Ethics Audit - Tim Delany

Association of Fundraising Professionals
Audioconference 2003
Ethical Leadership in Nonprofit

Organizations:
How to Conduct an Ethics Audit
Presented by:
Tim Delaney, JD/MPA
Virtual Seminar
Wednesday, May 21, 2003

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AUDIOCONFERENCE 2003
May 21, 2003 (KRM Code: FRE 7230-0)
Tim Delaney, CFRE
Ethical Leadership in Nonprofit Organizations: How to Conduct an Ethics Audit
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Biographical Information Regarding
Tim Delaney, JD/MPA
Tim Delaney, Founder and President of The Center for Leadership, Ethics & Public Service,
graduated from Yale and then earned joint advanced degrees in law and public affairs from the
University of Texas. In 1983 Tim moved to Phoenix to join a large multi-state law firm, where he
represented clients such as Citibank, IBM, and numerous media entities and helped prosecute the
impeachment of Arizona’s Governor. In 1995 he was appointed to serve as Solicitor General of
Arizona. Tim helped Arizona win four cases in the U.S. Supreme Court before being promoted to be
Chief Deputy Attorney General. As Chief Deputy, he served as executive officer for legal operations
and administrative matters for the state’s largest law firm.
In 2001 Tim left the Attorney General’s Office to pursue his dream of creating a nonprofit
public benefit organization, The Center for Leadership, Ethics, and Public Service. The Center strives
to enhance the capacities of individuals and organizations to serve, strengthen, and transform their
communities. In just over two years, the Center has worked with more than 6,900 people from more
than 30 states. Representative clients in the government sector include the Arizona Senate, the
Attorney General Offices of Arizona, California, Delaware, Hawaii, Missouri, Oregon, Utah, and
Wyoming, the Commission on Judicial Conduct, the League of Arizona Cities & Towns, and the U.S.
Military Academy. Those served in the nonprofit sector include the American Red Cross, the Arizona
Community Foundation, the Association of Fundraising Professionals, CityCares, Girl Scouts, the
Kansas Health Foundation, Make A Difference, and Southwest Valley Citizens Academy.
A past president of both Valley Leadership and the Valley Citizens League, Tim now serves as
the International Leadership Association’s Co-Convener on Public Service, writes an ethics column for
The Business Journal, and teaches classes on “Leadership & Ethics in the Nonprofit Sector” and “How
to Start a Nonprofit Organization” as an adjunct faculty member at ASU’s School of Public Affairs and
Nonprofit Management Institute.
Numerous organizations have formally recognized Tim’s community and professional
contributions, including the National Association of Attorneys General (Marvin Award for leadership
and service, and Best Brief Award for legal writing), National Association of Community Leadership
(Distinguished Leadership Award), LBJ School of Public Affairs (Distinguished Public Service
Award—1998 alumnus of the year), ASU’s College of Extended Education (2003 Outstanding Faculty
Member Award), Make a Difference (2002 Hearts & Hands Community Leadership Award), and the
City of Phoenix (dedicated The Delaney Family Playground “to honor Tim Delaney’s eight years of
public service as a member and Chairman of the Parks & Recreation Board”).
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Ethical Leadership in Nonprofit Organizations:
Tim Delaney, JD/MPA

Founder and President
The Center for Leadership, Ethics, and Public Service
C4LEAPS@aol.com
Agenda
I. THE CONTEXT
A. Why?
1. Why is the issue of ethical leadership important to the nonprofit sector?
2. Why is the topic of ethics audits important to AFP members?
B. What?
1. What definitions are we using?
2. What is an “ethics audit”?
II. THE MECHANICS

A. How is an ethics audit conducted (overview)?
B. How is an ethics audit conducted (detail)?
1. Societal (legal) audit?
2. Internal (organizational) audit?
3. External (‘relational’) audit?
III. ANCILLARY ISSUES

A. Who?
1. Who should suggest that an ethics audit be conducted?
2. Who should conduct the ethics audit?
3. Who should assist with the ethics audit?
B. When should an ethics audit be conducted?
C. Where?
1. Where can nonprofits turn for assistance?
2. Where can further information be found?
Copyright © 2003 Tim Delaney

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I. THE CONTEXT
A. Why?
1. Why is the issue of ethical leadership of heightened importance to the nonprofit sector?
a. Earning and protecting “public trust”
“Public trust is the most important asset of the nonprofit and philanthropic community….
Donors give to and volunteers get involved with charitable organizations because they trust
them to carry out their missions, to be good stewards of their resources, and to act according to
the highest ethical standards.” INDEPENDENT SECTOR.
b. Recent scandals in and negative stories about the nonprofit sector undermine public trust
“[Public] trust can be gradually undermined by instances of fiscal irresponsibility,
mismanagement, wastefulness, and fraud within the sector…. [Indeed,] illegal actions by a tiny
number of organizations … could poison the well of public good will toward all not-for-profit
organizations.” Joel Fleishman, “Public Trust in Not-for-Profit Organizations and the Need for
Regulatory Reform,” in Philanthropy and the Nonprofit Sector, Clotfelter & Ehrlich, eds. (1999).
c. The modern Hydra monster that nonprofits face
Nonprofits face a new evil Hydra monster – including increased demands for services,
seemingly decreasing resources, and increased competition for those limited resources – that
intensifies pressure to cut corners in the short run that can be devastating in the long run.
d. Increased scrutiny with potentially increased regulation, oversight, and costs:
¾ Legislators: Congress enacted the Sarbanes-Oxley Act, which requires publicly-traded
companies to – among other things – disclose whether they have adopted a codes of ethics
(and if not, why not). While not directly applicable to nonprofits, many predict that the
effective requirement of having a code of ethics will migrate quickly to nonprofits.
¾ Regulators: “The New York State Attorney General said he will propose legislation that
calls for nonprofit chief executive officers to certify financial reports and the adequacy of
internal controls at the organization … and demonstrate the independence of audit
committees that certify financial statements…. The proposed legislation would affect New
York State registered nonprofits with annual revenue of at least $250,000, but could have
repercussions across the nation…. ‘We collectively need to ratchet up the intensity of our
participation and examination of these organizations, or else we won’t be in the position to
restore the confidence of the American public,’ [Attorney General] Spitzer said.…. [But] a
CPA … said Spitzer’s plan will hurt small nonprofits….[because] fees for such audits
would range from $7,000 to $10,000 [which amounts to] between 2.8 and 4 percent of
income for an organization with $250,000 in revenue.” Jeff Jones, “Nonprofits Under Siege
from State AGs,” The Nonprofit Times (March 1, 2003).
¾ U.S. Supreme Court: The Court has issued a decision about nonprofit fundraising,
Madigan v. Telemarketing Associates, that could be misinterpreted by the media and spun
in a negative light that hurts all nonprofits.
¾ Funders: Many contributors have been looking for more assurances that their funds are
being used appropriately. “Donors to nonprofit organizations are keeping closer tabs on
how those organizations spend their contributions, with some donors even taking back gifts
when they feel their intentions haven’t been honored, the New York Times reports.”
Philanthropy News Digest (The Foundation Center April 1, 2003).
Bottom-line: AFP members need to recognize that maintaining public trust is a survival
issue for their organizations and the nonprofit sector as a whole.
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2. Why is the topic of ethics audits important to AFP members?
a. Because it is the right thing to do.
¾ “All organizations undergo a metamorphosis over time that calls for periodic review, fine-
tuning, and sometimes major overhaul of their governance structures. Organizational
performance, like human performance, is cyclical in effectiveness and in need of renewal as
it evolves over time.” Richard Ingram, in Ten Basic Responsibilities of Nonprofit Boards.
¾ Conducting an ethics audit “will make the business articulate its ethical priorities; it will
make the business aware of its successes and shortcomings; and it will allow feedback and
continuous improvement.” Elizabeth Vallance, in Business Ethics at Work.
b. Because it is the smart thing to do.
Why is it “smart”? Because an ethics audit is one means by which to fulfill your obligations to
the AFP Code of Ethical Principles and Standards of Professional Practice!
¾ “The Association of Fundraising Professionals (AFP) exists to … preserve and enhance philanthropy
and volunteerism.”
¾ “Members of AFP… serve the ideal of philanthropy; are committed to the preservation and
enhancement of volunteerism; and hold stewardship of those concepts as the overriding principle of
their professional life.”
¾ “AFP members aspire to:
o “practice their profession with integrity, honesty, truthfulness and adherence to the absolute
obligation to safeguard the public trust;
o “act according to the highest standards and visions of their organization, profession, and
conscience; …
o “inspire others through their own sense of dedication and high purpose; …
o “adhere to the spirit as well as the letter of all applicable laws and regulations;
o “advocate within their organizations, adherence to all applicable laws and regulations;
o “avoid even the appearance of any criminal offense or professional misconduct; …
o “encourage colleagues to embrace and practice these ethical principles and standards of
professional practice”
¾ Standard No. 1: “Members shall not engage in activities that harm the members’ organization,
clients, or profession.”
¾ Standard No. 2: “Members shall not engage in activities that conflict with their fiduciary,
ethical, and legal obligations to their organizations and their clients.”
¾ Standard No. 3: “Members shall effectively disclose all potential and actual conflicts of
interest; such disclosure does not preclude or imply ethical impropriety.”
¾ Standard No. 4: “Members shall not exploit any relationship with a donor, prospect,
volunteer, or employee for the benefit of the member or the member’s
organization.”
¾ Standard No. 5: “Members shall comply with all applicable local, state, provincial,
federal, civil and criminal laws.” … and more…
c. Because it is a survival issue.
Nonprofits depend heavily on positive public trust. When that trust erodes, it makes it more
difficult for nonprofit organizations to do their important work … and it makes it more difficult
for AFP members to raise the funds for those nonprofits to fulfill their missions. An ethics
audit can serve as a template or roadmap to guide nonprofits to better protect the public’s trust.
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B. What?
1. What definitions are we using?
a. “Ethics”
Webster’s provides the following definition for the term ‘ethics’:
“the discipline dealing with what is good and bad and with moral duty and
obligations; a set of moral principles and values; a theory or system of moral
values; the principles of conduct governing an individual or group”
The underscored part, loosely translated, means “knowing the rules of the game.”
In the nonprofit sector, people have been using another ‘ethics’ related word --
“accountability” -- with great frequency (perhaps because of the public trust issue).
b. “Audit” = “a methodological examination and review” – Webster’s
c. Terminology of “ethics audits”
One significant challenge involves terminology. While most people are familiar with
traditional “financial audits” to review an organization’s financial health, few are
familiar with “ethics audits.” Unfortunately, because it is an unfamiliar term, many
people may assume (incorrectly) that an organization conducting an ‘ethics audit’ has a
problem with ethics. Accordingly, organizations may prefer to use alternative
terminology until the concept of a proactive ethics audit becomes more common.
Alternative terms include the following:
• Accountability assessment
• Accountability audit
• Accountability review
• Ethics assessment
• Ethics review
• Fiduciary responsibility review
• Organizational audit
• Organizational review
• Public trust assessment
• Public trust accountability review
• Public trust organizational review
Bottom-line: Consider whether your nonprofit has completely earned the right to the
public’s trust. Sure, the nonprofit involves a noble cause, but does the nonprofit
have a code of ethics? A conflict of interests policy? A meaningful orientation
and training program? A system to assist with ethical decision-making?
Assurances that it is complying with applicable laws? A comprehensive review
of the basics will allow the organization to prove to itself (and others) that it
“knows and follows the rules” and thereby merits the public’s trust.
2. What is an “ethics audit”?

