Text of Maryland Association’s Guidelines for Ethical Behavior by Charities

Following are the eight “Guiding Principles” and 55 “Standards for Excellence” recently adopted by the Maryland Association of Nonprofit Organizations and distributed to its members.

Guiding Principles

I. Mission and program

Non-profits are founded for the public good and operate to accomplish a stated purpose through specific program activities. A non-profit should have a well-defined mission, and its programs should effectively and efficiently work toward achieving that mission. Non-profits have an obligation to insure program effectiveness and to devote the resources of the organization to achieving its stated purpose.

II. Governing body

Non-profits are governed by an elected, volunteer board of directors which should consist of individuals who are committed to the mission of the organization. An effective non-profit board should determine the mission of the organization, establish management policies and procedures, assure that adequate human resources (volunteer or paid staff) and financial resources (earned income, government contracts and grants, and charitable contributions) are available, and actively monitor the organization’s financial and programmatic performance.

III. Conflict of interest

Non-profit board and staff members should act in the best interest of the organization, rather than in furtherance of personal interests or the interests of third parties. A non-profit should have policies in place, and should routinely and systematically implement those policies, to prevent actual, potential, or perceived conflicts of interest.

IV. Human resources

A non-profit’s relationship to its employees and volunteers is fundamental to its ability to achieve its mission. Volunteers occupy a special place in non-profit organizations, serving in governance, administrative, and programmatic capacities. An organization’s human-resource policies should address both paid employees and volunteers, and should be fair, establish clear expectations, and provide for meaningful and effective performance evaluation.

V. Financial and legal

Non-profits must practice sound financial management and comply with a diverse array of legal and regulatory requirements. A non-profit’s financial system should assure that accurate financial records are kept and that the organization’s financial resources are used in furtherance of the organization’s charitable purposes. Organizations should conduct periodic reviews to address regulatory and liability concerns.

VI. Openness

Non-profits are private corporations which operate for public purposes with public support. As such, they should provide the public with information about their mission, program activities, and finances. A non-profit should also be accessible and responsive to members of the public who express interest in the affairs of the organization.

VII. Fund raising

Charitable fund raising provides an important source of financial support for the work of most non-profit organizations. An organization’s fund-raising program should be maintained on a foundation of truthfulness and responsible stewardship. Its fund-raising practices should be consistent with its mission, compatible with its organizational capacity, and respectful of the interests of donors and prospective donors.

VIII. Public affairs and public policy

Non-profits provide an important vehicle through which individuals organize and work together to improve their communities. Non-profits should represent the interests of the people they serve through public education and public-policy advocacy, as well as by encouraging board members, staff, volunteers, and constituents to participate in the public affairs of the community.

Standards for Excellence

I. Mission and program

A. Mission. (1) The organization’s purpose, as defined and approved by the board of directors, should be formally and specifically stated. The organization’s activities should be consistent with its stated purpose.

B. Organizational evaluation. (1) A non-profit should periodically revisit its mission to determine if the need for its programs continues to exist. The organization should evaluate whether the mission needs to be modified to reflect societal changes, its current programs should be revised or discontinued, or new programs need to be developed.

C. Program evaluation. (1) A non-profit should have defined, cost-effective procedures for eval uating, both qualitatively and quantitatively, its programs and projects in relation to its mission. These procedures should address programmatic efficiency and effectiveness, the relationship of these impacts to the cost of achieving them, and the outcomes for program participants.

(2) Evaluations should be candid, be used to strengthen the effectiveness of the organization and, when necessary, be used to make programmatic changes.

D. Program service. (1) In rendering its programs or services, a non-profit should act with the utmost professionalism and treat persons served with respect. Where appropriate, a non-profit should have policies in place which protect the confidentiality of personal information and should provide a grievance procedure to address complaints. Non-profits should regularly monitor the satisfaction of program participants.

II. Governing body

A. Board responsibilities. (1) The board should engage in ongoing planning activities as necessary to determine the mission of the organization, to define specific goals and objectives related to the mission, and to evaluate the success of the organization’s programs toward achieving the mission. (2) The board should establish policies for the effective management of the organization, including financial and, where applicable, personnel policies.

