By Peter Panepento

Nonprofit organizations have long held a reputation for having significantly higher ethical standards than businesses and government.

But a report released today by the Ethics Resource Center, in Washington, shows that gap is closing quickly — as standards at charities are declining at what the study’s authors say is a disturbing rate.

Rates of observed misconduct at nonprofit organizations are at the highest level since the Ethics Resource Center began measuring in 2000. In 2007, more than half — 55 percent — of nonprofit employees observed one or more acts of misconduct in the previous year.

Twenty-four percent of nonprofit employees observed their co-workers putting their own interests above those of the organization. Twenty-one percent observed managers or executives lying to employees. Nearly one in five employees — 19 percent — reported that they had seen abusive behavior or that they had seen co-workers misreporting the number of hours they had worked.

The frequency of these behaviors mirrors the frequency reported in the for-profit and government arenas, the study found.

“One would think that freed from the pressure to generate and distribute profits to shareholders, nonprofit organizations would rise high above the myriad ethics and compliance issues that have plagued the public and private sectors over the years,” Ethics Resource Center President Patricia Harned said in a written statement. “Unfortunately, the 2007 National Nonprofit Ethics Survey paints a very different picture. The nonprofit sector that for so long enjoyed a better reputation with regard to its ethics now exhibits many of the shortcomings ERC found in its companion surveys of the public and private sectors.”

558 Interviews

The survey is based on interviews with 558 nonprofit employees and is weighted and compared with similar surveys with corporate and government employees.

Based on those interviews, many nonprofit organizations are less stringent in maintaining their ethical standards than they have been in the past.

The study found that 19 percent of nonprofit employees believe that their organizations have become less ethical in the past five years. By comparison, only 7 percent of those who work for businesses and 11 percent of those who work in government agreed with this perception.

The findings also reflect the results of other recent studies of accountability in the nonprofit world.

For example, a recent analysis of fraud cases involving nonprofit groups that had been examined by the Association of Certified Fraud Examiners found that many organizations that had been victimized by fraud did not have proper internal controls that deter theft.

In addition, a 2007 study by the Urban Institute, in Washington, found at least 20 percent of nonprofit groups make insider deals with board members and more than 70 percent have not adopted policies to insure that such deals could be easily identified as posing a conflict of interest.

Ms. Harned says these trends suggest the nonprofit world needs to take action to preserve public confidence — and the confidence of its employees.

“With misconduct on the rise, the nonprofit community needs to mobilize,” she said. “Strong ethical cultures need to be reinforced where they’re already in place, and established in other organizations to combat the loss of confidence that we’re seeing among many nonprofit employees.”

A full copy of the survey is available on the Ethical Resource Center’s Web site.