|By: Donald A. Griesmann
7115 B Monmouth Avenue
Ventnor NJ 08406
August 10, 2002, updated on July 14, 2003
Disclosure to the Public
What facts and documents of your nonprofit organization (NPO) are
required to be available to the public? If you are acknowledged by the
Internal Revenue Service (IRS) as a 501 (c) (3) organization, you have
legal requirements to provide the public with certain documentation and
accountability upon request. If you receive public funds, there may be
requirements from funding sources about public accountability. There are
certain staff personnel records that may not be released, such as health
records. On the other hand if you have staff, there are personnel records
open for inspection at least to funders. There are documents that the
board of trustees should have available to them about the organization.
Client/customer/patient (hereafter "client") records may be protected but
not all client records are protected from a subpoena or court order or
from a contract compliance provision.
For all NPOs the incorporation papers, IRS determination letter as an
exempt organization, 990s (required if the NPO has over $25,000 in
receipts in the year) and Form 1023 (the original papers filed with the
IRS for determination) are public records. Your state may also have law on
disclosure as well.
The IRS web site features material for nonprofits about public
disclosures. Sites that are helpful include the following:
- Frequently Asked Questions can be found at
Here you will find answers to a definition of tax exempt organizations,
what organizations are affected by the law, what tax-exempt
organizations are required to do, and what must be made available to the
public and other factors.
- The IRS maintains a complete Manual for exempt organizations.
Sections of the Handbook of particular, but not only, interest to NPOs
are Sections 7.8.1 through 7.27.27 -
- Copies of IRS Field Memoranda are located at -
- Concerning contributions and required disclosure see "
http://www.irs.gov/charities/article/0,,id=96430,00.html and Form 1771,
"Charitable Contributions - Substantiation and disclosure",
- IRS Revenue Rulings (not the easiest listing to use, but it provides
the links if you know what you are looking for) listed by years and
distribution number are available at -
- For general tax information about charities and nonprofit
organization from the IRS, see -
- Material concerning filing requirements, including the 990 forms,
with the IRS can be found at
- For information about donations to an exempt organization and
Many leaders of nonprofit tax exempt organizations have not recognized
the movement within the oversight of the organizations " increased
transparency of the organization. One critical aspect is the posting of
IRS Form 990 and 990-EZ on the Internet. The public, potential donors,
foundations, corporate sponsors all have access to the 990s of previous
The Instructions to the IRS Form 1023 state clearly that the
application and supporting documents are a public record. Trade secrets,
patents, style of work and other items are not a public document. Certain
documents may be marked, "Not Subject To Public Inspections". The
documents that the IRS says must be open for public availability include
the determination letter from the IRS. The public documents are to be
available at the main office and at all other offices with at least three
employees during regular business hours.
The Taxpayer Bill of Rights 2 provides other "open document"
requirements. This law provides that an organization must furnish a copy
of its 990, 990-EZ, 990-BL, 990-PF or 1065 and the last three annual
information returns or exemption application and certain related documents
if requested in writing or in person. Certain schedules associated with
those forms do not have to be disclosed such as Schedule A of Form 990-BL,
Form 990-T, Schedule K-1 of Form 1065 or Form 1120-POL. The only charge
that can be assessed is reasonable cost for copying. If the request is in
person, the organization must make the copies available on the same
business day unless there are unusual circumstances as listed in IRS
Regulations section 301.6104(d)-1(d)(1)(ii). If the request is in writing,
the request must be met within 30 days. The penalty for failure to allow
public inspection of annual reports is $20 per day the failure continues.
Willful failure to provide public inspection or to provide copies can
subject the NPO to a fine of $5,000 for each return or application. An
organization can ask the Secretary of Treasury for a waiver if it believes
it is being harassed. For more information see IRS Form 1023 and
Publication 557, Tax-Exempt Status for Your Organization. There is a
provision that when this material is "widely available" there has been
compliance with the law. For further analysis see material produced by
Eric Mercer at
this material, however has not been updated since 1999 but is still
One question that NPO leaders may want to assess is how to maximize the
990 to tell the story of the nonprofit organization and its mission.