(3) The board annually should approve the organization’s budget and periodically should assess the organization’s financial performance in relation to the budget. As part of the annual budget process, the board should review the percentages of the organization’s resources spent on program, administration, and fund raising.

(4) The board should hire the executive director, set the executive’s compensation, and evaluate the director’s performance.

(5) The board should periodically review the appropriateness of the overall salary structure of the organization.

B. Board composition. (1) The board should be composed of individuals who are personally committed to the mission of the organization.

(2) Where an employee of the organization is a voting member of the board, the circumstances must insure that the employee will not be in a position to exercise undue influence.

(3) The board should have no fewer than five unrelated directors. Seven or more directors are preferable.

(4) The organization’s bylaws should set forth term limits for the service of board members.

(5) Board membership should reflect the diversity of the communities served by the organization.

(6) Board members should serve without compensation. Board members may be reimbursed for expenses directly related to their board service.

C. Conduct of the board. (1) The board is responsible for its own operations, including the education, training, and development of board members, annual evaluation of its own performance, and, where appropriate, the selection of new board members.

(2) The board should establish stated expectations for board members, including expectations for participation in fund-raising activities, committee service, and program activities.

(3) The board should meet as frequently as is needed to fully and adequately conduct the business of the organization. At a minimum, the board should meet four times a year.

(4) The organization should have written policies which address attendance and participation of board members at board meetings, and which include a process to address non-compliance.

(5) Written meeting minutes reflecting the actions of the board, including reports of board committees when acting in the place of the board, should be maintained and distributed to board and committee members.

III. Conflict of interest

A. Conflict-of-interest policy. (1) Non-profits should have a written conflict-of-interest policy. The policy should be applicable to board members and staff, and volunteers who have significant independent decision-making authority regarding the resources of the organization. The policy should identify the types of conduct or transactions that raise conflict-of-interest concerns, should set forth procedures for disclosure of actual or potential conflicts, and should provide for review of individual transactions by the uninvolved members of the board of directors.

B. Conflict-of-interest statements. (1) Non-profits should provide board members, staff, and volunteers with a conflict-of-interest statement which summarizes the key elements of the organization’s conflict-of-interest policy. The conflict-of-interest statement should provide space for the board member, employee, or volunteer to disclose any known financial interest which the individual, or a member of the individual’s immediate family, has in any business entity which transacts business with the organization. The statement should be provided to and signed by board members, staff, and volunteers both at the time of the individual’s initial affiliation with the organization and at least annually thereafter.

IV. Human resources

A. Personnel policies. (1) A non-profit should have written personnel policies and procedures, approved by the board of directors, governing the work and actions of all employees and volunteers of the organization. In addition to covering basic elements of the employment relationship (e.g., working conditions, employee benefits, vacation and sick leave), the policies should address employee evaluation, grievance procedures, confidentiality of employee, client, and organization records and information, and employee growth and development.

(2) With respect to volunteers, the organization’s policies and procedures should also address initial assessment or screening, assignment to and training for appropriate work responsibilities, ongoing supervision and evaluation, and opportunities for advancement.

B. Employee performance evaluation. (1) Organizations should have a system in place for regular written evaluation of employees by their respective supervisors, which should take place at least annually.

C. Employee orientation. (1) New employees of the organization should receive an orientation, which includes review of the organization’s personnel policies and procedures, and an introduction to the Standards for Excellence. Employees should be provided with a copy of the personnel policies and these Standards, and should acknowledge receipt in writing.

V. Financial and legal

A. Financial accountability. (1) A non-profit should operate in accordance with an annual budget which has been approved by the board of directors.

(2) A non-profit should create and maintain financial reports on a timely basis that accurately reflect the financial activity of the organization.

(3) For non-profits with annual revenue in excess of $300,000, the accuracy of the financial reports should be subject to audit by a certified public accountant.

