Reports of misdeeds at Southwest Key, a nonprofit serving unaccompanied immigrant children in shelters along the southern U.S. border, along with stories of wrongdoing at other nonprofits, remind us of the need to preserve the nonprofit world’s greatest asset: the public’s trust.
Especially in this holiday season of giving, donors want assurance that their charitable contributions support worthy causes and are not being used for improper activities.
Charities gain government and community support because they’ve shown they can be trusted to tackle the toughest issues facing our society. Therefore, heads of nonprofits, leaders of coalitions and associations of charities, and officials in government all have important roles to play in ensuring ethical and legal behavior by nonprofits.
Within individual nonprofits, executive directors and boards of directors must put clear ethical guidelines in place and ensure that they are followed. Independent Sector, a national membership organization of charitable organizations and grant makers that I lead, developed and promotes 33 Principles for Good Governance and Ethical Practice. Voluntarily following principles like these helps organizations and the entire nonprofit world demonstrate that we deserve the public’s trust because we are transparent, accountable, and devoted to the common good.
Speak Up
Besides promoting and following ethical principles, all of us who work at nonprofits should call out organizations when their boards and other leaders fall short of accepted standards of transparency and oversight. At this time, the extent and nature of any wrongdoing at Southwest Key is still not clear. But it’s possible, from what we read, that the organization’s leadership did not follow several of the Independent Sector principles, including standards on conflict of interest.
Organizations should develop and put in place conflict-of-interest policies to reassure the public that mission is valued above personal gain. When potential conflicts exist, organizations should be transparent in disclosing that to the public. It’s encouraging that Southwest Key has called for a review of its own governance and conflict-of-interest rules. The organization has said it will appoint an auditor to review concerns about its accounting and finances.
Federal and State Enforcement
Beyond the role nonprofits play in monitoring themselves, government at all levels needs to ensure that proper laws and regulations are in place and that these mandates are properly enforced. The Internal Revenue Service and state attorneys general are especially important agents of government oversight of nonprofits and grant makers.
The foundation of effective oversight and enforcement is already in place, but work remains to be done to strengthen this system to make it more relevant to the world we operate in today. We at Independent Sector believe several additional principles of conduct are of critical importance, and we look forward to working with leaders from nonprofits and government to see them adopted.
- The voluntary role of board members of nonprofits does not excuse insufficient oversight. Boards must become more active in monitoring organizational activity.
- Nonprofits should become more familiar with, and more thorough about, putting good ethical practices and standards in place.
- Leaders of nonprofits should be willing to call out the misdeeds of their colleagues when presented with proven evidence of transgressions.
- Government must do a better job of enforcing the laws and regulations on the books. We do not need new regulations that cripple nonprofits but need instead better enforcement of the existing regulations. Thus, the IRS and state attorneys general must have increased funding to do the necessary work of overseeing a rapidly growing but also vital part of our society.
In this end-of-the-year season of giving, we call on our communities to support nonprofit causes. In turn, it is the responsibility of boards and staffs of nonprofits, leaders of associations that represent charities and foundations, and government officials to ensure that nonprofits act responsibly.
As we look to the future, we aim to see government and nonprofits work together to improve our system of oversight, self-regulation, and enforcement in ways that help organizations advance their critical missions and build the public’s trust in the integrity of our operations.
Dan Cardinali is CEO of Independent Sector, a membership organization of nonprofits, foundations, and corporations that seek to advance the common good.
