Best Practices, Governance Principles Revised

February 25, 2015       Patrick Sullivan      

Independent Sector has updated nearly every one of its 33 Principles for Good Governance and Ethical Practices, the first set of substantive changes since the document was released in 2007.

The Washington, D.C.-based IS will release the principles later today during a Capitol Hill event, led by Sen. Chuck Grassley (R-Iowa) and U.S. Representatives Mike Kelly (R-Pa.), Earl Blumenauer (D-Ore.) and Debbie Dingell (D-Mich.).

“The sharing of best practices makes sense in any field. That’s especially true in philanthropy, where good governance makes it easier for charities to continue their work,” Grassley said via a statement. “Donors want to give to organizations that have transparency, strong financial management, and get the most value from every dollar donated. Independent Sector gives organizations a guidepost for doing things right.”

According to the authors of the report, the impetus to update the principles was twofold. First, new case law and statutory regulations have come into play for a number of areas governed by the principles, and IS has taken a closer look at state regulations for the 2015 version. Second, the environment in which the nonprofit sector operates has evolved since 2007, notably in the areas of data protection, transparency and privacy, and overhead costs.

When the principles first were drafted in 2007, online giving was not as popular, mobile giving was nascent, and crowdfunding was cutting edge. Now, all three are well established. Principles 27 through 33 reflect this new fundraising reality, with updated language regarding donor intent, donor information and filing requirements as they pertain to online fundraising, social media and crowdsourcing.

“Principles emphasize the importance of providing training and supervision for fundraisers, the handling of donor data, and how to take control of the organization’s brand if online platforms are raising funds for the particular organization without their permission,” wrote the authors of the new principles.

The conversation around executive compensation and overhead also has evolved. Movements such as The Overhead Myth attempt to inform the public about the importance of fundraising expenses and overhead cost. Principle 24 keeps the recommendation that organizations spend at least 65 percent of revenue on programs, but it now allows for more flexibility.

The principle reads, in part, that while the 65 percent recommendation is “reasonable” for most organizations, “there can be extenuating circumstances…that require an organization to devote more resources to administration and fundraising.”

Risks to data are much greater than in years past. More organizations use cloud-based software for their donor management systems, and prominent nonprofits such as Goodwill can suffer cyber attacks in which credit card and donor information can be compromised. Principles 5, 6 and 21 now “recognize the importance of protecting an organization’s data along with its business records, property, program content, integrity and reputation,” wrote the document’s authors.

Other extensive updates include principles that deal with the subjects of codes of ethics (Principle 2); whistleblower policies (Principle 4); new business and earned income (Principles 8, 19); and, transparency and privacy (Principles 6, 7 and 33).

The updated version of Principles for Good Governance and Ethical Practices will be available for purchase at www.principlesforgood.com