Generally the 990 is left to the accountant or fiscal officer who prepares
the annual audit, but perhaps it should be a shared preparation. Part III
of the 990 asks for a description of the activities performed, the reason
for the primary exempt status and descriptions of the four most costly
programs. Many 990s have a one liner here. Think about how you can best
utilize this section of the 990 for marketing your NPO. Attachments to
further show your program are discouraged by the IRS. There is not enough
space to cover the efficiency and effectiveness of your organization, but
there is an opportunity to expand the importance of your mission. If the
interest is peeked, it may encourage further search from a potential donor
by contacting you or reviewing your web site. For a very useful article
about how to read a 990, see
GuideStar provides invaluable assistance with its project linking all
nonprofit 990s online and with an easy search engine,
Take a look; your program is undoubtedly listed. GuideStar has a voluntary
project for NPOs to increase the knowledge about the organization at the
web site. It is becoming clear at GuideStar that persons considering
giving a major gift frequently are aware of the site and check on the
information there about the nonprofit before contributing or going further
in providing a grant. The GuideStar information can be a nonprofit
resource for major gifts and personal and corporate giving. See
for 10 reasons to be a participating nonprofit.
The National Center for Charitable Statistics has State and county
records of 990s, the 990 Form and the United Registration Statement (URS)
at http://nccs.urban.org/">http://nccs.urban.org/. The site
has profiles of charitable organizations from 1998; click on the button
"Databases" on the left hand side. 990 online.com has links to a large
database of material from the IRS, law schools and congressional member's
href="http://www.990online.com/">http://www.990online.com/; please be
aware this is a commercial site that has many free links.
There are data and information that need not be disclosed on the 990.
For a brief discussion about electronic filing of the 990 and what does
not have to be disclosed see the material at the Nonprofit Coordinating
Committee of New York,
A further Internet boost to accountability, disclosure and transparency
is the addition of a donor's assessment kit and report card about
charities. This site,
of Philanthropy Now, has donor coaching, tools for giving and asking for
donations and nonprofit consultation for donors. The future of nonprofits
and their relationship with donors will include donors performing homework
checks over the Internet as part of the decision-making process and
nonprofits maintaining due diligence, delivering on their missions.
It may be in the best interest of an NPO to have a written, public
policy stating that any person seeking a public document shall ask in
writing and with specificity what is being sought. The policy should state
that copies are to be sent within a certain number of business days (not
exceeding 30 days) after payment of a reasonable copying fee; state the
amount per page. IRS Publication 557 states that as of June 1, 2001 the
rate is $1.00 for the first page and 15 cents for each additional page.
The organization can also charge the actual postage costs it pays to
provide the copies.
There may be state laws requiring that certain documents filed with the
state for determination of tax-free status are open to the public. I
suggest making the overall disclosure policy consistent. The state may not
have the detailed requirements about how the records are to be shared with
the public to the degree that the IRS has developed.
Sharing Documents with the Staff and Volunteers
There are other issues about what you share with staff or volunteers.
What do you give a new employee on the first day at work? Here is a sample
list of material a new employee should be given:
- The Employee Handbook.
- IRS Form W-4 - all employees must complete this form for tax
- Employee Benefits Elections - if you provide benefits such as health
insurance, life insurance or pension plan, the employee should sign up
and the employer should provide all relevant documents and Summary Plan
- Confidentiality and invention assignment agreement - employees need
to maintain confidentiality while working for the agency and the
employer should have a form
- INS Form I-9 - this form is required by the US Immigration and
Naturalization Service to preclude undocumented aliens from employment.
- Emergency notification - have a form requesting the name, address,
telephone numbers for any person(s) to be contacted in an emergency.
- Agreement to abide by the organization's policy that personnel
disputes are to be resolved through arbitration, signed - if the
organization wants this system and it is permitted under state law.
- Use of Technology in the Workplace and Privacy Issues Manual.
- Violence in the Workplace Policy and Procedures Manual.
- Anti-sexual Harassment Policy signed.
- Drugs and Alcohol in the Workplace Policy, signed.
- Equal Employment Policy and statement concerning diversity , signed.
- Conflict of Interest Policy signed.
- Salary Administration Plan and Salary Schedule.
- Time Sheets for Payroll, Grant Reporting.
- Client Complaint and Appeal Process and Forms.
- Job Description and Evaluation Forms and Process for the Position.
- Program Priorities and Planning Report with Mission Statement,
Vision, Measurable Goals and Objectives and Work Plans.
- New Employee Welcome/orientation Kit.
- Internal Operations Policy, Procedures, Forms and Record Keeping.
- Media and Publicity Guidelines.
- Standards of Practice and Code of Ethics.
- Policy on intellectual property, signed.
- Organization safety and disaster plan.
- Training plan.
- Policy on disclosure of information required by the IRS and the
- Other Forms, Policies, Procedures and Record Keeping Manuals that
may be contract compliance requirements.
- File Maintenance Policy and Procedures.
