the great opportunity this past year to work quite closely with organizations applying for recognition under the Standards for Excellence voluntary accreditation program.

Reasons for participating vary quite a bit, but they often center on themes such as: interest in propelling the organization to the next level, desire to be recognized for the good work accomplished, achieving goals associated with having strong boards, and being more attractive to donors and foundations. These organizations recognized their own need for organizational renewal and used the process as a journey to strengthen their infrastructure.

These leading organizations had an end goal in mind. They wanted to set themselves apart from the ordinary, from the other million plus organizations in the nonprofit sector.  Groups that earn the Seal tell us that earning the Seal of Excellence has assisted their organizations in a number of different ways:

• It’s opened doors with individual donors and foundation grants
• For some corporate givers, the fact that the organization has earned the seal conveys “instant credibility”
• “…by going through Standards for Excellence, you make [an] investment that different parts [of the organization] strengthen and reinforce each other…”
• “…created [a] better relationship between [certified] organization and [funder] . . . and gave . . .a sense of comfort that organization wouldn’t squander hard to come by  . . .funding”
• the standards program helped the organization get “ready for next phase – for board, ourselves and our constituency that we had come into our own as a young organization – we realized the places where we needed stronger staff, more skills, program issues  . . .it stretched us into growing up as an organization”
• For a new executive director, the Standards “was an incredibly fabulous way to learn all about the organization. . . Good structured opportunity – a real roadmap.”
  
• The Standards program “opens discussions that might have been hard to have. . .”
• For an organization that faced some tough times, [earning the seal has] “helped them get their reputation back … It was really their turning point for their organization and people now look at agency as a reputable one.”
• “Floodgates opened up—got new foundation money in the doors”
• “helped get funding from major funders”  
• Standards program helped give an organization “instant credibility” particularly during a time when others in their service area where undergoing significant scrutiny
• Being in [a competitive nonprofit area], nonprofits have to work twice a hard for credibility.  We had no foundation funding. [Then we earned the seal and received foundation support] . . .  it all started to fall in line – a methodology of making ourselves more credible”
• “Biggest return has been within the organization… staff feels good…board feels good.”
• With some grant applications, organizations that have earned the Seal of Excellence are exempted from turning in certain documents

For a full list of nonprofit organizations currently licensed to display the Seal of Excellence for their adherence to each one of the fifty-five performance measures outlined in the Standards for Excellence: An Ethics and Accountability Code for the Nonprofit Sector, click here.

For more information on how your nonprofit organization can earn the Seal of Excellence for its governance and management practices, please visit our website or contact Standards for Excellence Institute Certification Manager Melissa Sines at msines@standardsforexcellenceinstitute.org or 410 -727-1726 ext 2337.

What we have is a mismatch of expectations and a lack of transparency. Clearly what people thought the Central Asia Institute was doing with its money is not what it was doing with it. Sure, it was delivering on its mission, but clearly not to a level that was proportionate to the level of philanthropic support it received. Sure, Mr. Mortenson’s charisma and books were significant assets that the organization leveraged to get that support, but comingling his personal endeavors with the finances of the nonprofit make it look as though these “assets” were actually significantly costing the organization at the expense of fulfilling the mission.

I work with nonprofits daily, and I can attest that their structure and regulation can be confusing. It’s not always clear what’s allowable to do under the tax exempt designation nor are the passionate people who start these endeavors, like Mr. Mortenson, always aware of the unique complexities of running a charitable organization and managing its finances.  Not understanding how a nonprofit should operate and not having the full scope of skills to run a complex organization can lead to unfortunate events like those illustrated in this case.

It is important that those working to improve our world through nonprofit charitable organizations have access to the knowledge needed to be successful, have impact, and remain accountable. Here at the Standards for Excellence Institute®, we work diligently to provide such resources and guidelines so that organizations can build sustainable governance and operations to maximize the social impact of their work, reassure donors that their contributions are used as expected, and keep themselves out of potentially compromising situations by adhering to the highest levels of accountability and ethics. We also provide organizations the opportunity to demonstrate this commitment to the public by earning the Seal of Excellence, an honor held by 250 nonprofit charities in the US.

One thing is clear. Donors, the government, and the public at large expect charities to exist for the benefit of communities and environments, not for the benefit of the people that found or run them. Following proven practices of good nonprofit governance and management reminds us that the best interest of the nonprofit and the community it serves is to take the time to learn about what the community needs and from what it can benefit; understand what it takes to effectively operate; and, when it comes to accepting items of personal benefit it may be better to only accept one cup of tea rather than three when doing so.

But don’t take our word for it!

Fisher Howe’s leading publication, The Board Member’s Guide to Fundraising (Jossey Bass Publishers)  starts with this statement:

“Start with the first principle: The board of a nonprofit organization is responsible for governing the organization and ensuring that it succeeds in its mission. That responsibility-no matter what the size of the organization or the nature of its mission includes seeing that that organization has the resources required to carry out that mission . . . . If an institute is having trouble raising money, don’t look to the development office; don’t look to the chief executive; first check out the board of trustees.”

BoardSource’s 10 Responsibilities of the Nonprofit Board clearly states that the board should:

“Ensure adequate resources.”

We know that in some organizations, board members feel as though fundraising is not really a responsibility that they want to take on.  In many situations, this stems back to their first encounters with the board:   often board members are not adequately apprised of their fundraising responsibilities during their recruitment and orientation.  Setting high expectations at the outset can go a long way toward ensuring high performance.

