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Standards for Excellence
Code
 STANDARDS
FOR EXCELLENCE
An Ethics and
Accountability Code for the Nonprofit Sector
7th
Edition, October 2009
ã1998-2009 Maryland Association of
Nonprofit Organizations dba Standards for Excellence Institute, offered
under licensing agreement through the Pennsylvania Association off Nonprofit
Organizations. No part of these materials may be reproduced or transmitted
in any form, or by any means, electronic or mechanical, including
photocopying, recording, or by any other information storage retrieval
system without written permission of the Standards for Excellence Institute
of the Maryland Association of Nonprofit Organizations or the Pennsylvania
Association of Nonprofit Organizations. Organizations in Pennsylvania
should contact the Pennsylvania Association of Nonprofit Organizations at
777 East Park Drive, Suite 300, Harrisburg, 17111-2738, 717-236-8584,
www.pano.org. Other organizations should contact the Standards
for Excellence Institute at 190 West Ostend Street, Suite 201, Baltimore,
MD 21230, phone: 410-727-1726,
www.standardsforexcellenceinstitute.org.
PREAMBLE
Pennsylvania’s nonprofit sector is committed to public service. Hard at
work in communities across the state, nonprofit organizations are serving
and meeting the needs of our citizens and strengthening our communities.
The success
of Pennsylvania’s nonprofit organizations depends on public confidence and
broad public support. Pennsylvania’s nonprofits are supported by
individuals, corporations and foundations through charitable contributions
and volunteer effort; by government through contracts and grants; by
consumers through purchases and fees; and by the general public through
state and federal tax laws.
The
Pennsylvania Association of Nonprofit Organization’s (PANO) is the statewide
membership organization, serving and advancing the charitable nonprofit
sector through leadership, advocacy, programs and services in order to
improve the quality of life in Pennsylvania. PANO is committed to
bolstering public confidence and support for the nonprofit sector.
Therefore, PANO has adopted adopting these Standards for Excellence
(Standards) to promote ethical practices and accountability in
nonprofit organizations across the state.
Nonprofit
organizations must comply with applicable local, state and federal laws.
These Standards build on that foundation and go a step further.
Based on fundamental values – such as honesty, integrity, fairness, respect,
trust, responsibility and accountability – these Standards describe
how nonprofits should act to be ethical and accountable in their program
operations, governance, human resources, financial management and
fundraising. Eight (8) Guiding Principles are provided, along with
fifty-five (55) Standards – more detailed performance benchmarks
which will enable nonprofits to strengthen their operations.
PANO is
committed to these Standards, and all PANO members are encouraged to
pledge their commitment to the Guiding Principles. Members are
supported in their efforts to implement the Standards through
training and technical assistance provided by PANO, as well as through a
voluntary self-regulatory program by
which organizations are evaluated based on their compliance with the
performance indicators. In addition, PANO invites
non-members to subscribe to these Standards.
The
Standards for Excellence are intended to describe how the most well
managed and responsibly governed organizations should, and do, operate.
They provide benchmarks to determine how well an organization is fulfilling
its obligations to those who benefit from its programs, to contributors, and
to the public.
I. MISSION AND PROGRAM
Charitable nonprofits are founded for the public good and operate to
accomplish a stated purpose through specific program activities. A
charitable nonprofit should have a well-defined mission, and its programs
should effectively and efficiently work toward achieving that mission.
Charitable nonprofits have an obligation to ensure program effectiveness and
to devote the resources of the organization to achieving its stated
purpose.
II. GOVERNING BODY
Charitable nonprofits 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 charitable nonprofit 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
Charitable nonprofit board and staff members shall act in the best
interest of the organization, rather than in the furtherance of personal
interests or the interests of third parties. A charitable nonprofit 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 charitable nonprofit’s relationship to its employees and volunteers is
fundamental to its ability to achieve its mission. Volunteers occupy a
special place in charitable nonprofit 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
Charitable nonprofits must practice sound financial management and comply
with a diverse array of legal and regulatory requirements. A charitable
nonprofit’s financial system shall assure that accurate financial
records are kept and that the organization’s financial resources are used in
the furtherance of the organization’s charitable purposes. Organizations
should conduct periodic reviews to address regulatory and liability
concerns.
VI. OPENNESS
Charitable nonprofits 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
charitable nonprofit should also be accessible and responsive to members of
the public who express interest in the affairs of the organization.
