Guiding Principles & Best Practices

Introduction

The South Carolina Association of Nonprofit Organizations is pleased to publish this web version of the revised, second edition of Guiding Principles & Best Practices for South Carolina Nonprofits. This publication was first issued in early 2007, when SCANPO celebrated its 10th anniversary of service as the premier resource for networking, education and information on behalf of the state’s nonprofit sector. It is designed to encourage accountability among nonprofits and grantmakers that is guided by values of openness, inclusiveness, accessibility, ethical conduct and sensitivity to the diverse communities that we all serve.

The document resulted from an extensive initiative, known as “Preserving the Public Trust,” that was guided by a Blue Ribbon Task Force of representatives from nonprofit organizations and foundations, professional advisors and additional volunteer experts. As part of its deliberations, the task force considered the input of over 600 nonprofit executives and board members who participated in “listening sessions” conducted around the state.

Publication of the Guiding Principles & Best Practices was followed by the introduction of training workshops to help nonprofits assess their current practices and identify opportunities for improvement. This second, revised edition reflects feedback received from training participants, as well as a team of experts who continue to advise SCANPO in a valued role as volunteer curriculum advisors. The major changes include the addition of two new principle/practice areas – Operational Planning & Evaluation and Marketing & Communication.

In publishing these Guiding Principles & Best Practices, we are seeking to promote and support adherence through education, training, and building awareness. Our ultimate goal is that, through widespread adoption of the principles and practices, South Carolina nonprofits will grow stronger and will demonstrate they can govern themselves responsibly. The hoped-for result is to preserve the trust and confidence of the public, whose continued support is critical to the sector’s vitality.

The voices and experience of our partners help ensure this document remains relevant. We encourage you to continue to share your thoughts and suggestions as you seek to put these practices to work in your organizations.

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How to Use the Guiding Principles & Best Practices

The practices are organized around nine core principles:
• Mission & Planning
• Governance
• Accountability, Transparency & Legal Compliance
• Operational Planning and Evaluation
• Financial Management and Stewardship
• Human Resources
• Fundraising
• Marketing & Communications
• Information Management

Adherence to these principles and practices is not mandatory. However, SCANPO believes that all well-run organizations should adopt them. At the same time, it is recognized that nonprofits are diverse and that they evolve differently over time. Nonprofit board members and staffers are encouraged to use the document as a guide to assess their current levels of practice, with an eye toward identifying opportunities to improve the effectiveness of their organizations.

SCANPO acknowledges that many nonprofits have taken steps toward excellence by obtaining accreditation or certification as affiliates of parent organizations that have established their own performance standards. The Guiding Principles & Best Practices are seen as complimentary to the work of these other bodies. In fact, some of those organizations’ standards helped inform the work of the task force. In addition, organizations whose boards are operating under Policy Governance®, also known as Carver Governance, may differ slightly in their definition of “best practices”. For these organizations, a brief supplement to the Guiding Principles & Best Practices is available from SCANPO upon request.
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Mission & Planning

A nonprofit operates for a clearly defined mission that flows from its vision of the community it seeks to build and the role it will plan in achieving that vision. A set of values guides both that vision and how the organization believes it will go about achieving its mission. Vision, values and mission drive fundamental decisions and planning.

Best Practices

• The board of directors has developed vision, values and mission statements that define the organization’s reason for being and guide all decision-making. These statements are sufficiently defined to effectively guide all activities of the organization.
• The board, in concert with key staff, sets direction and strategic targets to be achieved, and relies on input from stakeholders
• The board regularly assesses vision, values and mission, to determine ongoing relevancy, address evolving needs and consider societal and community changes.
• The organization’s vision, values, mission and strategic direction are not created and adopted by the board in a vacuum. The board seeks and relies on input from all of the organization’s stakeholders, including staff, clients, members, supporters, partners and the community at large.
• A strategic analysis is conducted on a regular basis resulting in a body of quality information from both internal and external sources.
• The board anticipates the future by asking “what if” and considers how current issues and developments may impact the organization’s activities in the future.
• The board sets aside sufficient time at every board meeting to examine strategic direction and make needed adjustments.
• The organization consults with its counter parts in the community to determine the need for services and the best use of community resources.

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Governance

The responsibility for governing a nonprofit lies with its board – a decision making body that provides overall leadership and policy direction. The board ensures sound stewardship of nonprofit assets and resources. Board members are held to the high legal and ethical standards to ensure that their loyalties lie entirely with the nonprofit, that they are diligent in carrying out their duties, and that they act in good faith to advance the nonprofit’s mission.

