The Accountable Nonprofit Organization
The Accountable Nonprofit Organization is a statement of principles to guide charities.
It outlines the operations and procedures a nonprofit undertakes to show it is accountable to donors, the people it serves, and the general public.
This statement was endorsed by AFP Board in 1995.*
The Accountable Nonprofit Organization
Each nonprofit organization holds a public trust to improve the quality of life.
The accountable organization clearly states its mission and purpose, articulates the needs of those being served, explains how its programs work, how much they cost and what benefits they produce.
The accountable organization freely and accurately shares information about its governance, finances and operations. It is open and inclusive in its procedures, processes and programs consistent with its mission and purpose.
The nonprofit organization is accountable to all those it exists to serve, to all those who support it, and to society.
The accountable nonprofit organization is responsible for mission fulfillment, leadership on behalf of the public interest, stewardship and quality.
The accountable nonprofit is responsible for:
- Doing what it says it will do.
- Maintaining relevance by meeting needs in a changing environment.
Leadership on behalf of the public interest
- Enhancing the well-being of communities and society.
- Promoting inclusiveness, pluralism and diversity within society.
- Educating the public, business, nonprofit organizations and government, including appropriate advocacy and lobbying.
- Maintaining effective governance and management.
- Generating adequate resources, managing resources effectively, supporting and recognizing volunteers, and appropriately compensating staff.
- Avoiding conflict of interest and abuse of power.
- Striving for and achieving excellence in all aspects of the organization.
- Evaluating the total organization and its outcomes on an ongoing basis.
* The above statement, endorsed by AFP's board in 1995, was developed for nonprofit leaders by participants of Accountability and Nonprofit Organizations, a think tank program held in 1995 at the Mandel Center for Nonprofit Organizations. The think tank was co-sponsored by the National Assembly of Voluntary Health and Social Welfare Organizations and the National Health Council, and supported by a grant from the Lilly Endowment, Inc.
America’s charitable nonprofits rely on the public trust to do their work. That is why it is so important that charitable nonprofits continuously earn the public’s trust through their commitment to ethical principles. If only one donor loses confidence in a charitable nonprofit because the nonprofit behaves unethically, that’s one too many. That’s why the National Council of Nonprofits is taking this opportunity to showcase excellent resources that charitable nonprofits can use to demonstrate the core values of accountability and transparency.
What practices demonstrate accountability and transparency?
Laws Imposing Ethical Conduct
- IRS regulations require that charitable nonprofits may not be “operated for the benefit of private interests.” This prohibition is the foundation of the “public benefit” requirement, and the legal, as well as ethical, guiding principal for all charitable nonprofits.
- TheSarbanes-Oxley Act of 2002 includes two provisions that apply to nonprofits: (1) a prohibition against destruction of documents that are tied to a criminal investigation, and (2) a prohibition of retaliation against whistleblowers. As a result of the Act (and questions posed on the IRS Form 990) most nonprofits are now aware of the "best practices" of having a board-approved whistleblower protection policy, and a document retention/destruction policy.
- The IRS Form 990, Part VI, includes several questions focusing attention on governance practices that while not legally required, demonstrate accountability and transparency. These questions ask whether the nonprofit has a written conflict of interest policy, as well as procedures for managing conflicts, and whether the full board approves executive compensation, as well as the IRS Form 990 prior to filing; Other questions ask whether the nonprofit has a whistleblower protection policy and a document retention policy.
State Law requirements
State laws may also address accountability and transparency practices. For example, some state nonprofit corporation laws dictate the procedures a board of directors must follow to address conflicts of interest, and several states’ laws prohibit loans to board members. State laws fundraising regulations also typically dictate a threshold level of financial transparency through annual corporate (state) filings and charitable solicitation registration requirements. While many nonprofits adopt codes of ethics, we are unaware of any state law that requires a nonprofit to adopt one. (Many of state-specific best practices for nonprofits address codes of ethics and ethical conduct in general.)