- Organization's administration policy and procedure.
- Local and Long Distance Travel, Training and Conference Forms.
- Library and Book Request Form.
- Forms, Policies, Procedures and Record Keeping relative to political
activity and lobbying.
- Petty Cash Form and other Fiscal Forms required by the organization.
- A Master List of all Forms, Policies, Procedures, Record Keeping and
Reporting requirements used by the organization including those above.
- Any other documents pertaining to the organization such as a policy
on the value of collaboration and networking.
- Schedule for Orientation.
Administrators have found it very helpful to have a check-off list of
all material to give a new employee, to have it signed and to place the
list in the personnel file as well. Similar records should be kept about
and shared with volunteers.
A major concern to nonprofit leaders and consultants to NPOs is the
assessment of risk within an organization. The risk elements include the
potential for violence (see above list of policies, Violence in the
Workplace) and failures of fiscal accountability and redundant features to
assure bills are paid, reports are filed, grant requests timely sent and
receipts are deposited. Organizations can serve staff and mission well by
taking time to consider at a retreat or meeting what the vulnerabilities
are to staff at every level. See my article, Nonprofits and Workplace
Violence, posted at
which has a discussion about planning meetings and sample policies about
violence. The increased concern about biological warfare gives us all
pause but also leads us to consider that we provide the most reasonable
safety for employees, volunteers and constituents who come to the office.
Workforce Dot Com has a free membership (requires a name and password
that you create) and helpful newsletter. There are hundreds of articles at
this site including a safe-hiring audit, a checklist to review an
organization's hiring practices, assistance in requesting information from
companies and advice how to handle applicants with a gap in employment
The consequences of a failure to check references can be high,
The Nolo Press has an interesting Chart measuring what questions can be
asked, which questions need to be work-related and which questions are
Employers are growingly looking for law enforcement background checks,
credit reports, pre-employment health certification, drug testing, proof
of licensing, fingerprinting, photo identification, lie detector tests and
other personal records about applicants for work, new hires and
volunteers. See below about posters concerning employers' responsibilities
and polygraph protection. For discussions about credit checks see
The web site of MIB (no, not Men in Black - but the Medical Information
Bureau) maintains medical and non-medical information about applicants for
and see the FAQ section and the discussion about privacy and disclosure.
The Federal Trade Commission has a copy of the Fair Credit Reporting Act,
especially Section 613 concerning employment and privacy. Your state may
have similar or more stringent statutes.
There are alcohol and drug related issues in the workplace. Can an
employer order a pre-employment drug test? Can an employer conduct a
random drug test during employment? See
for significant discussions on these issues and more although it is from
1999. NPOs are making counseling available in circumstances where alcohol
and illegal drugs are a problem for an employee and have developed
employee assistance programs (EAP). An EAP may be part of a health
Written policies about the tolerance level of the organization
concerning alcohol and illegal drugs can be very helpful. Serving alcohol
at an NPO-sponsored event should be carefully decided. Laws about driving
and drinking at corporate-sponsored events raise possible liability to the
agency. See discussions at 'Lectric Law, a sometimes irreverent site about
the law and lawyers with helpful material, lie detector testing
and general employment articles, scroll down the page at
Recently I read of a manager of a business who wanted to rehire a person
who had been fired because he had put marijuana in home-baked cookies
served at an organization event. The reason the manager stated was because
the "employee has learned his lesson and won't do it again." This raises
many red flags that are too obvious to go into here.
There are other articles and links to information about workplace drug
For a significant library on employment legal issues search the web site
maintained by Carter McNamara,
and see Human Resources, Staffing particularly about Screening, Background
Checks and Retaining Employees. Both federal and state laws may place
limits on many of these personal privacy issues.
Employers must be sensitive to the workings of the Americans with
Disabilities Act (ADA) and the recruiting, interviewing, job offering,
hiring and maintaining a disabled employee. A discussion about medical
records and questions about a disability and medication will assist
employers from making mistakes. In August 2002 the United States Equal
Employment Commission presented a primer for small businesses. NPOs will
find the primer helpful,
If you want to see more information about the ADA and civil rights, tap
onto the US Department of Justice web site at
You can also order a free CD-ROM about ADA from the Justice Department at
For further information about the ADA see
The US Department of Labor has material gathered relative to work and
Material includes employment rights, accommodation, small business
opportunities and self-employment among others. Monster Dot Com has a
short paper on "Ten Tips" that a person with a disability may want to
consider when applying for employment,
Each State has an agency that provides vocational and rehabilitation
services for persons who are disabled. For a rather up-to-date-list of
such services in each State, see
Each State also has an office of civil rights affecting the rights of
persons with disabilities; see
for the web site in your State.