VII. FUNDRAISING
Charitable
fundraising provides an important source of financial support for the work
of most charitable nonprofit organizations. An organization’s fundraising
program shall be maintained on a foundation of truthfulness and
responsible stewardship. Its fundraising policies 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
Charitable
nonprofits provide an important vehicle through which individuals organize
and work together to improve their communities. Charitable
nonprofits 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.
I.
MISSION AND
PROGRAM
Charitable
nonprofits are founded for the public good and operate to accomplish a
stated purpose through specific program activities. A charitable nonprofit
should have a well-defined mission, and its programs should effectively and
efficiently work toward achieving
that mission. Charitable nonprofits have an obligation to ensure program
effectiveness and to devote the resources of the organization to achieving
its stated purpose.
A. Mission
(1) A
charitable nonprofit should have a formal mission statement that defines the
organization’s purpose and is approved by the board of directors. The
organization’s activities should be consistent with the mission.
B. Organizational Evaluation
(1) A
charitable
nonprofit should periodically revisit its mission
(e.g.,
every 3 to 5 years)
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, whether its current programs should be revised or
discontinued
or whether new programs need to be developed.
C. Program Evaluation
(1) A charitable nonprofit should have defined,
cost-effective procedures for evaluating, 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. Evaluations should include input from 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
charitable nonprofit should act with the utmost professionalism and treat
persons served with respect. Where appropriate, a charitable nonprofit
should have policies in place, which protect the confidentiality of
personal information and should provide a grievance procedure to address
complaints. Charitable nonprofits should regularly monitor the satisfaction
of program participants.
II. GOVERNING
BODY
Charitable
nonprofits 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 charitable
nonprofit 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.
A. Board Responsibilities
(1) The board should engage in ongoing planning
activities 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 fundraising.
The full board should also approve the findings of the organization’s annual
audit and management letter and plan to implement the recommendations of the
management letter.
(4) The full board or some designated committee of the board shall hire the
executive director, set the executive’s compensation, evaluate the
director’s performance, and have input into setting the executive director’s
goals at least annually. In cases where a designated committee performs this
responsibility, details should be reported to the full board.
(5) The board should
periodically review the appropriateness of the overall compensation
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 and possess the specific skills needed to
accomplish the mission.
(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 (5) unrelated directors. Seven (7) or more directors are
preferable.
(4) The
organization’s
bylaws should define
specific terms of service for board members.
(5) Board
membership should reflect
the diversity of the communities served by the organization.
(6) Board
members
should serve without compensation for their services as board members.
Board members may be reimbursed only for expenses directly related to to
carrying out 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, periodic (i.e., at least every two years) evaluation
of its own performance and, where appropriate, the selection of new board
members. New board members should receive an introduction to the
Standards for Excellence.
(2) The
board should have a rigorous development process that outlines clear
performance expectations for board members and ensures accountability for
performance. To ensure that the board remains vital and that it represents
the constituencies necessary to make it most effective, the board should
establish
mechanisms for recruitment of new
members, terms of service, and succession planning, which could include
limitation of the number of consecutive terms a
board member may serve.
(3) The
board should establish
stated expectations for board members, including expectations for
participation in fundraising activities, committee service and program
activities.
(4) 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.
(5) The
organization should have written policies which address attendance and
participation of board members at board meetings. These policies should
include
a process to address noncompliance.
(6)
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
Charitable
nonprofit board and staff members
shall
act in
the best interest of the organization, rather than in the furtherance of
personal interests or the interests of third parties. A charitable
nonprofit should have policies in place and should
routinely and systematically implement those policies to prevent actual,
potential, or perceived conflicts of interest.
A. Conflict of Interest Policy
(1)
Charitable
nonprofits should have a written conflict of interest policy. The policy
should be applicable to board members, 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)
Charitable
nonprofits should provide board members, staff, volunteers and others who
have significant independent decision-making authority 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
charitable nonprofit’s relationship to its employees and volunteers is
fundamental to its ability to achieve its mission. Volunteers occupy a
special place in charitable nonprofit 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.
A. Personnel Policies
(1) A
charitable
nonprofit 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,
supervision, hiring and firing, grievance procedures, employee growth and
development, confidentiality of employee and client and organization records
and information. A charitable nonprofit should periodically review its
personnel policies.
(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 a review of the organization’s
personnel policies and procedures, position description 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
Charitable
nonprofits must practice sound financial management and comply with a
diverse array of legal and regulatory requirements. A charitable
nonprofit’s financial
system shall assure that accurate financial records are kept and that the
organization’s financial resources are used in the furtherance of the
organization’s charitable purposes. Organizations should conduct
periodic reviews to address regulatory and liability concerns.