According to the BoardSource’s Governance Index 2010 report, year after year, nonprofit leaders identify fundraising as their board’s greatest weakness and most important priority for board improvement.

Also according to BoardSource’s Governance Index 2010 report, board members are more comfortable with fundraising the farther they are from the donor.   Eighty-seven percent of board members are comfortable writing letters, compared to 57% with directly asking for money. Comfort with fundraising is declining. Board members express greater discomfort with various common fundraising activities such as soliciting funds, identifying donors, attending fundraising events and making personal contributions in 2010 than they did in 2007.

For more information, see the Standards for Excellence Educational Resource Packet, Conduct of the Board, which includes sample position descriptions for board members. This and other packets are free to Standards for Excellence Institute members through the members’ only section of our website. Hard copies are also available upon request.  We also offer one-on-one technical assistance for members only.  Not a member? Join now!

If your board is among the ranks of nonprofits without a strong commitment to fundraising and raising the resources for the organization, we hope this posting will provide some much needed ammunition for your journey to an excellent board.

The Standards for Excellence®: An Ethics and Accountability Code for the Nonprofit Sector provide clear guidance in the area of fundraising revenue and expenses and honoring donor intent.  Section 7A of the code states, “A nonprofit’s fundraising costs should be reasonable over time.   On average, over a five year period, a nonprofit should realize revenue from fundraising and other development activities that are at least three times the amount spent on conducting them.”  This 3:1 ratio is the minimum standard required to maintain the Seal of Excellence from the Institute.

However, the true power of the 3:1 principle lies in the freedom it gives to nonprofit managers.  It allows them to deliberate and  determine the most effective way to allocate scarce resources to raise essential support while still maintaining reasonable expense to revenue ratios.  Imagine if a reporter called you at work and said he knew your organization contracted a for-profit company to solicit your donors for end-of-year contributions or that you had spent large amounts of money on advertising campaigns to encourage donations. ,How great is it that you would be able to respond by clearly stating that over the past five years your organization has meet the high standard of a 3:1 revenue to expenses ratio across all of your fundraising efforts.  You can tell the reporter that even if you lose a large part of the cut for this specific fundraising campaign, your organization’s overall operations meet their goals and stand up to the highest public scrutiny. 

A nonprofit organization adhering to the Standards for Excellence may engage in any egal and ethical fundraising strategy as long as it meets the demands of the 3:1 fundraising ratio and honors the intent of donors.  Ethics, accountability, and best practices don’t mean your nonprofit must become a cookie cutter organization that operates according to some formula.  Quite the opposite- the Standards for Excellence guidelines give your organization the capacity and freedom from worry to creatively engage your donors and constituents.

For more information, see the Financial Cost and Fundraising Practices educational resource packets. This and other packets are free to Standards for Excellence Institute members through the members’ only section of our website. Hard copies are also available upon request.  We also offer one-on-one technical assistance for members only.  Not a member? Join now!

The real problem did not become apparent until earlier this year.  The IRS released figures in the spring of 2010 which listed hundreds of thousands of small charities that had not filed a Form 990-N for the three consecutive years (08, 09, and 10) since the above mentioned laws were passed.  Either these charities no longer operate, and/or these charities were not keeping up with important news and knowledge.

Even if you were not affected, there is a clear lesson to learn from this situation.  Make sure you stay in the know.  The Standards for Excellence® state,

“Nonprofits should periodically conduct an internal review of the organization’s compliance with known existing legal, regulatory and financial reporting requirements and should provide a summary of the results of the review to members of the board of directors.”

Not only should you carry out the mission of your organization; you also must devote the time to keep abreast of important news and happenings in the nonprofit sector.

As the opening story shows, nonprofit organizations can be hurt by a lack of vigilance.  Nonprofits must keep up with all the various laws and regulations of federal, state, and local governments.  These laws can and will change.  For this reason, the Standards for Excellence Institute® provides its members with a Legal Requirements Checklist educational packet.  We routinely update this resource with the information you need to stay on the right side of the law.  This and other packets are free and available to Standards for Excellence Institute members through the members only section of our website. Hard copies are also available upon request.  We also offer one-to-one technical assistance tomembers.  Not a member? Join now!

“This recommendation wouldn’t be made if the abuse had happened to a child.  Certainly a defendant wouldn’t be ordered to work with children for his rehabilitation. If the court wants rehabilitation, then counseling for violent behavior is appropriate, and it’s safer.”[i]

 Gabbey’s argument makes sense.  If you organization’s mission is to work with a certain population, would you want an accused abuser of that population to volunteer for you?  I assume not.

 What’s the simplest lesson to learn from this?  That’s right; make sure your non-profit has a clear, effective volunteer policy in place.  The Standards for Excellence® code states:

“With respect to volunteers, the organization’s policies and procedures should also address initial assessment or screening, assignment to and training for appropriate work responsibilities, ongoing supervision and evaluation, and opportunities for advancement.”

 Many non-profits depend on volunteers for the continued success of their mission.  If you are going to use volunteers, make sure you go about it in the best way possible.  We wish that everything works out well for our colleagues at the Maryland SPCA.  And we hope that you are prepared to respond, should you find yourself in a similar situation.  Make sure you protect your organization, your staff, and your volunteers.  Make sure you set yourself up for success. 

 Want some help implenting this advice?  The Standards for Excellence Institute offers educational resource packages that will help you set up goverance, ethics, and accountability policies and practices.  These packets are free and available to Standards for Excellence Institute® members through the members only section of our website. Hard copies are also available upon request. Not a member? Join now!

[i] The Baltimore Sun, September 22, 2010.