Best Practices

• The board functions at a level of policy and strategy to establish direction consistent with the vision, values and mission of the nonprofit.
• The organization complies with governing documents, including by-laws and articles of incorporation. The board reviews these documents regularly and updates them as needed.
• The board ensures that the nonprofit follows its policies and strategies through evaluation of the chief executive, the board itself and the nonprofit as a whole. That evaluation includes ongoing review of financial programmatic performance and leads to changes in policy or strategy as needed to advance its mission.
• In carrying out its duties, the board functions corporately, as a body. The whole board – and not individual members – establishes policy, determines strategies and gives direction to the nonprofit. The board through designated spokespersons speaks with a single voice on matters affective the nonprofit.
• Board members diligently carry out their duties by:
  a. regularly attending board and committee meetings,
  b. reviewing, understanding and independently evaluating materials presented to the board, and
  c. asking for the information needed to carry out their job.
• The board has in place and enforces policies and processes to ensure the highest ethical standards.
• Board members, staff and volunteers act in the best interest of the nonprofit. They do not further their own personal interests. Board members question wrongdoing.
• Board members are recruited, oriented and trained through a deliberate process that ensures that members have the skills and knowledge to carry out their duties and a clear understanding of:
  a. the nonprofit’s vision, values and mission.
  b. board member’s roles, both collectively and individually, in carrying out that mission,
  c. the board’s responsibilities and duties, and
  d. best practices in governing and leading nonprofits.
• The board includes a diversity of cultures, experiences, skills and perspectives that reflect the community that the nonprofit serves.
• The board adopts and uses processes for decision making that encourage full and vigorous discussion from diverse viewpoints and problem solving.
• The responsibilities and authority of the board and any staff are clearly outlined, consistent with the board’s legal duties and the vision, values and mission of the nonprofit.
• The loyalty of board members to the mission of the organization is greater than their loyalty to the chief executive.
• The board hires the chief executive, sets and reviews compensation, and holds him or her accountable for the organization’s performance.
• Board members serve as ambassadors, representing and advocating for the nonprofit, as well as hearing and seeing the needs for and effect of the nonprofit in the community it serves.
• Board members make personal financial contributions, commensurate with their ability, and help raise funds for the nonprofit.

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Accountability, Transparency & Legal Compliance

Nonprofits, by their nature, exist to serve the public good. They have a legal and ethical obligation to conduct their activities in a way that ensures their accountability and is transparent, or clearly evident, to the public. Communication to constituents and the public about the mission, activities and decision-making is open, honest and ongoing. Information that is easily accessible promotes external visibility, public understanding and trust.

 

Best Practices

• Board and staff know about and adhere to all applicable federal, state and local laws, regulations and fiduciary responsibilities. The organization conducts a periodic internal review of compliance and provides a summary of results to the board and staff.
• The organization has adopted a code of ethics and makes it publicly available.
• The organization has a formal conflict of interest policy that meets minimum IRS standards and guidelines and ensures board and staff members adhere to this policy in all dealings.
• A “whistleblower” policy and system are in place that allows individuals to report misconduct confidentially and without negative consequence for doing so.
• The organization has a policy to respect and protect the confidentiality and privacy rights of clients, members, grantees, employees, donors, volunteers, evaluation participants and others in the organization, consistent with applicable law. It does not release or disclose information about those individuals or organizations without their specific knowledge, understanding and permission, except as required by law or appropriate standards of organizational transparency.
• The organization prepares and makes available to the public annually a report that includes information about the mission, programs, basic financial data, board and staff members and volunteers.

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Operational Planning and Evaluation

Nonprofits development, implement and monitor operational plans based on the vision, values, mission and strategic direction created by the board of directors and key staff. Operational plans ensure accountability and provide the foundation for an evaluation of the organization’s activities. Nonprofits understand their essential responsibility to assess the impact of their efforts and act upon the information.