A. Financial Accountability
(1) A
charitable
nonprofit should operate
in accordance with an annual budget which has been approved by the board of
directors.
(2) A
charitable
nonprofit should create and maintain financial reports on a timely basis
that accurately reflect the financial activity of the organization. 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.
(3) Charitable nonprofits reporting total annual revenues in excess of
$500,000 should be subject to an audit by an independent Certified Public
Accountant. Organizations reporting total annual revenues in excess of
$300,000 should be subject to a review of financial statements by an
independent Certified Public Accountant. Organizations reporting total
annual revenues in excess of $100,000 should have a compilation of financial
statements prepared by an independent Certified Public Accountant.
(4)
Organizations should provide employees, board members and volunteers a
confidential means to report suspected financial impropriety or misuse of
organization resources and should have in place a policy prohibiting
retaliation against persons reporting improprieties.
(5)
Organizations should
have written financial policies adequate for the size and complexity of
their operations governing: (a) investment of the assets of the
organization, (b) internal control procedures, (c) purchasing practices and
(d) reserve funds. A charitable nonprofit should periodically review its
financial policies.
B. Legal Compliance and Accountability
(1)
Charitable nonprofits 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
fundraising, licensing, financial
accountability, document retention and destruction, 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
forego 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)
Charitable
nonprofits 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 directors.
VI. OPENNESS
Charitable
nonprofits 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 charitable nonprofit should also
be accessible and responsive to members of the public who express interest
in the affairs of the organization.
A. Annual Report
(1)
Charitable nonprofits should prepare, and make available annually to the
public, information about the organization’s mission, program activities and
basic audited (if applicable) financial data. Basic financial
data should, at a minimum, include a summary statement of activities and a
summary statement of financial position.
The report should also identify the names of the organization’s board of
directors and management staff.
B. Public Access
(1)
Charitable
nonprofits 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 organization.
(2)
Charitable
nonprofits 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.
FUNDRAISING
Charitable
fundraising provides an important source of financial support for the work
of most charitable nonprofit organizations. An organization’s fundraising
program shall be maintained on a foundation of truthfulness and responsible
stewardship. Its fundraising policies should be consistent with its
mission, compatible with its organizational capacity and respectful of the
interests of donors and prospective donors.
A. Fundraising Activities
(1) A
charitable
nonprofit’s fundraising costs should be reasonable over time. On
average, over a five year period, a nonprofit should realize revenue from
fundraising and other development activities that are at least three times
the amount spent on conducting them.
Organizations whose fundraising 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 shall 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 charitable nonprofit in its fundraising appeals about
the use of a
contribution should be
honored.
(4)
Charitable
nonprofits should honor
the known intentions of a donor regarding the use of donated funds.
B. Donor Relationships and Privacy
(1)
Charitable
nonprofits should respect
the privacy of donors and safeguard the confidentiality of information,
which a donor reasonably would expect to be private.
(2)
Charitable
nonprofits should provide
donors with an opportunity to state that they prefer to remain anonymous and
that their name, the amount of their gift, or other information would not be
publicly released.
(3)
Charitable
nonprofits should provide
donors an opportunity to have their names removed from any mailing lists
which are sold, rented or exchanged.
(4)
Charitable
nonprofits 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 fundraising 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
Fundraisers
(1)
Fundraising personnel, including both employees and independent
consultants, should not
be compensated based on a percentage of the amount raised or other
commission formula.
(2)
When using the services of paid fundraising professionals, organizations
must only use the services of professional solicitors and professional
fundraising counsel that are properly registered with the Bureau of
Charitable Organizations
of the Commonwealth of Pennsylvania.
(3)
Organizations must
exercise control
over any staff, volunteers, consultants, contractors, other organizations,
or businesses that are known to be soliciting contributions on behalf of the
organization.
VIII. PUBLIC
AFFAIRS AND PUBLIC POLICY
Charitable
nonprofits provide an important vehicle through which individuals organize
and work together to improve their communities. Charitable
nonprofits 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.
A. Public Policy Advocacy
(1)
Charitable
nonprofits should have a written
policy on advocacy defining the process by which the organization determines
positions on specific issues.
B. Public Education
(1)
Charitable nonprofits should ensure 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)
Charitable nonprofits engaged in promoting public participation in community
affairs
must
be
diligent in assuring that the activities of the organization are strictly
nonpartisan.
Amended: September 2004
June 2007
September 2009
Special thanks to the following for their
endorsement of the Standards for Excellence Program in PA
BENEFACTOR
The Huston Foundation
www.hustonfoundation.org
Sponsor
Mutual of America
www.mutualofamerica.com
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