“A comprehensive ethics audit should assess the extent to which … agencies have practices,
procedures, and policies in place to protect clients, identify ethics-related risks, and prevent
ethics complaints and ethics-related litigation.” Frederick Reamer, in The Social Work Ethics
Audit: A Risk Management Tool.
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Ethics Audits for Nonprofit Organizations
C4LEAPS@aol.com 602/870-9061
Purpose: To review the operations of the nonprofit organization to ensure that it both
knows and complies with:
¾ the minimum standards set by law (societal/ legal audit);
¾ the higher standards that the organization should have of itself
(internal/ organizational audit); and
¾ the highest standards that the organization strives to achieve for those with which it
interacts, including donors and the general public (external/ relational audit); and
in the process identify any areas that need improvement so corrective action
can be taken.
Process:
Who Every nonprofit organization, whether new or old, large or small.
What Review, among other things, the following broad areas:
¾ Do external laws apply to the organization (and do the people who need to know
about those laws [e.g., employees, part-time and summer help, volunteers, and
agents] know the required standards)?
¾ Do internal, agreed-upon standards exist?
¾ If so, are those internal and external standards shared in a MEANINGFUL way?
¾ Do the organization’s actions align with its articulated values?
¾ Does a system exist (and is it known) to get preventive assistance?
¾ How are the articulated values kept visible and vibrant?
The review should look at the overall organization, as well as its component parts, such
as issues relating to employment, confidentiality of information regarding clients and
others, use of resources, conflicts of interests, and more.
When Regularly – a comprehensive audit every 3 years (depending on the needs of the
organization), with periodic reviews more frequently (such as an annual review of any
changes to external legal standards, to review written guidelines [such as a code of
ethics], or the soundness of training or preventive assistance programs).
Where Throughout the organization – not just in the leader’s mind, but also with volunteers
in the field, staff behind the scenes, and other representatives of the organization.
Why Concentric ring analysis: to avoid personal liability (civil and criminal), to protect the
organization/its mission/those it serves, to model the way for others (public, private,
nonprofit) in the community, and because it is the right thing to do.
How Either internally (by a respected person) or externally (by an independent and respected
person or entity – perhaps a lawyer, an accountant, or another informed consultant).
Punctuate Just as you finish a sentence with punctuation, so too you should finish an ethics audit
with action: remove causes of ethics problems (human, policies, or otherwise), develop
necessary systems, support your people (managers, staff, board, volunteers) with
MEANINGFUL training, or do whatever else is needed.
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Personal
Audit of
Relational Standards
to Interact with Others
Audit of Internal
Standards Set by
the Organization
Audit of Legal
Standards Set
by Society
Building Blocks of an Ethics Audit

1st level = foundational level of complying with the minimum standards set by
laws (societal/ legal audit)
2nd level = higher level of complying with internal standards that the
organization should have (internal/ organizational audit)
3rd level = highest standards that the organization strives to achieve for those
with which it interacts, including donors and the general public
(external/ relational audit)
top level = personal values and commitment to ethical behavior
package = overseeing it all is commitment to process, because even the
process of planning and conducting the audit will promote positive
ethics within the organization
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Ethics Audits:
A Concentric Ring Analysis
Proactive ethics audits should be conducted to avoid the concentric rings of

liability:
Æ to avoid personal liability (civil and criminal),
Æ to protect the organization/its mission/those it serves,
Æ to model the way for others in the community, and
Æ because it is the right thing to do.
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Serving Two Purposes:
The Janus Effect of Ethics Audits
Janus
Janus, the Roman god of beginnings, is depicted as a head with two faces looking in opposite
directions. Nonprofits need to view ethics audits as tools that, like Janus, look both forwards
and backwards.
Looking backwards.
Most people can readily see how an audit looks backwards: did past actions comply with the
rules and expectations? In sum, this view “measures past actions.”
Looking forwards.
Nonprofits need to understand how an ethics audit also can serve as an important tool to guide
future action, not just measure past actions. Consider:
Most people associated with nonprofits want to do the right thing…yet

where does one learn how to “do the right thing” with respect to nonprofits?
People don’t learn it in high school or college. And it doesn’t happen by
osmosis.
Plus, the nonprofit world is becoming increasingly more complex and

regulated – formally and informally.
Accordingly, people need to have a clearer understanding of what is the right

thing to do. In sum, they need a template, or a roadmap, that provides a
clear image of what the nonprofit should (and should not) do.
The process of developing and performing an ethics audit provides an

excellent means for the nonprofit to identify how to “do the right thing” in
the future.
In sum, this view “informs to guide future action”

