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How to codify your nonprofit’s ethics

August 10, 2020

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Does your not-for-profit have a code of ethical conduct? According to the Association of Certified Fraud Examiners, establishing and enforcing an ethical code is associated with 50% lower fraud losses. Codes of conduct aren’t just about fraud prevention, though. Holding staffers and board members to an ethical code helps your nonprofit communicate its values to the public and reassures supporters.

Practicing ideals

Your organization probably already has a mission statement that explains its values and goals. So why would you also need a code of ethics? Think of it as a statement about how you practice ideals. A code not only guides your organization’s day-to-day operations but also your employees’ and board members’ conduct.

The first step in creating a code is determining your values. To that end, review your strategic plan and mission statement to identify the ideals specific to your organization. Then look at peer nonprofits to see which values you share, such as fairness, justice and commitment to the community. Also consider ethical and successful behaviors in your industry. For example, if your staff must be licensed, you may want to incorporate those requirements into your written code.

Documenting expectations

Now you’re ready to document your expectations and the related policies for your staff and board members. Most nonprofits should address such general areas as mission, governance, legal compliance and conflicts of interest.

But depending on the type and size of your organization, also consider addressing the responsible stewardship of funds; openness and disclosure; inclusiveness and diversity; program evaluation; and professional integrity. For each topic, discuss how your nonprofit will abide by the law, be accountable to the public and responsibly handle resources.

Communicating the code

When the code of ethics is final, your board must formally approve it. To implement and communicate it to staffers, present hypothetical examples of situations that they might encounter. For example, what should an employee do if a board member exerts pressure to use his or her company as a vendor? Also address real-life scenarios and how your organization handled them.

To help ensure accountability, ask staffers and board members to sign the code of ethical conduct. Instruct them to report any suspicions or concerns to a supervisor or HR or via a confidential reporting mechanism, such as a fraud hotline.

Contact us with questions or if you need assistance to create an ethical culture.

© 2020

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a Clark Schaefer Hackett professional. Clark Schaefer Hackett will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.

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