Between the Nonprofit and Business Sectors
1. Nonprofit organizations and business organizations are equally important to the health and welfare of their communities.
2. Nonprofit and business organizations are both responsible to the community for the successful fulfillment of the tasks within their mission or line of business, as applicable.
3. Nonprofits are operating enterprises with perpetual missions and finite resources, and they must be sensitive to the underlying tension between the two. Nonprofits have a duty to deploy available resources effectively, cognizant of practical limitations in the face of enduring need and with respect for the challenges awaiting future members of their communities. Nonprofits are not entitled, simply by virtue of their mission, to donations, contributions, or gifts of goods or services. They must operate lawfully, efficiently and effectively to deliver quality goods and services in their communities, and to establish a positive reputation and goodwill that will attract donations and support. Nonprofits are “private” organizations in that they are managed by private individuals (the board of directors), but operate for public purposes.
4. Businesses are accountable to their communities for the sale of quality goods and services at reasonable prices. They must operate within the law, create bona-fide opportunities for gainful employment, and generate new wealth in the community through innovation and expansion. Business organizations should also, directly and indirectly, provide meaningful financial and in-kind support to well managed nonprofit organizations within the community.
5. Rigorous governance, management, and ethical principles and practices at all levels within nonprofit and business organization are essential to their success and longevity. The total is greater than the sum of the parts. The entire community benefits when its nonprofits and businesses succeed. Business organizations make a profit so that nonprofit organizations do not have to do so.
One: Tax-exempt status is a privilege conferred by federal and state legislative acts. Tax exemptions and tax deductions reduce public tax revenue, and, as such, indirectly subsidize nonprofit sector operations.
Two: The governing boards and management teams of these organizations must adhere strictly to high fiduciary standards when expending and managing the funds and assets of the organizations they serve. Moreover, as fiduciaries of financial and other assets dedicated to a public/charitable purpose, nonprofit governing boards have a higher level of responsibility than do our elected officials who are not held to fiduciary standards when they exercise their voting authority over public assets.
Three: Nonprofit governing boards have a duty to develop a set of measures and metrics to gauge both internal operating functions and the social impact of their organizations. The applicable measures and metrics should be prepared in conformance with the fiduciary standards mentioned above consistent with applicable benchmarks, data, and known industry standards.
Four: Organizations should report prominently and candidly the results of operations relative to the measures and metrics. The fiduciaries governing boards of these organizations must have the courage to report poor measures and metrics, not unlike the manner in which publicly traded business organizations are required to do so – even if over the objections of management.
Five: Nonprofit Organizations should not misuse the emotional appeal of their mission. The emotional appeal of a mission statement should be subordinate to the measurement and metrics outcomes.