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II. THE MECHANICS
A. Overview: How is an ethics audit conducted?
Step 1 Someone Prompts the Audit
These audits do not occur on their own. Someone concerned about the nonprofit –
either out of a proactive desire to strengthen the organization or a defensive effort to
address a perceived problem – must prompt the process. See AFP Ethical Principles:
“AFP members aspire to … advocate within their organizations, adherence to all applicable laws.”
Step 2 Define the Scope of Work
Make sure that there is a “meeting of the minds” between those who are requesting the
ethics audit (in terms of, for example, the detail of the review and the final product) and
those who will be conducting the audit. The head of the ethics audit team should consult
with the nonprofit’s attorney (see page 17).
Step 3 Initial Overview
A. Review “Public” Documents (e.g., annual report, newsletter(s), marketing brochures)
B. Review “Internal” Documents (e.g., budgets, minutes of recent meetings, bylaws)
C. Interview Key People (e.g., board chair, CEO)
Step 4 Conduct First Component: Legal Audit of Societal Standards
A. Existence [articles of incorporation; current bylaws; notice of a regular meeting;
minutes of a regular meeting; current state or provincial Annual Report]
B. Exemption [application for nonprofit status; all correspondence with the IRS; IRS
determination letter; state exemption documents; any solicitation filing(s)]
C. Intermediate Sanctions Compliance
D. Operations: [compliance with all federal, provincial, state, and local laws]
Step 5 Conduct Second Component: Organizational Audit of Internal Standards
A. Standards [mission statement; values statement; written code; written policies
on conflicts of interests; gifts policies; personnel policies and procedures]
B. Integration [is the mission statement used—by board? by staff? by volunteers?;
recruitment/hiring; orientation; on-going training; evaluations; accountability]
C. Assistance [dedicated resource? decision-making process?]
Step 6 Conduct Third Component: Relational Audit of External Relations
A. Clients [e.g., confidentiality and privacy]
B. Donors : solicitations [e.g., review for compliance with required federal disclosures
in solicitation; general accuracy of solicitation; written verifications]
C. Volunteers and employees
D. Insurance [e.g., current D & O; current general liability]
Step 7 Analysis and Report
A. Analyze
B. Report (verbal and/or written)
Step 8 Follow-Through
Before taking the second step, organizations need to commit to follow-through, or else
the effort to conduct the ethics audit will be reduced to useless window dressing.
B. How is an ethics audit conducted? – sample details of the three components:
[NOTE: “Sample” details follow, because while some elements will be common to all
nonprofits, an audit must be customized to fit any special needs (e.g., a health care nonprofit)]
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Sampling of Items for Legal Audit Component:
Complying with External Standards Set by Society
A. Existence
1. articles of incorporation
• any amendments?
• undertaking or contemplating activities outside the original scope?
2. bylaws
• current? conform to present activities?
• any amendments – done? pending? contemplated?
3. meetings (notices and minutes)
• statutes and bylaws often require a certain number of meetings each year—does
the organization comply?
• many bylaws require notice and/or agenda be given, so does the organization
comply?
4. state or provincial governmental Annual Report and/or Certificate of Disclosure
B. Exemption(s)
1. application for nonprofit status
• undertaking or contemplating activities outside the original scope?
2. latest federal 990 return
3. copies of all correspondence with IRS
4. IRS determination letter
5. state exemption documents
6. state or provincial governmental charitable solicitation filing(s)
7. complying with transparency disclosures of access to foregoing?
C. Intermediate Sanctions Compliance

1. invoke rebuttable presumption procedures?
2. any excess benefits transactions? policies in place to prevent?
D. Operations
1. any special statutory requirements/prohibitions?
• e.g., confidentiality of patient records
2. any general statutory requirements/prohibitions?
3. any contractual (by clients/vendors/donors) requirements/prohibitions?
4. General Checklist of Federal/Provincial/State/Local Laws and Regulations:
• Financial
• Fundraising
• Human Resources (such as unemployment insurance, confidentiality
of records)
• Licensing (in the event the nonprofit engages in certain regulated
activities, such as child care)
• Lobbying
• Registration
• Taxation (employment, income, property, etc.)
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Main AFP Standards and Guidelines Relating to Legal Audit Component:
AFP Standard No. 2: “Members shall not engage in activities that conflict with their fiduciary, ethical,
and legal obligations to their organizations and their clients.”
Guideline c: “Members shall make every reasonable effort to assure that their organization’s
obligations are held to the highest ethical standard and conform to applicable law.”
Examples of Ethical Practice:
1. “Knowing and, if necessary, informing organizational leadership and/or
organizational clients of applicable ethical and legal fiduciary practices.
2. Being prepared to inform appropriate organizational leadership of any illegal
practices in which their organization may be participating.”
Examples of UnEthical Practice:
3. “Ignoring known illegal practices of the member’s organization.
4. Encouraging others to engage in unethical or illegal gift transactions.”
AFP Standard No. 3: “Members shall effectively disclose all potential and actual conflicts of interest;
such disclosure does not preclude or imply ethical impropriety.”
Guideline d: “Members encourage their organizations to adopt policies on conflicts of interest.”
Guideline f: “Members understand the provisions of the IRS ‘Intermediate Sanctions’
regulations or their equivalent in other countries, that apply to persons associated with
nonprofit organizations who might also benefit from business or commercial
arrangements with the organization.”
AFP Standard No. 5: “Members shall comply with all applicable local, state, provincial, federal, civil and
criminal laws.”
Guideline a: “Members recognize that compliance with applicable laws is a clear standard.
Nevertheless, laws regarding fundraising are proliferating, and ethical practitioners,
remembering the admonition that ignorance of the law is no excuse, must be alert to new
laws.”

1. “Undertaking personal responsibility for keeping up with changes in applicable laws
and regulations.
2. Recognizing that one’s employer may not be in compliance with applicable laws due
to lack of knowledge, and bringing this to the attention of appropriate organizational
leadership.
3. Ensuring that reports which are part of regulatory requirements for which the
member may have some responsibility are completed accurately and in a timely
manner.
4. Maintaining appropriate licensure, registration, or certification requirements.”
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Sampling of Items for Organizational Audit Component:
Complying with Internal Standards Set by the Organization
A. Standards
1. mission statement
• is there one?
• when was it last revised?
• when was it last used—by board? by staff? by volunteers?
2. values statement
3. written code of ethics [and/or code of conduct]
4. written policies on conflicts of interests
5. written standards regarding gifts
6. personnel policies and procedures
B. Integration of Standards
1. purposeful recruitment/hiring
2. comprehensive orientation
3. meaningful training
4. continuous sensitivity
5. evaluations with worthy incentives
6. accountability through enforcement
C. Assistance in Ethical Decision-making

