Nonprofit Code of Conduct

By Elizabeth Rayne

Many nonprofit organizations create a code of conduct for the organization, not only to address common workplace issues, but also to maintain goodwill and a positive reputation essential to any thriving nonprofit. Nonprofit organizations may navigate many different areas of law, from employment law to tax regulations, and a code of conduct may help the organization stay on track. While not mandatory, a code of conduct can help to set standards and avoid problems that may derail the organization's mission.

Employee Conduct and Hiring

The code of conduct should address personnel policies and employee conduct. A nonprofit may have the board of directors create or approve an employee policy that addresses workplace conditions, hiring and firing of employees, employee benefits and use of organization resources, and employee grievance procedures. The code of conduct may address how to create a respectful and safe work environment. Additionally, the code may address anti-discrimination policies in hiring and opportunities within the organization. The organization should not discriminate on the basis of gender, race, religion, or national origin. However, religions nonprofits may not be barred from hiring employees on the basis of religion.

Dealing with Program Participants

The nonprofit may also choose to include in the code of conduct the organization's expectations for interactions with program participants. Employees should treat program participants with respect and professionalism, especially between adult staff and youth, and members of the opposite sex. If appropriate, the nonprofit should have policies in place to protect participant confidentiality and privacy. Some nonprofits, such as those that help victims of domestic violence, may be legally required to maintain client confidentiality.

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Dealing with the Public

Many nonprofits may draft a code of conduct that prohibits staff from making representations to the public or the media without organizational approval. In addition to maintaining the mission of the nonprofit, the IRS restricts the political activity of nonprofit organizations that have 501(c)(3) status. 501(c)(3) organizations are generally barred from lobbying, but may take a stance on a particular public policy issue. However, there is a fine line between issue advocacy and prohibited political activity that could jeopardize the organization's exempt status. Nonprofits, therefore, may take extra precautions when communicating with the public. Nonprofits that are interested in lobbying or other political activities may instead pursue 501(c)(4), (c)(5), or (c)(6) status with the IRS.

Executive Standards

Executives and the board of directors for the nonprofit should have a separate code of conduct that addresses conflicts, professionalism, accountability and transparency. Many states have nonprofit laws which address nonprofit executive and board standards, such as banning loans to board members or procedures for financial conflicts of interest that may arise. Additionally, the IRS requires that nonprofits submit an annual form 990, and provide detailed information about the organization's conflict of interest policy, compensation and whistle blower protection policies. As such, nonprofits may consult their state laws and IRS regulations when drafting executive and board policies.

State Standards

Nonprofits may refer to state law when creating the code of conduct. The state where the nonprofit is formed may have specific registration requirements for new nonprofits and require organizations to include certain provisions in the organizing documents. For example, state law may prohibit nonprofit directors and officers from receiving any share of the profits of the organization, apart from reasonable compensation. Similarly, when the nonprofit is dissolved, the state may require it to distribute its assets to another nonprofit or government agency. Such provisions may also be included in the organization's code of conduct.

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Conflict of Interest Policy for 501(c)(3)


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