Do you read the newspaper or watch the news regularly? If you do, you can probably relate to many stories about the economy and terms like gross domestic product and recession. Reporters like to keep their eyes on the health of the economy to keep you informed all the time.
By keeping an eye on the economy, you’ll learn a lot about the stock market. The ups and downs of the stock market reflect the performances of companies across the country and the world. Companies usually project what they expect to earn and then measure their profits and report them.
But not all companies have a primary goal of making a profit. These companies are called non-profit organizations. You must be wondering an organization would conduct its operations without the aim of making a profit. Non-profit organizations make money most of the time. However, it’s what they do with the money that separates them from profit organizations.
Non-profit organizations are businesses or groups with a philanthropic mission. They are usually private; meaning that they are not connected to governmental entities. Unlike profit organizations, non-profit organizations don’t pay out their earnings to investors in the form of dividends or profits. Instead, they funnel their earnings back into the operations of the organization. In short, money is used to support the mission of the organization.
Different countries have different rules and regulations that nonprofit organizations must follow to maintain their status. These rules involve payment of taxes and reporting what they do with their earnings comprehensively. Some of the philanthropic efforts supported by non-profits include education, protecting the environment, supporting arts, social or political reforms, charity, and saving endangered species to name a few.
Ethics in nonprofit organizations
According to paper writers, most people assume that all non-profit organizations are ethical when dealing with employees, donors, volunteers, and the community since they exist to serve a greater good. Surprisingly, nonprofits can be brought to the limelight due to lapses in ethical decision-making just like their counterparts. The structure and purpose of nonprofit organizations create ethical dilemmas that leaders should be aware of.
1. Honesty and transparency
Although most people paint a rosy picture of for-profit organizations when seeking funding from investors, non-profit organizations have a duty and responsibility to define the needs that they serve and the impact that the organization is making.
The organization’s spending analysis must be accurate even if the organization is spending too much on its growth than on the programs. According to the rules and regulations of most nations across the world, nonprofit organizations should allow the public to analyze their financial statements and audit reports.
2. Donor Privacy
Nonprofit organizations can collect a lot of personal information about the donors including bank details and credit cards. Protecting the personal information of donors not only vital but also ethical. It can be tempting for the leaders of nonprofit organizations to publicize their donors by sharing their email addresses for more cash. This practice is considered unethical if the organization does not ask for permission from the donor before publicizing such information. In the increasingly digital landscape, it is becoming more important to provide a safe donation platform, one that maintains donor privacy.
3. Conflict of interest
Members of the board of directors are usually chosen based on their experience, connections, and resources. Some of the connections that make board members valuable can lead to a breach of ethical conduct.
A common example is when a non-profit organization utilizes the products or services of a company which the board member is tied with when the same product or service could be purchased at lower costs or higher quality from other sources.
Conflict of interest also arises when nonprofits end up operating according to the desires of the most valuable donors or board members. Large donors can easily change how the organization spends its money, funneling into the donor’s projects or associates when the money could be used for better purposes elsewhere.
Board members or managers receiving personal gifts from donors can also influence important decisions such as spending. And this creates a breach of ethics.
Executive managers dedicate a lot of time and energy to the growth of the organization and future success. However, compensation practices in for-profit organizations are not allowed in non-profit organizations.
Some compensation practices such as paid vacation, travel expense reimbursement, and luxurious travel packages can lead to anger and dissatisfaction among the donors. Executive compensation should be presented transparently not only to the donors but also to the public to avoid secrecy and mishandling of money.
5. Strategic management
Board members and executives have the responsibility of keeping the organization focused on its missions to achieve the highest impact possible in its area of specialization. Due to factors such as market expansion, organizational goals, and revenue growth, the mission of the organization can become blurred thus making it harder to make a meaningful impact.
Since nonprofit organizations don’t pay taxes, they usually carry a fiduciary duty not only to the donors but also to the taxpayers to keep their focus on helping the groups they serve.
Accountability for nonprofits
Nonprofit organizations need to be more accountable than their counterparts when it comes to gaining trust for their principles and commitments. Practices like ethics, internal controls, governance, financial transparency, and governance demonstrate accountability.