1. dedicated resources?
2. decision-making process
D. Governance
1. Board (attendance; composition; size; meetings)
2. Committees (via bylaws; operational aspects)
3. Any subsidiaries or joint operations?
4. Clarity of roles of staff and board
E. Financial
F. Self-evaluation
1. Organization?
2. Programs?
[See more detailed sampling in Appendix B.]
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Main AFP Standards and Guidelines Re: Organizational Audit Component:
AFP Standard No. 1: “Members shall not engage in activities that harm the member’s organization, clients….”
Guideline a: “Members shall subscribe to and become advocates for the mission and goals of their
organization.”
1. “Refusing to participate in activities contrary to the organization’s mission and goals.”
3. “Maintaining one’s education in philanthropy and fundraising best practices to convey
appropriate advice to constituents, the community, and the public.”
3 “Ignoring unethical practices of others and not reporting same to organizational leadership or
appropriate authorities (e.g., Legal, AFP, etc.).”
1. “Knowing and, if necessary, informing organizational leadership and/or
organizational clients of applicable ethical and legal fiduciary practices.
2. Being prepared to inform appropriate organizational leadership of any illegal
practices in which their organization may be participating.”
3. “Ignoring known illegal practices of the member’s organization.
4. Encouraging others to engage in unethical or illegal gift transactions.”
AFP Standard No. 3: “Members shall effectively disclose all potential and actual conflicts of interest;
such disclosure does not preclude or imply ethical impropriety.”
Guideline d: “Members encourage their organizations to adopt policies on conflicts of interest.”
criminal laws.”
Guideline a: “Members recognize that compliance with applicable laws is a clear standard.
Nevertheless, laws regarding fundraising are proliferating, and ethical practitioners,
remembering the admonition that ignorance of the law is no excuse, must be alert to new
laws.”
1. “Undertaking personal responsibility for keeping up with changes in applicable laws
and regulations.
2. Recognizing that one’s employer may not be in compliance with applicable laws due
to lack of knowledge, and bringing this to the attention of appropriate organizational
leadership.
3. Ensuring that reports which are part of regulatory requirements for which the
member may have some responsibility are completed accurately and in a timely
manner.
4. Maintaining appropriate licensure, registration, or certification requirements.”
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Sampling of Items for Relational Audit Component:
Complying with Standards Regarding Interactions with Others Set by Society or the Organization
[NOTE: While not listed in the “Legal Audit” category, many of these items involve legal rights.]
FOR ALL CATEGORIES: Does the nonprofit treat them with respect and dignity?
A. Clients
o [details will vary by agency]
o Confidentiality and privacy
o Disclosure of information (e.g., new HIPPA)—to client? to parents?
o Screen potential employees and volunteers working with youth?
B. Donors
o Solicitations
i. review copies for required disclosures in solicitation
ii. general accuracy of solicitation (e.g., past results and intended use)
iii. written verifications of donations?
iv. keep donors informed?
o Restricted funds
i. maintained as such?
ii. use of residuals?
C. Employees
o fair pay and benefits?
o support their continuing ethics training and development?
o support their compliance with their other professional codes?
o evaluations?
D. Volunteers
o appropriate orientation, training, and support?
o indemnify and insure?
E. Fundraisers
F. Vendors
G. Third Parties/Public
o Insurance
i. current D & O
ii. current general liability
iii. property
iv. vehicle
v. unemployment
vi. workers compensation
o Internet policies
o Advocacy and education
H. Other Nonprofits and the Nonprofit Sector

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Main AFP Standards and Guidelines Re: Relational Audit Component:
AFP Standard No. 1: “Members shall not engage in activities that harm the member’s organization,
clients….”
Guideline b: “Members shall conduct their personal and professional lives recognizing that their
actions represent the organizations by which they are employed.”
Guideline c: “Members shall respect the wishes and needs of constituents, and do nothing that would
negatively impact their social, professional, or economic well-being.”
AFP Standard No. 4: “Members shall not exploit any relationship with a donor, prospect, volunteer, or
employee for the benefit of the member of the member’s organization.”
criminal laws.”
AFP Standard No. 6: “Members recognize their individual boundaries of competence and are
forthcoming about their professional experience and qualifications.”
Example of Ethical Practice 1: “Being honest and above reproach concerning one’s duties and
responsibilities, and practicing an ethical approach to employment in the field.”
AFP Standard No. 7: “Members shall take care to ensure that all solicitation materials are accurate and
correctly reflect their organization’s mission and use of solicited funds.”
AFP Standard No. 8: “Members shall take care to ensure that donors receive informed, accurate and
ethical advice about the value and tax implications of potential gifts.”
AFP Standard No. 9: “Members shall take care to ensure that contributions are used in accordance with
donors’ intentions.”
AFP Standard No. 10: “Members shall take care to ensure proper stewardship of charitable
contributions, including timely reports on the use and management of funds.”
AFP Standard No. 11: “Members shall obtain explicit consent by the donor before altering the conditions
of a gift.”
AFP Standard No. 12: “Members shall not disclose privileged or confidential information to unauthorized
parties.”
AFP Standard No. 13: “Members shall adhere to the principle that all donor and prospect information
created by, or on behalf of the organization, is the property of that organization…”
AFP Standard No. 14: “Members shall give donors the opportunity to have their names removed from
lists that are sold to, rented to, or exchanged with other organizations.”
AFP Standard No. 16: “Members shall not accept compensation that is based on a percentage of
charitable contributions; nor shall they accept finder’s fees.”
16
III. ANCILLARY ISSUES
A. Who?
1. Who may suggest that an ethics audit be conducted?
¾ “AFP members … advocate within their organizations, adherence to all applicable laws and
regulations”
¾ AFP Guideline 2c: “Members shall make every reasonable effort to assure that their organization’s
fiduciary obligations are held to the highest ethical standard and conform to applicable law”
¾ AFP Standard 3d: “Members encourage their organizations to adopt policies on conflicts of interest.”
¾ AFP Standard 5b: “Members consult the legal counsel involved with their own organizations.”
¾ AFP Guideline 10c: “Members urge their organizations to adopt and operate within written policies
governing planned gifts, donor recognition, and investments.”
¾ AFP Guideline 12j/k: “Members urge the development of written policies at their organizations…”
¾ AFP Guideline 13b: “Members encourage the nonprofit…to develop written policies….”
2. Who should conduct an ethics audit?

¾ Internal – a well-respected member of the board or certain professionals (such as an
accountant or attorney), although internal sources may have formal or informal blinders due
to pre-existing knowledge
¾ External – someone who actually knows about nonprofits (i.e., not just any lawyer)
3. Who should assist with an ethics audit?
Before embarking on an ethics audit, a nonprofit should consult with its attorney to
ensure that the audit is structured properly. As Frederic Reamer cautions (at page viii)
in The Social Work Ethics Audit: A Risk Management Tool:
Those “who conduct an ethics audit should be aware that the audit and its
component parts
• are not protected from discovery in a court proceeding.
• are not automatically confidential or subject to the protection of
privilege. The documents and files related to the audit should be
clearly marked as confidential for agency use and review only.
• may provide information or data that, unless acted on, could provide
evidence in a malpractice claim or ethics complaint.
• may result in an action report that if not implemented may leave the
agency or practitioner in a vulnerable, legal, or ethical position.
Questions regarding the potential legal ramifications of the ethics audit or its
components should be addressed to an attorney.
The above caution notwithstanding, conducting and following up on the ethics
audit can demonstrate a diligent effort on the part of agencies and social
workers to identify their strengths and weaknesses and to serve clients well.”
B. When: When should an ethics audit be conducted?

INDEPENDENT SECTOR recommends that ethics audits be conducted annually. A nonprofit
should conduct a comprehensive audit every 3 years (depending on the needs of the
organization), with periodic reviews more frequently (such as an annual review of any changes
to external legal standards, to review written guidelines [such as a code of ethics], or the
soundness of training or preventive assistance programs).
17
C. Where?
1. Where to turn for help?
Written materials to help with ethics audits are very limited, but some resources worth
consulting include the following:
¾ American Bar Association, Guidebook for Directors of Nonprofit Organizations

(ABA 2d edition 2002)
¾ American Bar Association, Nonprofit Governance and Management (ABA 2002)
¾ Colorado Association of Nonprofit Organizations, Conducting an Ethics Audit

(CANO, 1994)
¾ Richard Ingram, Ten Basic Responsibilities of Nonprofit Boards (National Center

for Nonprofit Boards 1999)
¾ Frederick G. Reamer, The Social Work Ethics Audit: A Risk Management Tool
(NASW Press 2001)
¾ Kathryn Tyler Scott, Creating Caring and Capable Boards – Reclaiming the
Passion for Active Trusteeship (Jossey-Bass 2000)
2. Where to get additional information about ethics in the nonprofit sector?
The Internet offers a number of good websites about ethics in the nonprofit sector,
including the following:
¾ Association of Fundraising Professionals: www.afpnet.org
¾ Better Business Bureau’s Wise Giving: www.give.org
¾ BoardSource: www.boardsource.org
¾ Free Management Library: www.mapnp.org/library
¾ Independent Sector: www.independentsector.org
¾ IRS: www.irs.gov
¾ Maryland Association of Nonprofit Organizations: www.mano.standards.org
18
Some Final Images …
Ethics Audits = Preventive Maintenance
Failure to perform preventive maintenance may lead to wrecks.
Regular performance of preventive maintenance

can help avoid painful procedures.
19
... and Some Final Thoughts
“Nonprofit board members have come under increased scrutiny in recent years,
caused in part by a few organizations that have failed to maintain appropriate oversight and
therefore fell victim to fraud, embezzlement, or some other breach of public trust.
The board is ultimately responsible for ensuring adherence to legal standards and ethical norms.”
-- Richard Ingram
“The greatest threat to the not-for-profit sector is the betrayal of public trust,
the disappointment of public confidence. Virtually all knowledgeable observers
of the not-for-profit scene believe that an overwhelming proportion of not-for-profits
are honorably run, even if not most efficiently and effectively.
That admirable context, however, does not provide much protection to
the sector when a sequence of highly publicized disgraceful not-for-profit misdeeds occurs.”
--Joel Fleishman
“Cowardice asks the question, Is it safe?

