Study Helps Georgia’s Nonprofits Assess Accountability
by Anya Martin
“Being Accountable: Ethical Practices of Georgia Nonprofits,” a new study on ethical practices by the Georgia Center for Nonprofits (the Center), finds that nonprofit organizations (NPOs) within the state largely meet standards of accountability but there’s also plenty of room for improvement.
Why now
The Center conducted the study in response to increased public scrutiny of governance practices of publicly traded companies and the nonprofit industry, from Enron to the American Red Cross, said Karen Beavor, the Center’s president and CEO.
Congress and state legislatures are considering whether to compel nonprofits to adopt financial and organizational accountability guidelines similar to the 2002 American Competitiveness and Corporate Accountability Act (Sarbanes-Oxley). In response, many nonprofits nationwide are voluntarily adopting accountability guidelines like the Center’s Standards for Excellence.
“This study seeks not only to discuss what common national standards are, but also to benchmark where nonprofits are performing well and where there are areas for improvement,” she added. “Nonprofits can use this study to get a deeper understanding of best practices and assess where they compared to their peers.”
Results can help set the tone and content of such debates, help nonprofits voluntarily adopt standards, and ensure that any laws benefit rather than hamper the activities of nonprofits, Beavor said.
“If we do not have a clear understanding of what the sector currently does and how it currently performs in this area, it is hard to take part in conversations that could eventually guide policy governing nonprofit practice,” she added.
Key findings
The study had two goals: to inform Georgia’s nonprofits of pressing issues pertaining to nonprofit governance and to assess their ethical practices.
The survey instrument was created by researchers at Brandeis University, and leaders of 482 nonprofit organizations across the state participated. Questions covered mission and programs, governing body, conflicts of interests, human resources, financial management and legal requirements, openness, fund raising and public affairs and policy.
More than 76 percent of Georgia’s nonprofit leaders stated that they feel Georgia’s nonprofit sector would benefit by adopting and publicizing a standard set of ethical practices.
In addition, 71 percent said that this act would improve the image of the nonprofit sector; 52 percent believed it could increase giving; and 49 percent felt it could impact volunteerism.
While only 14.5 percent knew specifically about the Center’s Standards, Georgia’s nonprofits are largely practicing the recommendations therein.
Of Georgia’s nonprofits, 97 percent have a written mission statement and most have revised their mission within the last eight years.
A healthy 88 percent have their financial reports annually audited by a certified public accountant.
Annual reports, including financial data and/or yearly audit, are published by 77 percent, indicating that Georgia’s nonprofits overall meet a key criteria for openness.
They also score high on issues of donor privacy.
Still, some groups could improve their accountability practices.
More than half of Georgia’s nonprofits have some or all services in place with no programmatic evaluation.
Two-thirds of Georgia’s nonprofits limit terms of board participation, while one-third does not. Of the nonprofits who do impose term limits, nearly half reported a standard term limit to be three years. Forty-eight percent reported either no or low involvement when it comes to enforcing written conflict of interest policies for board members.
While a majority of nonprofits maintain written financial policies, a substantial number do not, and only 64 percent prepare internal financial statements at least quarterly.
And 41 percent do not regularly publish financial statements, a fact that could lead —and already has led—to questions of honesty in operations.
These findings suggest that Georgia’s nonprofits have conflicting notions of what makes a nonprofit “accountable” and support the value that a code of standards could provide to nonprofits, Beavor said
What nonprofits can do
While most of Georgia’s nonprofits are safeguarding their governance practices to ensure ethical and accountable behavior, the study suggests the following checklist for evaluations:
Are programmatic activities being reviewed?
Are specifications for board responsibilities, conduct and activities carefully outlined for board members?
Does an organization have whistleblower protections?
Does an organization have written personnel policies, and are employees aware of them?
Are the organization’s financial and legal operations in compliance with local, state and federal law?
Is the organization open, i.e., does it disseminate information to the public concerning governance compliance?
The Center plans to use the study to help hone its programs to help nonprofits improve their accountability and ethics practices, Beavor said.
Her first advice to nonprofits is to “become aware of the Standards For Excellence and follow the checklist to ensure that policies and practices are made routine.”
“Talk to the board about the issue and appoint a task force of the board to review Standards and measure compliance,” she added. “This is a perfect activity for the board.”
Other tools offered by the Center include an organizational assessment product that, for an extremely low cost, reviews compliance with the Standards and makes specific recommendations for improvement; classroom and online training; and educational packets and solution sets that address a number of topics.
To read a complete copy of the report, as well as find out more about how the Center can help nonprofits with assessing and developing ethics standards, please login at www.gcn.org. Click on Services then Research then Research Reports.