Best practices for nonprofit organizations

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Nonprofit organizations depend upon leaders like you. You are donors, board members, volunteers and staff members. You invest your time, money, knowledge, skills and efforts in the organizations that matter.

You understand the important roles that charity organizations play in our community and your participation makes them efficient.

How do you choose the organizations that deserve your investment? There are two important factors.

First, there are causes that are important to you: illnesses that have impacted your family, environmental issues, help for people working toward self-sufficiency, children needing advocacy, social injustices, animals, historical preservation, literacy, art education and many more. You choose the organizations that address the community needs that are most compelling to you.

Secondly, you want to invest your resources in a well-run organization. The Denver Foundation, in its Giving and Volunteering Study, noted that 90 percent of donors choose an organization “because it is one they can trust.”

Recent hearings conducted by the U.S. Senate Finance Committee have focused on the balance between government regulations and self-regulations for charitable organizations. There have been discussions about legislation similar to Sarbanes-Oxley (government imposed standards and procedures that primarily impact for-profit industries).

To increase self-regulation in nonprofits, there is general movement among communities to adopt a set of best practices or standards. There are many versions, but they share most of the same concepts.

The Guiding Principles designed by the Maryland Standards for Excellence Institute, which have been adopted by eight states, contain the following areas of significance:

  • Mission and program
  • Governing body
  • Conflict of interest
  • Human resources
  • Financial and legal
  • Openness
  • Fundraising
  • Public affairs and public policy

Below is a summary of the themes included in the majority of best practices or standards checklists:

  • A nonprofit organization exists to serve a community need. Its mission statement and programming must be aligned with that particular need. As communities change and their needs change, the mission and the programs must be reviewed regularly by the board.
  • The governing body or board of a nonprofit organization is composed of volunteers who have a passion for the organization. They have tremendous responsibilities because their decisions impact the organization, its clients and the community. They determine and approve goals, objectives, policies, financials and they hire, fire and evaluate the executive director. Best practices for boards include having five or more unrelated directors, diversity that reflects the community and term limits.
  • Board members, staff and volunteers have a responsibility to act in the best interests of the organization and the community rather than their personal interests. Therefore, organizations must establish conflict of interest policies and disclosure statements. Most people (and their families) are involved in a variety of businesses and organizations. Sometimes these interests will overlap and can cause a conflict or the appearance of a conflict. A written policy is important because it is much easier to determine what constitutes a conflict and how to handle it before a conflict occurs. Each year potential conflicts need to be disclosed in writing so that they can be addressed.
  • Employees and volunteers of an organization must be treated fairly. The best way to ensure fairness is to have written comprehensive personnel policies which have been approved by the board.
  • Laws and financial regulations must be met. Beyond legal requirements, there are additional good financial practices. The board approves an annual budget and regularly reviews the financial results against the budget. An annual audit is recommended for most organizations. Policies related to purchasing, internal controls and investments should be approved by the board.
  • Since a nonprofit organization exists to serve the community, its operations and financial information should be made available to interested parties. Most nonprofits do this through an annual report and information on their Web sites. This philosophy of transparency increases public trust.
  • Fundraising is a major activity in most nonprofit organizations and this activity must be performed in a highly professional manner. The Association of Fundraising Professionals has a code of ethics that addresses important fundraising practices. Some people are surprised that fundraisers should not be paid a commission based on funds raised. This principle helps ensure that fundraisers act in the best interests of the organization and its donors.

The Colorado Springs Center for Nonprofit Excellence supports the idea of best practices and self-regulation. To assist nonprofit organizations, we are building a program to promote an easy-to-use checklist. The center has always provided workshops and seminars for the nonprofit community and we will be adding workshops that discuss and support these ideas.

The time, money and efforts that you invest in the nonprofit community are highly valuable. Make sure you invest where your heart is and in organizations that follow best practices.

Lynne Telford is executive director of the Center for Nonprofit Excellence and vice president of Planned Giving for Pikes Peak United Way. She can be reached at 575-4341.