Expediency asks the question, Is it politic?
Vanity asks the question, Is it popular?
But conscience asks the question, Is it right?
And there comes a time when one must take a position that is neither safe,
nor politic, nor popular, but he must take it because his conscience tells him it is right.”
--Martin Luther
“What if we could get model communities in this country,

and model institutions, schools, businesses, and government units,
that would become islands of excellence in a sea of mediocrity?
What if they could become models to others so that this
whole spirit of stewardship … could take root and flourish?
I honestly think we could heal our country.”
--Stephen Covey
“Voluntary action on behalf of the common good is the inherited legacy of every American,
and gives life to an abiding belief that we share responsibility for the creation
and quality of community life.”
--Kathryn Tyler Scott
“Community trusteeship involves holding the community in trust

by serving others and working for the common good.”
--Tim Delaney
20
APPENDICES
A AFP Code of Ethical Principles and Standards of Professional Practice
B Sample Organizational Component Worksheet for Nonprofit Ethics Audit
C Ethics Column: “Respecting Your Donors’ Intentions”
D Ethics Column: “Playing by the Established Rules”
21
Appendix A
AFP Code of Ethical Principles and

Standards of Professional Practice
STATEMENT OF ETHICAL PRINCIPLES
Adopted November 1991
The Association of Fundraising Professionals (AFP) exists to foster the development and growth of fundraising professionals and the profession, to pro-
mote high ethical standards in the fundraising profession and to preserve and enhance philanthropy and volunteerism. Members of AFP are motivated by
an inner drive to improve the quality of life through the causes they serve. They serve the ideal of philanthropy; are committed to the preservation and
enhancement of volunteerism; and hold stewardship of these concepts as the overriding principle of their professional life. They recognize their responsi-
bility to ensure that needed resources are vigorously and ethically sought and that the intent of the donor is honestly fulfilled. To these ends, AFP mem-
bers embrace certain values that they strive to uphold in performing their responsibilities for generating philanthropic support.
AFP members aspire to: 5. Members shall comply with all applicable local, state, provincial, fed-
✦ practice their profession with integrity, honesty, truthfulness and adher- eral, civil and criminal laws.
ence to the absolute obligation to safeguard the public trust; 6. Members recognize their individual boundaries of competence and
✦ act according to the highest standards and visions of their organization, are forthcoming and truthful about their professional experience and
profession and conscience; qualifications.
✦ put philanthropic mission above personal gain;
✦ inspire others through their own sense of dedication and high purpose; Solicitation and Use of Charitable Funds
✦ improve their professional knowledge and skills in order that their per- 7. Members shall take care to ensure that all solicitation materials are
formance will better serve others; accurate and correctly reflect the organization’s mission and use of
✦ demonstrate concern for the interests and well being of individuals solicited funds.
affected by their actions; 8. Members shall take care to ensure that donors receive informed, accu-
✦ value the privacy, freedom of choice and interests of all those affected by rate and ethical advice about the value and tax implications of poten-
their actions; tial gifts.
✦ foster cultural diversity and pluralistic values, and treat all people with 9. Members shall take care to ensure that contributions are used in
dignity and respect; accordance with donors’ intentions.
✦ affirm, through personal giving, a commitment to philanthropy and its 10. Members shall take care to ensure proper stewardship of charitable
role in society; contributions, including timely reports on the use and management
✦ adhere to the spirit as well as the letter of all applicable laws and regulations; of funds.
✦ advocate within their organizations, adherence to all applicable laws and 11. Members shall obtain explicit consent by the donor before altering
regulations; the conditions of a gift.
✦ avoid even the appearance of any criminal offense or professional mis-
conduct; Presentation of Information
✦ bring credit to the fundraising profession by their public demeanor; 12. Members shall not disclose privileged or confidential information to
✦ encourage colleagues to embrace and practice these ethical principles unauthorized parties.
and standards of professional practice; and 13. Members shall adhere to the principle that all donor and prospect
✦ be aware of the codes of ethics promulgated by other professional information created by, or on behalf of, an organization is the proper-
organizations that serve philanthropy. ty of that organization and shall not be transferred or utilized except
on behalf of that organization.
STANDARDS OF PROFESSIONAL PRACTICE 14. Members shall give donors the opportunity to have their names
Adopted and incorporated into the AFP Code of Ethical Principles removed from lists that are sold to, rented to, or exchanged with
November 1992 other organizations.
15. Members shall, when stating fundraising results, use accurate and con-
Furthermore, while striving to act according to the above values, AFP sistent accounting methods that conform to the appropriate guide-
members agree to abide by the AFP Standards of Professional Practice, lines adopted by the American Institute of Certified Public
which are adopted and incorporated into the AFP Code of Ethical Accountants (AICPA)* for the type of organization involved. (*In
Principles. Violation of the Standards may subject the member to discipli- countries outside of the United States, comparable authority should
nary sanctions, including expulsion, as provided in the AFP Ethics be utilized.)
Enforcement Procedures.
Compensation
Professional Obligations
16. Members shall not accept compensation that is based on a percentage
1. Members shall not engage in activities that harm the member’s organ- of charitable contributions; nor shall they accept finder’s fees.
ization, clients, or profession. 17. Members may accept performance-based compensation, such as
2. Members shall not engage in activities that conflict with their fiduci- bonuses, provided such bonuses are in accord with prevailing prac-
ary, ethical, and legal obligations to their organizations and their tices within the members’ own organizations, and are not based on a
clients. percentage of charitable contributions.
3. Members shall effectively disclose all potential and actual conflicts of 18. Members shall not pay finder’s fees, commissions or percentage com-
interest; such disclosure does not preclude or imply ethical impropriety. pensation based on charitable contributions and shall take care to dis-
4. Members shall not exploit any relationship with a donor, prospect, courage their organizations from making such payments.
volunteer or employee to the benefit of the member or the member’s
organization. Amended October 1999
22
Appendix B
Sampling of Organizational Component
Worksheet for Nonprofit Ethics Audit
C4LEAPS@aol.com
I. SETTING THE STANDARDS

A. Principles and Values
1. Has the organization agreed upon its core principles or values? Yes___ No___
a) If yes, when? _____________ By whom? ____________
b) How? ___________________________________________
c) When were they last revised? _____________ By whom? ______________
d) When were they last reviewed to ensure continued validity? _______
By whom?________
2. Has the organization reduced its core principles or values to written form? Yes___ No___
a) If yes, in what form? ___________________________
B. Formal Standards
1. Do you have a written code of ethics/code of conduct? Yes___ No___
a) If yes, what? ________________
b) When was it last revised? ______ Reviewed? ____ By whom?___________
2. Do you have written policies/procedures/rules/regulations? Yes___ No___
a) If so, what? List the various sets of written standards:
b) When was each last revised? ___ Reviewed? ___ By whom? _______________
3. So unique federal, provincial, state, or local laws apply to your nonprofit? Yes___ No___
a) If yes, do you have written materials explaining those laws? Yes___ No___
4. Do you have written guidelines for ethical decision-making? Yes___ No____
a) If yes, to whom do you distribute them? _____________________________________
b) If no, how are ethical dilemmas resolved? ____________________________________
5. Are the formal ethics standards identified above clear and understandable? Yes___ No___
a) If yes, are they readily available to all stakeholders? Yes ___ No ___
II. MOVING FROM PRINCIPLES TO PRACTICE