Employers are finding that it is vital at a minimum to check references
before hiring anyone to avoid a negligent hiring. There are, however, some
instances where state or federal law requires certain personal background
checks, particularly work with youth and children, nursing homes and frail
elderly. To be on the safe side, NPOs should consider warnings on job
announcements, job applications and in other documents about these
personal records and their use by the NPO. Organizations should also be
familiar with their state's laws on criminal expungements. The expungement
of a criminal record may or may not prevent hiring in certain
circumstances in your state. For further guidance in the nonprofit context
see the articles at MyNoodle.Com:
Private industry has turned to outsourcing with investigators to assist
in the background check; see, for instance,
which also provides document storage that suggests a whole set of other
potential privacy issues. May a third-party company seek information about
an applicant that cannot be pursued by the hiring nonprofit? How much
control can/must the nonprofit have over the third-party company hired for
background checks and references? What is the liability of the nonprofit
if the third-party violates the rights of an applicant and is sued? Anyone
can sue anybody about anything at any time and in any jurisdiction --
don't lose! It may serve you well to err on the side of caution if you
contract with a third party for background checks by having a very
detailed agreement and talk to your attorney for assistance. For some more
discussion in the context of for-profit companies and similar concerns,
and note that Connecticut requires two personnel files according to the
There are posters that are required to be in plain view: (Federal)
Equal Employment Opportunity, Job Safety and Health Protection, Federal
Minimum Wage ($5.15), Family and Medical Leave Act (FMLA), Employee
Polygraph Protection Act and Fair Labor Standards Act. Your state
undoubtedly has statutes that require posters such as the state minimum
wage law, laws against discrimination and an employee and community right
to know about hazardous substances in the work place. A web site for most
required posters is
where you can access all federal posters without cost with free
e-notification when there are changes and low-cost state posters as well
as a free e-notification of changes in your state posters. It is possible
for nonprofits to secure free copies of both State and Federal posters.
States may have a number of other posters required that are not listed
here. The site will give you the list of most of the required posters for
both the federal and your state without cost. Check your state's web site
for a full list of state required posters that may apply to your
Another consideration about employment records is what to do with
applications and resumes and other paper filed with your agency. An
argument can be made that organizations should maintain copies of job
announcements, resumes and cover letters, application forms, reference
letters through the period of the state or federal statute of limitations
under anti-discrimination laws to have evidence available in case there is
a law suit. As with other issues facing NPOs, it is useful to have a
written policy and procedure for the retention and disposal of applicant
Where do you keep all these personal records? What facts and documents
of your organization's personnel are available to the public? How long
should the NPO keep the records? If you have staff, there are certain
personnel records that may not be released, such as health records. On the
other hand, there are personnel records open for inspection at least to
funders. Many organizations create several personnel files, all of which
are open to the individual employee who is the subject of the files. One
file contains public documents such as IRS Form W-4, INS Form I-9, and an
emergency notification form, resume, application for employment, job
description and so on. A second personnel file contains the new-hire form
for child support, evaluations, health records, any garnishment or child
support orders, disciplinary actions and so on. Some organizations
maintain a third personnel file containing time sheets, travel, training
and conference expense forms and similar internal logs. An auditor may
review the first and third files listed here; a funding source may require
that the auditor review the second file only for contract compliance.
How long should you keep records? Your state or the grant or contract
may have minimum requirements for keeping records. It is my suggestion
that you have a written policy about keeping these records. There is a
caution here that organizations maintain copies of all business-related
web sites and e-mail at least through the statute of limitations for
bringing a lawsuit against the organization and any subsequent appeals.
The statutes of limitation are different state by state and with the
federal law; they are based on the type of suit or administrative
complaint. It is important that you meet with an attorney to assist on
this and other policies to be certain you are appropriately protected.
Once hired are there pitfalls employers can fall into about the privacy
of an employee on-the-job? In short, the answer is "Yes". One of those
pitfalls has to do with the use of technology. I suggest above that one of
the documents new employees should receive on the first day is the NPO's
policy "Use of Technology in the Workplace and Privacy Issues Manual".
Helpful discussions and articles about the privacy of employees,
surveillance and the rights of employers in this arena can be found at
This is an ever growing workplace problem and the last on the subject has
not been written.
Sharing Information with the Board of Trustees
What information should be shared with the Board of Trustees/Directors?
