PA 536 –October 23, 2007

1. PA 536 –October 23, 2007 • By the end of class you should • Have a clear concept of what constitutes an ethical organization • Be able to participate in drafting a Code of Ethics for a nonprofit • Be familiar with the basic requirements under Sarbanes-Oxley

2. Next week • Speaker: Lillian Thompson, Planner II, City of Raleigh and Support Staff to the Southeast Raleigh Assembly • Readings & Case on electronic reserve • M. M. Shaw, “Successful collaboration between the nonprofit and public sector,” (reading 32) • M Golensky and G. L. DeRuiter, “The urge to merge: A multiple-case study,” (reading 34) • Winer & Ray, “How do we begin” (reading 22). This is the article for the Tri-County Case

3. Questions to Ponder I • Complete sentence: An ethical nonprofit is . . . • What would you look for to determine if a nonprofit was ethical/behaved ethically or raised ethical concerns

4. Questions to Ponder II • Nonprofit hospitals & nursing homes have fewer negative outcomes than for-profit ones. Why do you think this is so? Do you think that ethics plays a role? • Do you consider some of the issues raised in last week’s case (Mercy Health Center) to involve ethical issues? • If a nonprofit asked you to help it draft a code of ethics where would you begin?

5. Ethical Values (from IS Code of Ethics) • Commitment to the public good; • Accountability to the public; • Commitment beyond the law; • Respect for the worth and dignity of individuals; • Inclusiveness and social justice; • Respect for pluralism and diversity • Transparency, integrity and honesty; • Responsible stewardship of resources; and, • Commitment to excellence and to maintaining the public trust.

6. What a code might cover • Statement of personal and professional integrity • Mission • Governance • Conflict of interest • Responsible stewardship of resources/financial oversight • Openness and disclosure • Program evaluation • Inclusiveness and diversity • Integrity in fundraising and/or grantmaking

7. Ethical Components: Conflict of Interest • Written policy applicable to board members and staff, and volunteers who have significant independent decision making authority regarding org. resources. • Should • Identify types of conduct/transactions that raise concerns • Set forth procedures for disclosure of actual/ potential conflicts • Provide for review of individual transactions by the uninvolved members of the board of directors.

8. Ethical Components: Fund Raising • Accurate, truthful solicitation & promotional materials • Accurately identify the organization, its mission, and the intended use of the solicited funds • Honor all statements about the use of a  contribution • Honor the known intentions of a donor regarding the use of donated funds.   • Respect donor privacy and confidentiality of donor information • Provide donors an opportunity to state that they prefer to remain anonymous and that their name, the amount of their gift, or other information will not be publicly released. • Honor donor requests to curtail repeated in-house mailings or solicitations • Solicitations should respect needs & interests of donors/potential donor.   • Should have policies to govern the acceptance and disposition of charitable gifts, including any limits on individuals or entities from which the organization will accept a gift, the purposes for which donations will be accepted, the type of property which will be accepted, and whether to accept an unusual or unanticipated gift in light of the organization's mission and organizational capacity.

9. Social Justice Concerns • Employment conditions • Pay a livable wage • Provide for health insurance & retirement • Develop a grievance policy • Confidentiality of records • Provide for employee & volunteer development • Determine insurance needs for organization Source: “Principles & Practices for Nonprofit Excellence,” http://www.mncn.org/info_principles.htm website of Minnesota Council of Nonprofits

10. Ethical Components: Advocacy • Have a written policy on advocacy defining the process by which the organization determines positions on specific issues.  • Should assure that any educational information provided to the media or distributed to the public is factually accurate and provides sufficient contextual information to be understood.

11. Sarbanes-Oxley: Implications for Nonprofits I • Insider transactions & conflicts of interest • Comply with all laws regarding compensation & benefits provided to directors & executives • Do not provide personal loans to directors or executives • Establish a conflict of interest policy & means for enforcing it • Independent & competent audit committee • Have an annual external audit (may not apply to very small nonprofit organization) • Establish a separate audit committee of the board • Selects & oversees external auditor • Members should not receive compensation for committee service • At least one member should be “financial expert” • Full board approves audit results • Auditors • Rotate at least every five years • Do not use for non-auditing functions except tax preparation

12. Sarbanes-Oxley: Implications for Nonprofits II • Disclosure • Disclose 990 in current/easily accessible manner (also required by IRS) • Whistle Blower Protection • Develop, adopt, disclose a formal policy to deal with complaints & prevent retaliation • Investigate employee complaints and correct any probemls (or explain why corrections are not needed) • Document destruction • Have written mandatory document retention & periodic destruction policy, which includes guidelines for electronic files & voicemail • Stop any document purging if an investigation is underway or even suspected Source: http://www.independentsector.org/PDFs/sarbanesoxley_checklist.pdf

13. Sources & Resources • Independent Sector • Model Code of Ethics • Check list for code of ethics and compliance with Sarbanes-Oxley • Links to other codes of ethics by organizational level and type • Maryland Nonprofits: Standards of Excellence http://www.marylandnonprofits.org • Minnesota Council of Nonprofits http://www.mncn.org