A. Training
1. Are each set of the formal written standards listed above distributed to:
a) all employees? Yes___ No___ If yes, when? _____________
b) all board members? Yes___ No___ If yes, when? _____________
c) all volunteers? Yes___ No___ If yes, when? _____________
2. Are each set of those formal written standards materials explained in detail to:
a) all employees? Yes___ No___ If yes, when and how? _____________
b) all board members? Yes___ No___ If yes, when and how? _____________
c) all volunteers? Yes___ No___ If yes, when and how? _____________
23
3. Do you provide a quality orientation program to:
a) all new employees? Yes __ No __
b) all new board members? Yes __ No __
c) all new volunteers? Yes __ No __
4. When was the last time you provided meaningful ethics training to:
a) all employees? ____________ If yes, how? ______________
b) all board members? ____________ If yes, how? ______________
c) all volunteers? ____________ If yes, how? ______________
5. What other methods do you use to keep ethics sensitivity high and core values visible:
a) internal newsletters? Last used this technique: ______________
b) memoranda? Last used this technique: ______________
c) e-mail reminders? Last used this technique: ______________
d) other? ____________ Last used this technique: ______________
____________ Last used this technique: ______________
B. Application
1. Who is responsible for managing your nonprofit’s ethics issues on a daily basis?
_____________________
2. Are your agreed-upon standards used when recruiting/interviewing/hiring?
Yes___ No___ If yes, how? ____________________________________
3. Can employees/volunteers do their jobs without violating:

a) Laws? Yes___ No___ Because: ___________________________________
b) Your written standards? Yes___ No___ Because:______________________
1. 4. Does the organization offer a decision-making model to help stakeholders? Y__ N__
If yes, is it readily available?
If yes, is it used? _______ When was the last time it was used by
the board? ___________________
the executive staff?____________
line staff?____________________
volunteers?___________________
5. Do you have a reward system to honor positive ethical behavior? Yes __ No __

Is so, what? ______________________ If not, why not? _____________________
6. Is there a systematic way to review/update/modify your written guidance?

Yes___ No___
a) If yes, what is that system? ________________
b) If yes, is that system used? ___________When was it last used?____________
C. Perception
1. Is management satisfied with the behavior of
a) the organization as a whole? Yes___ No___ If no, why not?_____________
b) employees? Yes___ No___ If no, why not?_____________
c) volunteers? Yes___ No___ If no, why not?_____________
24
2. If you surveyed people, would
a) employees rate supervisors as honest, fair, trustworthy? Yes___ No___
b) managers rate employees as honest, fair, trustworthy? Yes___ No___
c) recipients of your services rate the nonprofit as honest, fair, trustworthy?
Yes___ No__
3. If donors could see things behind the scenes, how would they regard the nonprofit?
4. What would people identify as the nonprofit’s actual operating values?
5. If you surveyed people, who would be regarded as the nonprofit’s ethics leader?______
6. When something goes wrong, does a positional leader take responsibility and initiate
corrective action?
III. ENFORCING THE STANDARDS

1. Is there a clearly identified way to seek assistance in resolving ethics issues? Yes___ No___
If yes, is it a formal position (ethics officer), an informal person, or a
committee?_________
When was that process last used?_________ How frequently is it used?_____________
2. Is there a clearly identified way to confidentially report suspected violations?

Yes___ No___
If yes, what is the system? _____________________________
When was that process last used? ___________ How frequently is it used? ___________
* * * * *
Based on the foregoing information:
A. What areas need improvement?

______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
B. What is the most important need?
C. Implementation deadlines for follow-through action?
25
Appendix C
Respecting Your Donors’ Intentions
A donor gives your nonprofit organization (NPO) $10,000 for computers, but someone else gives you
eight new computers. Can you now use the $10,000 for another purpose? A supporter gives your NPO $50,000
for a new project, but a sudden cash flow problem means that your employees won’t get paid for six weeks.
Can you “borrow” that money to ease the cash flow problem? A couple donates $10,000 in stock to help build a
room onto your building, but you learn that someone is trying to buy land across the street that you need for
future expansion. Can you use the stock to quickly buy the land?
Some may read those real-world scenarios and leap ahead to the question: “Where do you draw the line
in changing the donor’s intent?” After the original need is met? When a short-term emergency poses a greater
need? Or if a once-in-a-lifetime opportunity will be lost if action is not taken immediately?
However, those who leapt ahead skipped a more fundamental question: “When can I re-draw the line?”
The answer: you should never unilaterally re-draw a line set by a donor.
Donors give for a variety of reasons. Most who give to your NPO believe in your cause. Some,
however, might give for reasons you don’t know about. For example, they donate funds to purchase computers
because their grandfather helped design the first computer, so if you don’t need the money for computers they
will give their money to a group that does.
If you unilaterally alter the donor’s intent, you create several layers of trouble. First, it engenders
distrust for all NPOs. Second, your NPO can be harmed, in that the particular donor may not give again and
may complain to others that you are untrustworthy, damaging your NPO’s reputation. Third, depending on how
severe the alteration is, the donor may even file suit.
While it is rare for these types of matters to wind up in court, it does happen. For example, in 1968 the
Arizona Supreme Court decided a case similar to one of the scenarios above. A couple gave $10,000 worth of
stock to construct an annex to a Sunday school building. Later, church officials asked for permission to use
$8000 of the stock to purchase land across the street from the church. The couple said no and asked that their
donation be returned, but the church refused. The couple then filed suit to recover their donation.
The Arizona Supreme Court held that “where the gift has passed into the hands of the donee, there is an
implied promise agreeing to the purposes for which it is offered.” The court continued: “the church… is bound
both in law and in good conscience to perform the conditions or to return the stock.”
The court’s decision parallels a provision in the Association of Fundraising Professionals’ Code of
Ethical Principles [ AFP Standard No. 9] , which requires that fundraisers “shall take care to ensure that
contributions are used in accordance with donors’ intentions.”
So what should a NPO do? First, when possible, seek unrestricted funds. Second, where funds are
restricted, make sure the restrictions are as clear as possible so no misunderstandings arise. Third, if
circumstances change and a greater need develops, ask the donor to alter the restrictions. Most donors want to
help and after hearing the greater need probably will authorize the new use. But even if they don’t, you will
build trust and avoid unnecessary trouble.
* * *
Tim Delaney is an attorney with extensive experience in the public, private, and nonprofit sectors who recently
founded an independent, nonprofit think tank, The Center for Leadership, Ethics, and Public Service. You can
reach Tim at C4LEAPS@aol.com.
Note: This article first appeared in the Fall 2001 edition of PhilanthropyWorksAZ, published by AFP member
Susan Walling.
26
Appendix D
Playing by the Established Rules
Ethics scandals and their aftermath dominated the news last year, from the covers of magazines
to television talk shows. But unlike past scandals that flowed from the public sector (such as
Watergate, Iran-Contra, and Clinton/Lewinsky), these new scandals emanated from the private sector
(including Arthur Andersen, Enron, and WorldCom) and the nonprofit sector (the Catholic Church and
the Olympics).
In each of these cases, the wrong seemed so obvious. Indeed, one wonders how the unseemly
transgressions could have occurred in the first place or been so mishandled later. Conscientious
leaders in business, government, and nonprofit organizations must ask, “If scandals could happen to
those revered institutions, what can I do to prevent such damaging improprieties in my organization?”
The answer involves much more than telling people to “do the right thing.” Indeed, successful
leaders protect and enrich their organizations by activating responsible ethics programs with four vital
elements: a written set of ethics standards, meaningful integration of those standards into daily
operations, readily-available assistance, and ethics audits to determine where improvements can be
made.
Ethical standards: codes of ethics

Upon hearing the term “code of ethics,” many people immediately shut down mentally because
they believe they already know right from wrong.
Yet a code of ethics involves much more. It equates to an organization’s established rules.
People recognize that games like Monopoly and football have rules, so explaining that the code of
ethics amounts to the organization’s established rules that people must play by should help keep them
alert.
Common features of codes of ethics