There are excellent arguments that the preparation of electing a new Board
member begins at the level of recruiting the Board member. Organizations
and current Board members should assess the duties, obligations, fiduciary
duties and expectations to work and attend meetings and be open with
candidates. There should also be an assessment of the prospective Board
member's understanding of and agreement with the NPO's mission and vision.
Very early in the development of a new nonprofit, there should be an
open discussion about how open Board meetings will be to the public. The
Bylaws are an appropriate place to handle the decision. There may be state
laws, a contract requirement or a policy decision of the members that
requires all Board meetings to be open to the public. In most of the NPOs
I worked for, there was a place on the agenda for public and staff
comments. This section was utilized from time to time and was healthy for
the organization. A troubling aspect about open or closed meetings comes
up when a significant potential donor wants to attend a Board meeting that
historically has been closed to the public. Why should this person be
allowed in and not other contributors or other members of the
constituency? How does this fit your mission and values? Given the
movement to openness of NPOs there are growing arguments to open meetings
to the public and show accountability to the public.
The same or similar discussions should be held about how open the
minutes of an organization are. With the movement toward transparency, an
NPO may face embarrassing questions if there is a problem that becomes
Some organizations have Board Welcome Kits, material that helps a
prospective or new board member begin the learning process about the
intricacies of the organization. The Attorney General has posted a
handbook about the duties of a Board based on New York law at
Such Kits briefly tell the story and the history of the agency (and if the
agency is part of a national body that history as well). The Boards are
the leadership for creating and establishing policy and keeping the
mission, visions and goals at the forefront. In many NPOs the Board
members are expected to give funds and help raise funds for the
organization. The Kit should address the role of the Board and list the
- Establishing the mission and the budget
- Attending and participating during Board and Committee meetings
- Selecting the auditor and receiving the report of the auditor
- Hiring, evaluating, and firing the executive director
- Setting broad policy and monitoring program activities for the
- Approving all grants and contracts (with recognition some
applications have to be filed without Board approval but are subject to
- Overseeing fiscal and program accountability to clients, funding
sources, and other standards
- Participating in strategic planning and long-range issues
- Role of individual Board members contributing financially to the
organization and in fund raising
- Maintaining a role in the development of the organization's public
image and working on public relations
- Assuring a reasonable selection and orientation process for new
- Developing and periodically reviewing a plan of succession for the
executive director and board members.
There may be limits to the Board's authority and responsibilities that
are required by law, by ethics or by contracts. The Kit can describe
briefly how staff handles its activities and outline that client
information will not be provided to Board members except statistically.
There are instances that individual Board members may attempt to pressure
staff to break policy in order to assist a relative or friend; the Kit
should address the process for ALL clients to receive assistance. There
can be pressure from funding sources and politicians as well to help
someone outside of the process. The Kit may not address that, but there
should be some conscious agreement how that will be handled as well.
The Kit should address what insurance the organization has, how Board
members may be reimbursed for agency business travel, whether they serve
without a stipend (although some organizations pay members); see "Risk Management" and "Liability" on this
Does the organization's budget include a line item for Board training
and travel? There should be an indication of the effect of a Board member
seeking employment with the organization, such as resign before applying
for a job. A short section in the Kit about the management of the
organization clearly stating the executive director hires and fires staff,
that there are staff meetings, that there is supervision and evaluation of
staff can be helpful. The Kit can have the following checklist with some
- Information Board members should have (list of Board and staff,
organization and functional charts, budgets, etc.)
- The good faith responsibilities of the Board (attend meetings, read
material before the meetings, assure minutes are accurate, etc.)
- Awareness of organizational operations and risks (incorporation
papers, bylaws, conflict of interest, possible litigation, etc.)
- Knowledge of the human resources of the agency (clear personnel
policies, staff reflective of the community diversity, adherence to all
written policies, grievance procedure for staff and for clients, Board
orientation process, etc.)
- Information about the finances (internal controls, regular financial
reports and projections, annual audit, property inventory, tax forms
filed timely and paid timely, role of Board as contributor and as a
- Involvement in planning (is there a 3-5 year plan consistent with
mission, annual evaluation of program effectiveness and efficiency,
- Participation in community relations and public image (dealing with
the media, clear guidelines on client information, assessment of
community needs and priorities, representative board, etc.).
The material listed above that is prepared for Board meetings should be
provided to the Board by staff in a timely manner. A Board cannot exercise
its duties when it receives all information in reams of paper at the
beginning of a meeting and does not have enough time to understand all the
issues. Engaging the Board is vital to the continued life of an NPO. For a
useful discussion of engaging the Board, take a look at
The Board should be informed as soon as possible when there is the
threat or the reality of litigation against the organization. Review your
state law concerning what the Board may discuss in an executive session.
