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Nonprofit ethics seen deteriorating

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Nonprofit ethics standards are declining, catching up to the troubling levels already seen in the business and government sectors, a new study says.

Financial fraud is now more prevalent among nonprofits than among private businesses and government offices, according to 2007 data from the Ethics Resource Center.

The National Nonprofit Ethics Survey is part of a larger project that released a business ethics survey in November of last year, and its government counterpart this January.

The results of the three surveys show an almost exact correlation in the percentages of employees who reported witnessing one or more acts of misconduct in the past year: 55 percent at nonprofits, 56 percent at businesses and 57 percent in government.

A significantly larger number of nonprofit employees, however, said their organization had become less ethical in the past five years, with 19 percent reporting a weakening ethical culture, compared to 7 percent of business employees and 11 percent of public employees.

Those nonprofits that had not seen a rise in misconduct said they had well-implemented ethics and compliance programs.

A laundry list of misconduct types also correlates across the three sectors. Putting one’s own interests ahead of the organization’s was the top violation listed by 24 percent of nonprofit employees.

Another 21 percent said they had witnessed a colleague lying to other employees, and 19 percent each said they had witnessed abusive behavior or misreporting of hours worked.

Mid-sized nonprofits seem to face the greatest risk of ethical missteps, according to the report, and leadership style was also seen to be key.

The report suggested that many boards are not taking full advantage of their influence in curbing ethical deviations and, where board influence was heavy, those surveyed often reported high levels of misconduct.

Among nonprofit employees who saw their board as “top management,” 18 percent said their organization had weak ethical leadership, compared to only 11 percent among those who saw the executive director as the key leader.

“The good news is that, when compared with for-profit businesses and government institutions, nonprofit organizations still exhibit somewhat stronger ethical cultures where employees’ personal values are aligned with the missions and values of their organizations,” Patricia Harned, president of the Ethics Resource Center, says in a statement.

“We also found that nonprofit employees who demonstrate ethical courage and report misconduct are less likely to experience retaliation than employees in other sectors,” she says.

In 2005, 64 percent of nonprofit employees surveyed said they feared retaliation for reporting an incident.

In 2007, that number dropped to 42 percent.

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