 

Best Practices

• Working from the board’s strategic direction and guided by the organization’s vision, values and mission, the staff develops and works from an operational plan that defines how the organization will achieve its goals and objectives within an established timeframe and budget.
• The operational plan is dynamic. The organization modifies the plan in response to environmental changes and to ongoing evaluation of its successes and failures.
• The organization develops a budget that reflects the operational plan and ensures acquisition and allocation of adequate resources to accomplish the plan. The annual budget process includes steps to ensure that the budget is consistent with the organization’s vision, values, mission and strategic direction.
• The nonprofit builds evaluation into its operational plan. It includes clearly measurable outcomes, goals, objectives, timelines and key indicators, and defines specific activities and responsibilities for board, staff and volunteers. The operational plan serves as a management tool for measuring activities, evaluating outcomes, and adjusting plans and strategies.
• The nonprofit relies on evaluations to identify its strengths and successes as well as its weaknesses and failures. The organization uses evaluation findings continuously to improve program operations and guide the strategic planning process.
• Organizational stakeholders, including clients, members and constituents, are involved in evaluation activities. Evaluation includes measures of the satisfaction of service participants and constituents, as well as program efficiency, effectiveness and outcomes.
• The organization has defined procedures in place for evaluating its programs and outcomes in relation to its vision, values and mission. It uses performance measures that are realistic and appropriate to its size and scope and to its constituents. As appropriate, the evaluation makes use of both quantitative and qualitative data.
• The organization has a complaint policy and process for clients and constituents, which are a critical evaluation tool for determining how customers feel about what they do and how they do it.
• The organization seeks professional guidance in planning and executing evaluation processes as appropriate.
• The organization communicates evaluation results to a broad range of groups, including board, staff, constituents, clients, funders and the public.
• The organization, as a routine part of its work, anticipates and plans for disasters, disruptions and transitions. When unanticipated events occur, the board is fully informed and participates in determining a plan to proceed.

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Financial Management and Stewardship

Nonprofits are knowledgeable and responsible stewards in managing their financial resources. This requires effective annual budgeting practices, compliance with legally mandated financial requirements, adherence to sound accounting principles that ensure fiscal responsibility and public trust, effective internal controls, effective and efficient use of resources, and clear policies and practices to monitor the sources and uses of funds.

 

Best Practices

• The organization has established a system of internal controls that can produce accurate and reliable financial statements on a regular basis for review by the board and that can deter fraud. The extent of internal controls is based upon the size and complexity of the organization.
• The organization secures an external financial audit by an independent Certified Public Accountant (CPA). Small organizations, depending upon their size and complexity and consistent with the advice of a CPA or external accounting professional, may choose an annual review of the financial statements or take such other steps to ensure that the organization’s financial results are reported accurately and in a way that is comparable with similar organizations and that appropriate financial procedures are in place.
• The organization has established an audit committee, composed of directors who are not compensated by the organization and at least one financial professional. For organizations whose size or structure makes an audit infeasible, the audit committee reviews or ensures a review so that the board can be assured of fairly reported financial statements.
• The organization operates in accordance with an annual budget approved by the board or under financial guidelines set in place beforehand by the board.
• The board includes members with financial expertise appropriate to the size and complexity of the organization, and when appropriate, seeks outside professional advice.
• The organization operates in accordance with a board-approved investment policy that ensures reasonable returns balanced with investment prudence. The investment policy is customized to the particular goals and needs of the organization and, at a minimum, reviewed on an annual basis.
• The organization adheres to a risk management plan and regularly considers the need for insurance coverage, taking into account the nature and scope of the nonprofit’s activities and its resources.
• The IRS Federal Form 990 is reviewed with the board each year to ensure their familiarity with the content.

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Human Resources

People are a nonprofit’s most essential assets. Effective leadership, adequate resources and capable management of these assets enable nonprofits to accomplish their goals. Fair and equitable practices, including adherence to applicable local, state and federal employment laws, ensure the attraction and retention of qualified staff members and volunteers, and support a healthy work environment.

 

Best Practices

• A statement of the organization’s values is provided to all employees and volunteers and is used as a tool for creating a supportive work environment that fosters mutual respect and trust.
• Employees and volunteers are provided with written policies and procedures that describe expectations for them as well as obligations of the employees, and that have been approved by the board and reviewed by a qualified attorney.
• Staff members and volunteers are provided with opportunities for personal growth and professional development.
• The performance of staff members and volunteers is evaluated annually.
• Staff members and volunteers reflect the diversity of the communities the nonprofit serves.
• Staff members and volunteers possess the necessary skills and knowledge to perform their job.
• Staff members receive market-based and livable compensation, adequate benefits, and the opportunity to contribute financially to retirement plans.
• Current, written position descriptions are provided for staff members and volunteers.
• A clear conflict of interest policy has been established for employees that includes disclosure of relationships, nepotism and interested party transactions.
• Specific grievance procedures have been adopted for personnel that include protections for reports of violations or organizational policy or applicable laws.
• Organizational transition plans, including succession plans, have been established to manage changes in leadership.