It is usual that Boards enter executive session for such matters as
discussing litigation, personnel issues, and mergers and purchasing or
selling property. In some states there is a Sunshine law, Open Meetings or
Public Disclosure law for NPOs to make all decisions in open session
although certain discussions may be in an executive session. There is an
issue about how to handle the recording of the executive session
discussion for posterity but without public disclosure. Some NPOs have
their attorney present for executive sessions who takes minutes and
maintains them under the attorney-client privilege. Others create no
minutes at all. Issues that are "ripe" for discussion at an executive
session include but are not limited to personnel matters, client related
complaints handled by the Board, sale or purchase of property and
litigation by or against the NPO
A useful "cheat sheet" or "tool kit" about the responsibilities of
staff and the responsibilities of the board in planning, programming,
personnel, community relations and board committees can be found in the
Nonprofit organizations in Maryland developed an excellent list of
ethical and accountability standards for organizations and it is posted at
The Maryland Statement covers mission and program, board governance,
conflict of interest, human resources, financial and legal, openness, fund
raising, public affairs and public policy. Other states and NPOs are
considering adopting similar statements, for example Utah -
or its Home page
and click on Ethics there.
There is a sample policy on confidentiality and disclosure of certain
interests relative to members of the Board of Directors/Trustees based on
Minnesota law at
on this web site,
and from the IRS,
I have included at the end of this article a sample policy about
confidentiality and one on conflict of interest. See a sample policy from
One discussion that has to occur periodically is the expectations of the
staff that the Board has to help raise funds and the Board's expectation
that it is the staff's responsibility to raise the necessary money. There
is significant literature that citizens are tired of receiving letters to
support this or that charity. The horrific events of September 11, 2001
are raising concerns for nonprofits about fund-raising in the near and
distant future. There are also significant studies indicating that for
many nonprofits, the Board disagrees with staff about the role of Board
members as fund-raisers. Without meeting that issue and having it clearly
agreed upon as corporate culture, there would be an unhealthy aspect where
the rubber meets the road, where the Board perceives its role and resists.
The issue of whether the Board and staff exist as a partnership or as
two isolated beings that do not meet, do not share ideas and values is
also vital to the health of an organization. Many NPOs have a
dual-existence of Board and staff. Both the Board and the staff have to
openly decide if that is best for the mission and the vision of the
Recently I attended an all-day retreat of an NPO Board and staff as a
Board member. We are all committed to the mission of the organization. As
the day progressed it grew apparent that the Board and staff did not share
the same values or the same vision of the future. We have a great deal of
work to do or the lessons learned will be as dust on the floor. I am
suggesting that there should be a time and place where there is a
conscious decision about the Board-staff relationship and roles. Too often
it is a matter of the Executive Director being the wall between the Board
and the staff as if they live in isolation from each other. Is that the
value your organization desires as part of its corporate culture, decision
making and public disclosure?
What About the Records of Clients, Customers and Patients?
The movement of the states and the federal government is toward more
transparency of nonprofit accountability of funds and for measurable
goals, objectives and activities. The largest challenges concern the
records of personnel but even more so the records of clients.
Confidentiality of records is being eroded. There are nonprofit
organizations that promise confidentiality but may not in fact have legal
protection for what they believe is confidential. Each state has laws
protecting to one degree or another clergy, medical doctors, lawyers,
social workers, nurses and others, but not all people working in
nonprofits have that protection. Some clients such as persons living with
HIV or AIDS, some mental health patients and others also have privacy and
Nonprofit organizations that work in the health field have new rules
applying to them about privacy. The Health Insurance Portability and
Accountability Act of 1996 (HIPAA) became effective on April 14, 2003.
HIPAA, simply put, applies to privacy of health information created by
health care providers who engage in certain electronic transactions,
health plans, fund raising and health care clearinghouses. Frequently
asked questions (FAQ) about HIPAA and its requirements can be found at
The Office of Civil Rights has updates of administrative rules concerning
handling of patient information,
There are significant links to more information about HIPAA at
Persons interested in keeping up with HIPAA changes can subscribe to a
free newsletter at
There are a number of web sites with sample codes of ethics that are
worth study including issues of confidentiality. The list below is hardly
an exhaustive list because the world of philanthropy has many interests
and each is working out ethical considerations.
