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Nonprofits and the Public Trust: No Excuses

Periodically, social media is ablaze with comments from nonprofit leaders bemoaning the fact that their organizations are too small to keep up with a seemingly overwhelming amount of professional and regulatory standards. While one may hear less outright complaining from big nonprofits when they turn a blind eye to the importance of standards, ethics, and the public trust, chances are we'll be reading about their transgressions in the headlines.

Whether nonprofits flaunt the public trust due to ignorance or by design, the performance expectation for all nonprofits -- no matter their size, discipline, or resources -- is grounded in the fact they have been incorporated to perform a public service. They have entered into a relationship with the public that fulfills a need for which they receive benefits in return. Chief among these benefits is tax exemption for mission-related activities and the opportunity for donors to make tax-deductible contributions. When a nonprofit honors its accountability to its mission, its donors and regulators, and to the law, it is fulling its public benefit responsibilities. As Sara Tangdall writes, "As a result, members of the general public place a great deal of trust in nonprofit organizations and often hold them to a higher standard than for-profit organizations."

But when a nonprofit fails in these responsibilities it risks the loss of the public's trust, resulting in the loss of its reputation and effectiveness, donor giving and, in the most dire of circumstances, the loss of its legal incorporation. Writes Dan Cardinali, "The voluntary role of board members of nonprofits does not excuse insufficient oversight." The alarming fact is that many nonprofits skate terribly close to thin ice on a regular basis when it comes to accountability.
Besides promoting and following ethical principles, all of us who work at nonprofits should call out organizations when their boards and other leaders fall short of accepted standards of transparency and oversight.[1]
Holding up one's end of the public trust relationship is the cost of doing business as a nonprofit. There are no excuses for any nonprofit not doing what it says it will do in its mission. And for nonprofits that own property, care for important collections placed in the public trust, employ staff, deliver services and any of the hundred other benefits they provide, there is heightened scrutiny to do so according to legal and regulatory requirements, and accepted best practice. Why would any nonprofit choose to do otherwise?

Meeting the public's needs through nonprofit service is a choice. Whether it's forming a nonprofit corporation, governing an existing nonprofit, or working or volunteering for a nonprofit, preserving the public's trust in your organization's work is paramount. Closing the knowledge gap by gaining proficiency in the work of your nonprofit and learning about the public trust and its attendant legal and ethical expectations are all part of running a trustworthy organization. Nonprofit accountability requires an ongoing organizational commitment, which can include time for ongoing learning and funds to take advantage of professional development opportunities. I repeat: these are the costs of doing business as a nonprofit.

If a nonprofit can't or won't do that, should it survive?

[1] Dan Cardinali, "How Nonprofits and Government Can Work Together to Restore Public Trust," The Chronicle of Philanthropy, December 13, 2018.

Dan Cardinali, "How Nonprofits and Government Can Work Together to Restore Public Trust," The Chronicle of Philanthropy, December 13, 2018.

Karen Gano, "Regulators and Nonprofits – Working Together to Protect the Public Trust," National Council of Nonprofits, January 23, 2019.

Image: McDermott + Bull, Inc.


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