A quick test: pull out your organization’s set of ethics standards (whether labeled a code of
ethics, code of conduct, or something else). Does it reflect the following five features?
First, standards should be written. Otherwise, people are forced to guess what is expected. Plus,
written standards promote consistency over time.
Second, standards should be as clear, simple, and succinct as possible. Thick, dense, and
complex rules will never be read because they scare people away. (By comparison, when was the last
time you sat down to voluntarily read the Internal Revenue Code?)
Third, standards must be comprehensive, setting forth the organization’s values and
expectations. Enforcement of undisclosed expectations breeds distrust.
(So how can you reconcile the last two points of being simple yet comprehensive? Use of a
multi-tiered set of standards can help. For example, a crisp one-page code of ethics can be augmented
with additional detail through other tools, such as an employee handbook and policy manual. Always
be sure to include information about any applicable laws.)
27
Fourth, standards should have a reasonable objective. Standards can be aspirational to inspire
best behavior, punitive to identify inappropriate behavior that will be punished, or prescriptive to assist
with ethical decision-making. Some standards contain a little of each, such as having an aspirational
creed that identifies desired behavior, a code of ethics that sets forth unacceptable behavior, and a code
of conduct that provides more detailed guidance.
Fifth, standards should disclose enforcement mechanisms, including reasonable sanctions and
procedural safeguards, so people know the consequences.
Time to revise?
So how do your organization’s standards compare? And when were they last modified? Is it
time to revise them?
If fine-tuning is due, then use a participatory process. People are more willing to honor and
enforce codes that they helped develop. Involve all stakeholders who will be expected to comply with
the code (such as board members, employees, managers, and volunteers) through surveys, interviews,
small group discussions, and other devices.
The power of the code is not in the words alone, but in the process of dialogue and learning that
aligns the organization’s values.
The bottom-line: People must know the expectations against which their actions will be
measured. As Carol Lewis quotes from a study in her book, The Ethics Challenge in Public Service,
members of organizations “need to know what is regarded as acceptable and what is not….Can an
organization afford to have its members trying to guess what its standards are?”
* * *
Tim Delaney, a former Chief Deputy Attorney General, is founder of The Center for
Leadership, Ethics, and Public Service, an independent 501(c)(3) nonprofit public benefit organization
in Phoenix. Tim can be reached at C4LEAPS@aol.com.
Note: This column first appeared in the April 11, 2003 edition of The Business Journal.
28
CERTIFICATE OF PARTICIPATION
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Ethical Leadership in Nonprofit Organizations:

Presented by
Tim Delaney, JD/MPA
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January 9, 2003, Thursday (FRE7227-0) May 21, 2003, Wednesday (FRE7230-0 )

Creating a Fund Development Plan That Produces Ethical Leadership in Nonprofit Organizations:
Ownership and Results How to Conduct an Ethics Audit
Simone P. Joyaux, ACFRE Tim Delaney
How you create your plan is as important as the To help give your favorite nonprofit the tools to
resulting plan. An effective process builds ownership conduct its own ethics audit, Tim Delaney, founder of
and accountability among staff and board. This The Center for Leadership, Ethics, and Public Service
seminar is designed to help you re-think how you and faculty member at Arizona State University’s
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February 11, 2003, Tuesday (FRE7228-0) a negative A-1 story…or worse.
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Philanthropy Audit on a Shoestring Budget
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By MAIL: KRM Information Services, Inc., PO Box 1187, Eau Claire, WI 54702-1187
(Payment must accompany registration)

Method of payment (check one):
[ ] Check enclosed payable to KRM

[ ] MasterCard [ ] VISA [ ] Am. Ex. [ ] Discover
Card #______________________Exp._____ Signature____________________________________

Remember your favorite college professor?
DOVE ON FUNDRAISING ...it’s just like that.
The Association of Fundraising Professionals (AFP) and the Dove Institute on Fundraising are collaborating
to offer you a unique and special experience—the Dove on Fundraising Program. Using distance learning
techniques, you can experience the Dove on Fundraising program without leaving your office. Through
Audio Classes, Web-based discussion groups, and optional textbooks, AFP brings renowned educator,
author, and speaker Kent Dove to you, to share his expertise and knowledge with you in a personal
classroom setting. The program consists of:
• Dove on Fundraising Book Series

Those who sign up for the individual classes will have the opportunity to purchase the companion books
at significant discounts—up to 15 percent off! The books are an optional but enhancing opportunity to
learn more about each topic and to see real-life examples of how charities have used the information and
techniques in their own development operations. The discount form will be included in your handout
materials.
• 6 Live Audio Classes

Lecture and discussion from Kent Dove and his colleagues on accountability, strategic planning, capital
campaigns, major gifts, prospect research and management, and planned giving. Students will have the
opportunity to ask questions and to engage in dialog. Attend all six and save, or you can select just the
classes to fit your particular needs.
• Web-based Class Discussion Groups
By enrolling in the Dove on Fundraising Program, you’ll have access to a discussion group for each
audio class. For two weeks after each class, you will have the opportunity to pose questions about the
theory and thought behind each of the class topics (no organization specific questions please.) Kent will
review and combine questions to give participants the widest range of information. We’ll post those
questions and answers online, and provide additional information about each topic. Then the discussion
begins among classmates using the AFP website and closed discussion group technologies.
A value-added component to the Audio Classes!
AFP Chapters and Groups — Something for You, Too!
AFP Chapters and other groups are encouraged to participate in the Dove on Fundraising Program by
signing up for the Audio Classes so that several people can take part in the program. Site leaders will be
asked to coordinate questions for the Web-based discussions and to help facilitate book purchases. AFP
staffers are happy to work with you!
MEET YOUR PROFESSORS
Kent E. Dove is the author of the acclaimed Dove on Fundraising Series, described in a recent book review
(Contributions) as “an extraordinary series that has set the bar for all other writers in the field.” He is a highly
respected practitioner, too. He recently relinquished the title Vice President for Development at the Indiana University
Foundation to devote more time to teaching, lecturing and serving the profession. He is an adjunct professor at Indiana
University where he teaches both graduate and undergraduate courses, and he remains at the Foundation as its Senior
Adviser.
Teaching Audio Class # 5 on prospect research, Vicky L. Martin is Director of Research Management and
Information Services at the Indiana University Foundation. She is a popular presenter and lecturer in the field of
research and teaches in both the schools of Health, Physical Education, and Recreation, and Public and Environmental
Affairs at IU.
Teaching Audio Class #6 on planned giving techniques, Thomas W. Herbert is Executive Director of Development
and Alumni Programs at the Indiana University College of Arts and Sciences. Previously he served as Director of
Planned Giving at the Indiana University Foundation, becoming the youngest director of a planned giving program at a
major research university in America.
INDIVIDUAL AUDIO CLASS SCHEDULE

See the registration form for specific times and instructions. Visit www.afpnet.org for more details on each
Audio Class. Each Audio Class earns you 1.5 points towards CFRE education requirements.
• #1 February 27, 2003: Creating Accountability with your Donors and the Public
Accountability is more than a buzzword; it is imperative for the future if nonprofits plan to maintain positive
relationships with their donors and the public. Explore many facets of accountability—financial,
program/services, communications process, with the media—and discuss how “transparent” the work of your
nonprofit should be.
• #2 March 11, 2003: Strategic Planning that Works for Nonprofits

Do you have a strategic plan that works? Many nonprofits have a plan, but fewer have one that really works.
If you are in the latter group, do you want to develop a strategic plan that deliberately prepares you for a
predetermined outcome? This Audio Class should be your first step to formulating a successful strategic
plan.
• #3 May 8, 2003: Readiness Assessment for a Capital Campaign: The Key to Success
Are you preparing to do a capital campaign? Do you have questions about how prepared you are to begin?
Do you know the right questions to ask? If so, do you know how to evaluate the answers? Learn how to
assess your prepared-ness to undertake a capital campaign by responding to 10 fundamental questions using
a numerical rating system, (the Dove Preparedness Index - DPI). As a bonus, your organization, if you
choose, can submit your DPI results back to AFP and the instructor will provide, through AFP, a brief,
written analysis of the results from his perspective. Invite key staff and volunteers to take this class with you!
Collectively they can take the DPI, and can then tally their scores and see where they stand by the end of the
class.
• #4 June 4, 2003: Five Keys to Realizing Major Gifts