Carter McNamara has a virtual library of articles and sites dealing
with nonprofits, for-profit companies, values and ethics,
He discusses the myths that argue against a code of ethics and the reasons
for having a code of ethics. There are manuals and pamphlets that can be
downloaded at no cost. He states, in my opinion quite accurately, that
leaders and managers require more practical knowledge about ethics and he
sets out bringing the need for a code close to home.
The Illinois Institute of Technology Center for the Study in the
Professions has over 850 codes of ethics on line,
The codes are listed alphabetically from Agriculture to Travel and
Transportation. The list under "Other Professions" ranges from a
technician company called A & M Restoration to Yacht Architects and
Brokers Association. To the nonprofit world, there may be more interest in
the links to Arts, Computing and Information Systems, Education and
Academia, Finance, Health Care, Management, Religion and Service
Organizations. The "Other" professions include pastoral counselors,
American Evaluation Association, and the Institute of Internal Auditors. I
looked most carefully at the links for Health Care and Social
Organizations to see an illustration about the detail. The Health Care
link is detailed under management, mental health, physical health
(including dentistry, optometry, nursing and so on) and pharmaceuticals.
The sites are not limited to the United States and include codes from
Canada, Australia and other nations and local communities. The link to
Social Organizations has codes relative to child welfare professionals
and, again, nurses. There is a crossover under computing and information
systems covering the code of ethics for healthcare information and
management systems. The bibliography is extensive. The short piece on
"Using Codes of Ethics" offers a context for developing a code through a
The Free Speech Coalition, Inc. has related links about protecting
nonprofits' First Amendment Rights at
The Home Page (Index) features the latest news and developments on this
area of concern.
The development of partnering and collaboration between NPOs has
increased the referral of clients from one organization to others for
special care and work. Forms asking clients for authorization to release
confidential information should be carefully crafted. A critical issue for
clients signing such forms is whether she/he has "knowingly consented".
Persons living with HIV/AIDS have legal protection of records under 42 CFR
Part 2, for instance. The person being referred should be granted every
privilege to deny the permission and to rescind the authorization.
Partnerships and collaborations should discuss how they will handle
conflicts of interest and confidentiality between them to best serve the
recipients of the collaboration; recipients can be part of the discussion
and enhance the value of the decisions. There is a movement to present the
collaboration and issues of confidentiality, conflict of interest and
referral in writing and signed by leadership with approval by the Board of
Many organizations and frequently funders require a public notice at
each office that clients have the right to file a grievance if
dissatisfied with denial of service or the type of service. Translation of
such notices in other languages should also be addressed based on the
needs of your clientele.
A new and disturbing public process is Internet and privacy issues
between nonprofits and the public through web bugs. For information about
some of these issues see the Privacy Foundation,
The web sites of nonprofits which intend to use bugs in e-mail about the
organization or fundraising need to consider a notice of this invasion of
privacy. For further privacy issues, descriptions of workplace problems
Several years ago I worked with a mental health facility on an ethics
advisory committee. A department of the state provided considerable
funding to this NPO. In the blink of an eye the state decided in its
contracts that the client records were the property and under the
ownership of the state, not the nonprofit agency. The state agency had
legal authority over the clients who were served under the contract with
the mental health agency. The state's legal authority involved child
endangerment and unification of families. The grant was to assist those
persons with counseling aiming toward unification. The ethical issues of
keeping files of information provided to mental health professionals by
clients interferred with staff confidence and their sense of
confidentiality. Failure to accept the grant meant a significant loss of
funds and staff. To accept the money forced ethical and practical issues
for the agency and counselors. The compromise by the organization was to
keep very few notes about clients served under this grant. The issues of
vulnerability of being sued for inadequate recordkeeping when records are
subject to subpoena or court order and other issues were left unresolved.
The Board, leadership, management and administrative staff of
nonprofits must be vigilant and realize what the legal requirements are
and are not concerning disclosure of information. This is a ripe field
that is changing in the direction of openness. Failure to realize this and
to respond may be costly.
There are significant legal issues raised and listed in this paper that
deserve discussion with an attorney. Please consult an attorney about them
in light of your state law and federal law.
Sample Confidentiality Policy
All employees must exercise the utmost discretion regarding all matters
of official business of the organization. Employees shall refrain from any
action and avoid any public pronouncement that might reflect adversely
upon the organization or its clients. An employee shall not communicate to
any person information that has not been made public, except in the course
of regular duties or by authorization of the Executive Director. All
client file matters are confidential. Written documents are to be held in
confidence unless otherwise specified by the Executive Director or your
supervisor. All employees must assume the highest degree of
confidentiality and integrity in the best interest of the organization's
clients, and shall adhere strictly to all policies that serve to protect
the relationship of staff to the client.