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Fundraising

As the intermediary between donors and beneficiaries, nonprofits serve as the vehicle through which philanthropy occurs. They have an ethical and fiduciary obligation to ensure funds are handled properly to carry out the organization’s mission and the intentions of donors. Fundraising adheres to high standards of practice, governed by clear policies and open communication with donors and other stakeholders.

 

Best Practices

• The organization has established policies to govern the acceptance and use of charitable gifts that are in compliance with applicable laws and regulations consistent with the organization’s mission.
• A comprehensive fundraising plan of action has been developed that reflects diverse revenue sources when appropriate.
• Clear, valid, compelling bases have been established to attract charitable funds.
• The organization has secured board consensus of fundraising goals, objects and timelines, with accountability tied to the board committee charged with raising funds.
• The organization communicates regularly with donors regarding the nonprofit’s activities and makes information available through varied means and media.
• The organization adheres to the known intentions and restrictions of donors regarding the use of donated funds and property.
• The organization respects the privacy of donors and safeguards the confidentiality of donor information as instructed by the donor.
• Fundraising communications contain clear, accurate and honest information about the organization, its activities, and the intended use of funds.
• A donor stewardship program, with staff accountability, has been established for each level of donor.
• Volunteer fundraising leadership is recruited commensurate with the scope of the fundraising project.
• Compensation for fundraising personnel and contractors is on an ethical basis that puts the interests of the nonprofit first. The organization does not compensate personnel on a percentage or commission basis.

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Marketing & Communications

Nonprofits engage in marketing to communicate their vision, values, mission and progress of social change to both their internal and external constituents. They adhere to the highest ethical and professional marketing standards. Effective communications and sound marketing practices build trust through accountability and enhanced relationships. Investing in a clearly defined marketing and communications plan raises public consciousness, influencing decision making, increased funding and sustainability of the organization and contributes to mission fulfillment.

 

Best Practices

• The organization establishes clear, written marketing and communication standards, and includes them in orientation for all employees and volunteers.
• The organization intentionally strives to ensure consistency between its actions and its marketing and communications.
• The nonprofit has defined its key audiences and understands their needs and desires as they relate to the organization’s vision, values and mission. Audiences may include clients, funders, members, employees, volunteers, board members, media, legislators and the public.
• To understand the marketing environment, the nonprofit conducts research and completes a realistic situational and environmental analysis before developing and implementing a marketing and communications plan.
• The organization develops a marketing and communications plan that reflects realistic and measurable goals, objectives, a budget and timeline. The plan supports the organization’s overall strategic direction and demonstrates accountability to constituents and the public.
• Board members endorse and are committed to implementing the organization’s marketing and communications plan, and carry out their role as organizational advocates.
• The organization develops its marketing, communications and design efforts with the advice of individuals with marketing skills and experience. The organization builds internal capacity for marketing and communications.
• The organization regularly assesses the marketing and communications plan, evaluates results, and makes necessary changes to ensure achievement of goals, sustainability, and fulfillment of the mission.

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Information Management

Nonprofits have extensive responsibilities for managing information in a way that ensures confidentiality, accuracy, timeliness, integrity, security and legal compliance. Adequate and current technology is critical for managing information and achieving the organization’s mission.

 

Best Practices

• Systems are in place to provide timely, accurate and relevant information.
• The organization has created and regularly updates a plan for investing in and ensuring sufficient resources for technology.
• The organization has established policies that govern the use of information and technology systems, including security, data storage, appropriate use, access rights, maintenance and back-up.
• The organization has established policies to ensure confidentiality of information and privacy, with appropriate procedures to limit access to data.
• Staff, board members and volunteers have the skills they need to use technology required for their work.
• The organization has a written mandatory retention and periodic destruction policy, which includes guidelines for electronic files and voicemail.
• Policies and practices are in place to identify and protect the organization’s intellectual property rights and to ensure the rights of other organizations are not violated.
• The organization maintains and implements plans to deal with disasters and transitions.
• The organization seeks to ensure that any web-based information about the nonprofit is accurate.

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