The rapid evolution of major gift fundraising has revealed newer, better, more predicable ways of identifying
true major gift prospects and establishing cultivation plans that will eventually lead to major gift success.
This session takes you on the major gifts super highway and shows you what is new along the way. This
class will give modern definition to a traditional process.
• #5 September 4, 2003: Researching Prospects and Managing Them

With the emergence of the Web, prospect research is a fundraising tool within the reach of virtually every
nonprofit. This session will discuss both the best techniques and the most popular resources that assist
today’s research function. The modern research function’s task often is to pare down and focus on pertinent
information rather than discovering additional information. Learn the techniques of successful prospect
research!
• #6 October 7, 2003: Using Planned Giving Techniques to Realize Major Gifts

What is a major gift? What motivates donors to give them? How can you identify major gift prospects?
What techniques are most effectively used in closing major gifts using planned giving options? This class
will define major gifts and emphasize their importance to the success of fundraising programs.
Characteristics common to those who make major gifts also will be shared.
Dove on Fundraising Audio Classes 2003
February 27, 2003- Thursday (FRE 7233-0) Creating Accountability With Your Donors and the Public
March 11, 2003- Tuesday (FRE 7234-0) Strategic Planning That Works for Nonprofits
May 8, 2003- Thursday (FRE 7235-0) Readiness Assessment for a Capital Campaign: The Key to Success
June 4, 2003- Wednesday (FRE 7236-0) Five Keys to Realizing Major Gifts
September 4, 2003- Thursday (FRE 7237-0) Researching Prospects and Managing Them
October 7, 2003- Tuesday (FRE 7238-0) Using Planned Giving Techniques to Realize Major Gifts
The Audio Classes will be held at 1:00-2:30pm Eastern / 12:00-1:30pm Central

11:00am–12:30pm Mountain / 10:00-11:30am Pacific / 9:00-10:30am Alaska / 8:00-9:30am Hawaii
FEES: $150 (US) per member site per session; $200 per nonmember site per session
Multiple Discounts:
When registering for all 6 programs at once, price is $130 /member site per session; $180/nonmember site per session
When registering for 3, 4, or 5 programs at once, price is $140 /member site per session; $190/nonmember site per session
Can’t make the Audioconference? Note: Use of an audiotape of the program qualifies for 1.5 points toward CFRE education
requirements. Also available:
[] Audiotape/materials package $150 (Shipped approximately two weeks following the program)
Please print clearly (especially the e-mail address)
Name____________________________________MemberID#______________Title________________
Organization___________________________________________________________________________
StreetAddress__________________________________________________________________________
City__________________________________State/Province_______________Zip/Postal Code___________________
Phone__________________________Fax___________________________E-mail__________________
Dialing-in instructions for the program as well as the URL for accessing your class materials will be e-mailed to you. (You will
need the Acrobat Reader, available free at www.adobe.com)
[ ] Please check here if you are unable to receive your materials via the Web. We will ship a hard copy to you.
Three ways to register
By FAX: Complete form with credit card information and fax to 800-676-0734
By PHONE: Call 800-775-7654 please have your credit card information ready
By MAIL: KRM Information Services, Inc., PO Box 1187, Eau Claire, WI 54702-1187
(Payment must accompany registration)

Method of payment (check one):
[ ] Check enclosed payable to KRM

[ ] MasterCard [ ] VISA [ ] Am. Ex. [ ] Discover
Card #______________________Exp._____ Signature____________________________________

A Association of Fundraising Professionals A
Program Evaluation
This form is electronically tallied. Please mark only one circle for each question.
Do not mark outside the circles.
Ethical Leadership in Nonprofit Organizations: How to Conduct an Ethics Audit: May 21, 2003 FRE7230-0
Scale Definition: P - Poor F - Fair G - Good VG - Very Good E - Excellent

P F G VG E
1. Overall rating of program ............................................................................................................ $ $ $ $ $
2. Similarity of actual program content to advertised content ......................................................... $ $ $ $ $
3. Ease of registration ...................................................................................................................... $ $ $ $ $
4. Audibility of seminar ................................................................................................................... $ $ $ $ $
Presenter: Overall Effectiveness
5. Tim Delaney ................................................................................................................................. $ $ $ $ $

Participant Information
6. How many people listened at your site?

$ 1 $ 2 $ 3 $ 4 $ 5 $ 6-10 $ 11-15 $
$Y 21+N
16-20
7. Would you participate in another virtual seminar? .............................................................................................. $ $
What was your overall impression of the program and the virtual seminar format? Additional Comments?
Name of Participant (optional):_______________________________________________________________
PLEASE FAX COMPLETED FORM TO 1-800-472-5138
AA9
9 1

Ethics Audit - Tim Delany

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Ethics Audit - Tim Delany

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Association of Fundraising Professionals

Ethical Leadership in Nonprofit

Tim Delaney, JD/MPA

Wednesday, May 21, 2003

Services provided by KRM Information Services, Inc.

NAME (please print): ___________________________

Tim Delaney, JD/MPA

II. THE MECHANICS

III. ANCILLARY ISSUES

Copyright © 2003 Tim Delaney

2. What is an “ethics audit”?

Building Blocks of an Ethics Audit

Proactive ethics audits should be conducted to avoid the concentric rings of

Æ to avoid personal liability (civil and criminal),

Æ to protect the organization/its mission/those it serves,

Æ to model the way for others in the community, and

Æ because it is the right thing to do.

 Most people associated with nonprofits want to do the right thing…yet

 Plus, the nonprofit world is becoming increasingly more complex and

 Accordingly, people need to have a clearer understanding of what is the right

 The process of developing and performing an ethics audit provides an

 In sum, this view “informs to guide future action”

C. Intermediate Sanctions Compliance

Examples of Ethical Practice:

C. Assistance in Ethical Decision-making

[See more detailed sampling in Appendix B.]

H. Other Nonprofits and the Nonprofit Sector

2. Who should conduct an ethics audit?

B. When: When should an ethics audit be conducted?

¾ American Bar Association, Guidebook for Directors of Nonprofit Organizations

¾ American Bar Association, Nonprofit Governance and Management (ABA 2002)

¾ Colorado Association of Nonprofit Organizations, Conducting an Ethics Audit

¾ Richard Ingram, Ten Basic Responsibilities of Nonprofit Boards (National Center

2. Where to get additional information about ethics in the nonprofit sector?

¾ Association of Fundraising Professionals: www.afpnet.org

¾ Better Business Bureau’s Wise Giving: www.give.org

¾ Free Management Library: www.mapnp.org/library

¾ Independent Sector: www.independentsector.org

¾ Maryland Association of Nonprofit Organizations: www.mano.standards.org

Ethics Audits = Preventive Maintenance

Failure to perform preventive maintenance may lead to wrecks.

Regular performance of preventive maintenance

“Cowardice asks the question, Is it safe?

“What if we could get model communities in this country,

“Community trusteeship involves holding the community in trust

A AFP Code of Ethical Principles and Standards of Professional Practice

B Sample Organizational Component Worksheet for Nonprofit Ethics Audit

C Ethics Column: “Respecting Your Donors’ Intentions”

D Ethics Column: “Playing by the Established Rules”

AFP Code of Ethical Principles and

I. SETTING THE STANDARDS

II. MOVING FROM PRINCIPLES TO PRACTICE

3. Can employees/volunteers do their jobs without violating:

5. Do you have a reward system to honor positive ethical behavior? Yes __ No __

6. Is there a systematic way to review/update/modify your written guidance?

4. What would people identify as the nonprofit’s actual operating values?

III. ENFORCING THE STANDARDS

2. Is there a clearly identified way to confidentially report suspected violations?

A. What areas need improvement?

B. What is the most important need?

C. Implementation deadlines for follow-through action?

Ethical standards: codes of ethics

Common features of codes of ethics

Most people associated with nonprofits want to do the right thing…yet

Plus, the nonprofit world is becoming increasingly more complex and

Accordingly, people need to have a clearer understanding of what is the right

The process of developing and performing an ethics audit provides an

In sum, this view “informs to guide future action”

5. Do you have a reward system to honor positive ethical behavior? Yes No

Card #____________________Exp._ Signature__________________________________

Card #____________________Exp._ Signature__________________________________