March 27, 2008
Ethical Standards Erode at Nonprofit Groups, Study Finds
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.
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The University of Texas Southwestern Medical Center at Dallas is a prime example of this study. The university’s president,Dr. Kern Wildenthal, certainly puts his interests above everything and everyone else. News media in Dallas has exposed the president and his spending habits using donor funds to enhance a lifestyle over and above his $1.1 million salary.Wildenthal’s penchant for fine wine and caviar is only exceeded by his need to travel to Europe and stay in first class hotels,also at donor expense. He had his internal auditor declare “all expenses are 100% legitimate and appropriate”, what else could he say to his boss?? This misuse of donor funds even extends to the evp for business,John Roan who uses a memorial fund restricted to training for baseball tickets and meals.What the heck the donor has been dead twenty years?Arrogance is the hobgobblin of this administration.
— Brent Mar 27, 08:59 PM #
Although I agree with what the Ethics Committee is stating (and revealing) and equally find this a hugely problematic issue that seems to be heading in a downward spiral, I want to comment on Ethics Resource Center President Patricia Harned’s comment re: how one would think “nonprofit organizations would rise high above the myriad ethics and compliance issues that have plagued the public and private sectors over the years.” It seems to me that with the increasing number of nonprofit organizations competing for funding, in combination with the decrease in state and federal support, with a slow increase in salaries earned in the nonprofit sector, sometimes I feel that “the system” is what creates the environment through which ethical individuals slowly find themselves partaking in unethical practices. Now, with that being said, I am not discounting those individuals who transition into the nonprofit sector for “ulterior motives” (i.e. thinking it’s an easy and free ride, that there is more of an opportunity to “take advantages”, just want to get out of the for-profit world, etc.). I guess I’m saying that it is to the demise of our own government and societal ethics that have a trickle down affect, creating gaps in the ethical practices (or lack thereof) within, what one might think, as one of the few “ethical” areas of our society
— Ken Grunke - Pillars Mar 28, 03:53 PM #
One needs to take a very serious look into the funding operations of The Salvation Army. Not what you are all lead to believe. The Majors have complete control over their corps and are virtually raping the system for a live style that is incomprehensible to the average donor. The regulation system in place needs to be changed and a check and balance system by an outside entity needs to be in place for the army to maintain any further integrity with the general public. It may be just complacency, but I believe it is a much larger issue of which the army will possible implode from within if this situation is not corrected immediately.
— Mark Mar 29, 08:39 AM #
What utter rubbish you publish about the Salvation Army. World wide and locally the Sally Army is renown for it’s total honesty. The Salvation Army has the lowest expense ratio of any major charity, anyhwre in the world. Either put up your proof or shut up.
— Geoff Mar 31, 07:00 PM #
Unfortunately executives are chosen in first class and on the golf course not from the non-profit world. The American Red Cross is in the middle of of a 200 million dollar deficit and their solution is to layoff lower level staff and create new positions that the staff need to apply for. This is sad when employees have seen upper level management use funds for items such as private planes to the best seats at sporting events. “It’s free money so why not” has been the moto now the organization must pay for this recklessness.
Clara Barton must be rolling over in her grave.
— Lisa Apr 1, 11:05 AM #
For more information about what I describe as the biggest non profit fraud of our time, visit my site at http://sandyfrost.newsvine.com.
This site contains two years of investigative articles that have exposed the Shriners lack of non profit accountability, disclosure and transparency. Their sub-group, the Royal Order of Jesters, has been in the headlines lately because the FBI linked members to interstate prostitution.
— Sandy Frost Apr 1, 10:38 PM #