The organization expects employees to comply with the personnel
policies, practices and procedures including this policy of
confidentiality. Penalties will be assessed for infractions of this
policy, practice and procedure. Violation of confidentiality shall be
considered a major infraction. [Refer to any state laws, contract
requirements or other policies concerning response to a request for client
information from a funder, by subpoena or court order. Refer to the
disciplinary sections of the personnel policies.]
Sample Policy about Conflict of Interest
A conflict of interest is defined as an actual or perceived interest by
a (staff member/Board member) in an action that results in or has the
appearance of resulting in, personal, organizational or professional gain.
A conflict of interest occurs when an employee/Board member has a direct
or fiduciary interest which include
Employment of or by
Creditor or debtor to
Consultative or consumer relationship
a member of the Board of Directors/Trustees or an employee where one or
the other has supervisory authority over the other or with a client who
receives services. (In other organizations the definition of conflict of
interest includes any bias or the appearance of bias in a decision-making
process that would reflect a dual role played by a member of the
organization or group. An example, for instance, involves a person who is
an employee and a Board member, or a person who is an employee and who
hires family members as consultants.)
It is in the interest of the organization, individual staff and Board
members to strengthen trust and confidence in each other, to expedite
resolution of problems, to mitigate the effect and to minimize
organizational and individual stress that can be caused by a conflict of
Employees are to avoid any conflict of interest and even the appearance
of a conflict of interest. This organization serves the ---- community as
a whole rather than only serving a special interest group. The appearance
of a conflict of interest can cause embarrassment to the organization and
jeopardize the credibility of the organization. Any conflict of interest,
potential conflict of interest or the appearance of a conflict of interest
is to be reported to the Executive Director or your supervisor
immediately. Employees are to maintain independence and objectivity with
clients, the community and organization. Employees are called to maintain
a sense of fairness, civility, ethics and personal integrity even though
law, regulation or custom does not require them.
Employees, members of employee's immediate family, and members of the
Board are prohibited from accepting gifts, money or gratuities from the
- Persons receiving benefits or services from the organization;
- Any person or entity performing or seeking to perform services under
contract with the organization; and
- Persons who are otherwise in a position to benefit from the actions
of any employee of the organization.
Employees may, with the prior written approval of the Executive
Director, receive honoraria for lectures and other such activities while
on personal days, compensatory time, annual leave or leave without pay. If
the employee is acting in any official capacity, honoraria received by an
employee in connection with activities relating to employment with the
organization are to be paid to the organization. [Refer to the
disciplinary sections of the personnel policies.]
The author has other articles on the Internet that may be useful to you
and other nonprofit leaders:
Where Are the Nonprofit Jobs Listed?
Nonprofit Business Plan
What about hate groups?
US Immigration: The Best Information on the Internet
Nonprofits and Violence in the Workplace
The services and the sites that are contained in this article may have
information, facts and opinions from a variety of individuals and
organizations. These services and sites are provided on an "As Is" basis.
The services and sites may include bulletin boards, chat rooms and other
user and member created pages which allow the reader and others to post
information, provide feedback and interact in real-time. The reader uses
the services and the sites entirely at the reader's own risk. The author
has reviewed the sites listed in this article but there are linkages at
those sites that he has not reviewed. Readers link to web sites at her/his
own risk. Neither sites nor companies listed in this article have paid or
offered payment to the author for the inclusion in this article. Many of
the sites have User Agreements that should be reviewed. The speed at which
sites become obsolete is only exceeded by the speed of light. As I
researched the web, many sites were deadends or had not changed for
several years. In fact, by the time you read this, several sites may no
longer be in existence.
The author is an attorney in New Jersey. The purpose of this article is
not to provide legal advice to anyone in any state or country. The
material contained in this article is for information purposes only. End
of lawyer-speak. Almost
© Copyrighted and all rights reserved by Donald A. Griesmann 2003.
However, not-for-profit organizations, community-based organizations,
educators and government agencies may reproduce this document without my
permission. Just give me credit for it. For-profit persons and businesses
are asked to request my permission to reproduce this article in writing in
advance. I ask that any one intending to make money reproducing this
article receive my permission in writing in advance and be prepared to
include me in the process.
Last update: Sunday, September 14, 2003 at 6:07:48
© Copyright 2003 Internet Nonprofit Center; © 2006 Action Without Borders