Health Care and Nonprofits

Integrity at nonprofits

February 27, 2015
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What does integrity mean and what’s it worth? To a nonprofit organization, it should be everything.

It’s tax season. Many of us wish we had supported more nonprofit organizations and gotten more deductions. But caution must be used in considering which nonprofit to support.

The purpose of a nonprofit is spelled out in its articles of incorporation and bylaws. These documents are needed to get a corporate charter. Once the charter is granted, it is essential that the organization follow these roadmaps. The mission or purpose of the organization is paramount. The rules it sets become key in achieving this mission. In granting nonprofit status, the public says that the group’s purpose has sufficient public value to warrant not having to pay property and sales taxes. The public expects the organization to follow its rules to achieve its mission.

We have many wonderful nonprofit organizations that do a wide variety of things that we all appreciate. However, what if an organization fails to pursue its accepted mission and/or its own internal rules? What if it does not demonstrate effective and efficient use of its resources? These are challenges that give rise to problems.

Potential volunteers and/or financial contributors can and should look for many things in a nonprofit organization before agreeing to support it. Much can be summarized by the word “integrity.” Integrity can be defined in many different ways. However, many are not sure of what to look for. For many, integrity is like pornography — we know it when we see it. We also react when we don’t see it.

Some organizations might pursue a mission that no longer is relevant. Perhaps the mission has been accomplished. Is there a duty to either publicly change the mission or go out of business? From the taxpayer perspective, of course there is.

If an organization purports to represent or advocate for public interests or opinions, does it owe the public an explanation of what it does and how it does it? Does it get financial support from the community it represents? If all money comes from outside sources, questions must be raised. Where the funding comes from can reflect on integrity. This question often is raised about political and advocacy organizations, but it easily can apply to others.

Integrity must be questioned if an organization acts in private, especially if its own rules require it to be very open. If its rules require open notice of meetings, how can you respect it for calling secret, closed meetings? When its rules allow the public to attend and participate in meetings, doesn’t excluding the public from meetings cast a doubt on the organization’s integrity? Becoming exclusive rather than inclusive is a key reason to question an organization’s integrity.

What if spending differs from adopted budgets (assuming budgets have been adopted). Most people are not aware that they have a right to see the organization’s annual form 990, the nonprofit tax return. If this report is delayed or old by the time it is made available, there may be lurking issues. Another easy way to see if the operations meet expected standards is to ask for the most recent audit of the organization’s books. Although nonprofits are not required to share audit reports, ethical ones will. Failure to share these raises a red flag. If a nonprofit wants my financial contributions, I have the duty to withhold my money until I am satisfied. If the audit cites irregularities or areas to be improved, a red flag is raised. If the organization has not responded to any suggestions from its auditors, its integrity must be questioned even more. An organization with integrity should be able to freely share its current financial statements, and failure to share again raises questions. An organization with integrity won’t mind.

Effective management is important for integrity. Does the board of directors really control the organization’s administration? If there are employed staff, does the board set the personnel and administrative rules? If the organization’s internal rules require open, competitive bidding for contracts or services, failure to follow through on this raises doubts about integrity.

Are there adopted personnel policies and are these followed? If the organization’s rules require all its expenses to be documented by receipts, failure to adhere to such practices casts a doubt on integrity. What can one think of an organization that cannot follow its own rules requiring equal employment opportunity and public posting of job availability? Does the board control and monitor employee salary ranges, and are they reasonable?

If an organization’s board is in control, does it have rules requiring a quorum to be present to take action; can it provide minutes that show that the board had the needed quorum to take actions? Were there quorums present at meetings to select new board members? If the board has rules requiring that advance notices of meetings be posted, can it show when and where such notices were posted? Are reports made available to all board members so that they can do their volunteer jobs knowingly? These and similar questions about how a board functions are important in assessing the integrity of an organization. A significant clue that might cause questions about integrity involves board members resigning. If they are leaving, are their reasons that they might not want their names associated with the organization?

Are there independent assessments of the organization? For example, what does the Better Business Bureau have to say about it? It has common sense standards for nonprofits. Does the organization meet standards of independent evaluators who can recommend that people support the nonprofit? Are assessments based on current activities, or do they let organizations rest on past laurels?

Remember that things change, and so do nonprofits. Don’t let examples of work done in the past convince you. Be current. Ask to see what the organization has done lately. I can think of a few nonprofits that have changed from a clearly supportable organization to one that should be ignored.

Most of us have limited resources. We want to contribute but cannot support everyone. When a solicitor calls, I often ask for bylaws, most recent audit, IRS Form 990, current financial statements and samples of board minutes. Only if the solicitor can freely provide these will I consider supporting the organization. However, I will shun those that resist accountability; their lack of integrity speaks for itself. You should too!

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