(4) Internal financial statements should be prepared no less frequently than quarterly, should be provided to the board of directors, and should identify and explain any material variation between actual and budgeted revenues and expenses.

(5) Organizations should provide employees a confidential means to report suspected financial impropriety or misuse of organization resources.

(6) Organizations should have written financial policies governing: (a) investment of the assets of the organization, (b) internal control procedures, (c) purchasing practices, and (d) reserve funds.

B. Legal compliance and accountability. (1) Non-profits must be aware of and comply with all applicable federal, state, and local laws. This may include, but is not limited to, the following activities: complying with laws and regulations related to fund raising, licensing, financial accountability, human resources, lobbying and political advocacy, and taxation.

(2) Organizations should periodically assess the need for insurance coverage in light of the nature and extent of the organization’s activities and its financial capacity. A decision to forgo general liability insurance coverage or directors and officers liability insurance coverage shall only be made by the board of directors and shall be reflected in the minutes for the meeting at which the decision was made.

(3) Non-profits should periodically conduct an internal review of the organization’s compliance with known existing legal, regulatory, and financial reporting requirements and should provide a summary of the results of the review to members of the board of direc tors.

VI. Openness

A. Annual report. (1) Non-profits should prepare, and make available annually to the public, information about the organization’s mission, program activities, and basic financial data. The report should also identify the names of the organization’s board of directors and management staff.

B. Public access. (1) Non-profits should provide members of the public who express an interest in the affairs of the organization with a meaningful opportunity to communicate with an appropriate representative of the organiza tion.

(2) Non-profits should have at least one staff member who is responsible to assure that the organization is complying with both the letter and the spirit of federal and state laws which require disclosure of information to members of the public.

VII. Fund raising

A. Fund-raising activities. (1) A non-profit’s fund-raising costs should be reasonable over time. On average, over a five-year period, a non-profit should realize charitable contributions from fund-raising activities that are at least three times the amount spent on fund raising. Organizations whose fund-raising ratio is less than 3:1 should demonstrate that they are making steady progress toward achieving this goal, or should be able to justify why a 3:1 ratio is not appropriate for the individual organization.

(2) Solicitation and promotional materials should be accurate and truthful and should correctly identify the organization, its mission, and the intended use of the solicited funds.

(3) All statements made by the non-profit in its fund-raising appeals about the use of a contribution should be honored.

(4) Non-profits should honor the known intentions of a donor regarding the use of donated funds.

B. Donor relationships and privacy. (1) Non-profits should respect the privacy of donors and safeguard the confidentiality of information which a donor rea sonably would expect to be pri vate.

(2) Non-profits should provide donors an opportunity to state that they prefer to remain anonymous and that their name, the amount of their gift, or other information not be publicly released.

(3) Non-profits should provide donors an opportunity to have their names removed from any mailing lists which are sold, rented, or exchanged.

(4) Non-profits should honor requests by a donor to curtail repeated mailings or telephone solicitations from in-house lists.

(5) Solicitations should be free from undue influence or excessive pressure, and should be respectful of the needs and interests of the donor or potential donor.

C. Acceptance of gifts. (1) An organization should have policies in place to govern the acceptance and disposition of charitable gifts that are received in the course of its regular fund-raising activities. These policies should include procedures to determine 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.

D. Employment of fund-raising personnel. (1) Fund-raising personnel, including both employees and independent consultants, should not be compensated based on a percentage of the amount raised or other commission formula.

(2) Organizations should only use the services of fund-raising consultants who are registered with the Office of the Secretary of State of Maryland.

(3) Organizations should exercise control over any staff, volunteers, consultants, contractors, other organizations, or businesses who are known to be soliciting contributions on behalf of the organization.

VIII. Public affairs and public policy

A. Public-policy advocacy. (1) Non-profits should have a written policy on advocacy defining the process by which the organization determines positions on specific issues.

B. Public education. (1) Non-profits 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.

C. Promoting public participation. (1) Non-profits engaged in promoting public participation in community affairs shall be diligent in assuring that the activities of the organization are strictly non-partisan.