Nonprofit organizations are not only accountable to the donors but also the public for ethical behaviors and compliance with the guidelines. The leaders of a nonprofit organization are usually scrutinized when an unethical or distrustful situation arises. Such events may lead to more complications within the organization.
The donors and associates will demand to know how their funds were used. If a single donor or sponsor comes across an unethical behavior or fraud, the organization’s image would be tainted severely. This may lead to the reclamation of money thus depriving the organization of the ability to conduct its operations. And this eventually leads to the closure or shut down of the organization.
Nonprofit organizations have several different faces of accountability. These organizations must consider who they are accountable to and what they are accountable for.
Accountability does not necessarily mean complying with the laws only but also being transparent with the sponsors or donors and the public. Non-profit organizations are accountable to the donors or sponsors that have provided them with the finances to conduct their operations. The managers should acknowledge all the volunteers and respect their contributions to the mission to be achieved.
1. Internal accountability
Above all else, non-profit organizations should be true to their staff and helpers. No organization can move forward unless it is true to its family. Since the organization holds different degrees of accountability towards their patrons, detailed assessment and rapport with the stakeholders will foster great values such as transparency, responsiveness, efficiency, equity and inclusiveness, and accountability.
The public holds non-profit organizations accountable for several factors. Stakeholders need to know the vision, mission, values, and goals of the organization. These stakeholders will question the managers regularly based on their performance and progress in line with the set standards.
The individuals associated with the non-profit organization should also know about the finances. To maintain transparency, the financial policies of the organization should be reviewed regularly. The stakeholders also have the right to know how their money is being invested and if the organization is meeting their expectations.
2. Accountability and the board
Several factors are usually used to show how the board is performing and their accountability to the organization. The responsibility of the board is to fulfill the values and help the organization achieve its goals. It is supposed to include the staff when making decisions and acting as a considerate controller of the organization.
Various methods have been developed over time to ensure that non-profit organizations are accountable to the authorities. They include disclosure of financial statements, evaluations, audit reports, internal controls feedback mechanisms, and assessments to name a few.
Such disclosures can be great accountability tools that provide information about the operations of the non-profit organization. Remember, non-profit organizations exist thanks to the stakeholders and the public in general.
Accountability is associated with lots of factors excluding regulations and compliance. It is deeply connected with the trust of the stakeholders and the purpose of the organization.
It is up to the managers and stakeholders to define what accountability means to them and how they can make it easier for the public to access and know the operations of the organization. You never know which decision will affect the organization positively in the long run.
As we said earlier, different stakeholders play a critical role in the ethical operations of a non-profit organization. They include:
- Clients – All operations in a non-profit organization are directed to solving clients’ problems in one way or another. Clients are the customers or consumers of the organization’s products and services.
- Board – The board is made up of members from the community and it represents the clients of the organization. The law dictates that the board is in charge and accountable for the overall direction of the organization and the implementation of policies. The board configures the best way for the organization to achieve its vision and mission and does so through specifications of bylaws. The desire to serve the community through volunteering helps keeps the members of the board motivated.
- Board chair – The role of a board chair is to coordinate the work of the executive director, the board, and committees. The chair may appoint committees depending on the specifications of the bylaws. The power of the chair is through general leadership and persuasion.
- Committees – The board carries out the operations of the organization through several board committees. Board committees play a crucial role in the success of non-profit organizations.
- Executive director – The board chooses one person who is responsible for carrying out the agenda of the board. The executive director is accountable for how the staff operates and also supports the work done by the committees.
- Staff – Staff report directly to the executive director. They also support the work of the committee with the help of the executive director.
Non-profit organizations are formed to further social causes for the benefit of the public. Nonprofits operate from the donations and funding they raise. Most of the money raised by nonprofits in invested in their operations, that is why managers need to be honest and transparent.
By sharing financial statements and audit reports with the public, they can get more donors and well-wishers to further their cause. Everyone especially top-level management needs to be ethical and accountable all the time if they want the organization to last for decades.
About The Writer
Alice Jones is a writer at essay writing service and cheap assignment writing help. She is from San Francisco, CA. She graduated from the University of San Francisco and got a Master’s degree. As a journalist, she concentrated on such topics as business, marketing, and freelance.