The Importance of Ethics, Accountability and Transparency in Nonprofits

By QuickBooks Canada Team

4 min read

Your Canadian nonprofit organization depends on donor funding, which makes ethics, accountability and transparency extremely important to keeping your mission going. Your organization can demonstrate its commitment by tying your ethical code to your brand and putting internal controls in place to ensure that each member of your team follows best practices for nonprofits. Keep these vital elements in mind when starting up a new nonprofit or reorganizing an old one.

Develop and Follow an Ethical Code Regarding Donations

Gain public confidence by developing an ethical code and sticking to it. You must keep your communications honest and accurate, especially when you’re raising funds. Small elements can make a big difference, including keeping donor information private and getting permission before using photographs of people in your promotional materials. Provide timely reports to any foundations and government funding sources that provide money to your organization, and respect restrictions donors may put on their gifts. Acknowledge donors’ gifts quickly If donors don’t rule out public acknowledgment, showcase their contributions on your website or in your mailings, but if they want privacy, respect their anonymity. You can also adopt a donor’s bill of rights that clearly lays out your non-profit’s commitment and responsibility to donors.

Other elements to consider when developing an ethical code regarding donations include following all generally accepted accounting standards. In addition, you should clearly show how much of each donated dollar goes to your mission and how much goes toward overhead costs.

Evaluate Outcomes Honestly and Transparently

To keep donors interested in your mission, keep them informed as to how well your organization does at fulfilling its goals. Whether you’re helping troubled individuals, creating community groups to address specific issues, or supporting animals in need, seek and use feedback to evaluate your nonprofit’s performance and effectiveness. By showcasing what your nonprofit does well and admitting when it needs work, you provide donors with a candid look at how their donations make a positive difference to your mission. You can do this with direct newsletter mailings and emails to your donor base as well as with press releases in local resources that help your organization build public confidence. Podcasts and YouTube videos highlighting fundraising events as they happen along with follow-ups showing how those funds were spent also go a long way in keeping donors in the know while building your brand’s social reputation.

Maintain Records Carefully

Combine honest outcome evaluation with financial transparency to show donors exactly how your organization handles the funding they provide. To operate a registered charity in Canada, you must keep careful books and records that allow the Canada Revenue Agency (CRA) to verify your revenues, expenses, and charitable mission. Track all charitable donations received, show how you spend those funds, and keep governing documents together, including your incorporation documents, constitution and trust documents, financial statements and bank statements, and payroll records. Other important information to keep on hand includes your annual Form T3010 Registered Charity Information Returns, contracts and agreements, annual reports, and any other records connected to your financial solvency. Storing promotional materials, source documents such as invoices, work and purchase orders, bank deposit slips, and fundraising materials with this information makes it simple to handle requests for donor and government reviews.

Create Clear Policies

Create clear polices that cover any situation in which a conflict of interest might arise, and have a plan in place for public disclosure in such cases. Set rules that govern your board members and directors to ensure they stand down when voting on issues where they might experience financial gain, and be sure they don’t pressure other individuals or companies for donations.

When selecting volunteers for your non-profit, make sure they’re familiar with your charity’s best practices since they, along with board members, serve as ambassadors for your brand. You have responsibilities toward these workers as well as to paid staff, so put policies in place that respect their limits and provide clear-cut duties that fit their particular skill sets.

Create policies for accepting gifts and donations. These policies should clarify the amount of control donors have over the use of their funding, the types of gifts your organization accepts, and situations in which you can’t accept donations due to potential conflicts or inappropriate motivations. Stay aware of what’s going on within your organization by setting policies for whistleblowers that allow both paid and volunteer workers to approach you free from fears of retribution in any instance in which staff has failed to meet your nonprofit’s ethical standards. By putting these policies into place, you help insulate your nonprofit against potential ethical quandaries and foster a environment of accountability.

While running a nonprofit can prove challenging due to all the required record-keeping and need to raise funds, it can also prove extremely rewarding. Operating your charity with ethical awareness, accountability and transparency keeps your mission moving forward seamlessly while highlighting your brand and boosting its social reputation. Ethical transparency also keeps you on the good side of the Canadian government, as well as your donors and staff, and it lets you stay focused on your mission, so you can help more people.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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