The Ethics Resource Center, an organization which studies the ethical practices of public and private institutions, just released their report on the ethics of Nonprofit institutions in the US. It’s not pretty.

Ethics Resource Center: Celebrating 85 Years of Ethics Surveying and Research

Some believe that without the pressure to generate a profit, nonprofit organizations would exhibit higher ethical standards than for-profit organizations. However this report, based on data from 558 respondents , paints a different picture. Here are some highlights (or lowlights might be more accurate):

• 6% observed alteration of documents.
• 8% observed alteration of financial records–called financial fraud.
• 14% observed lying to customers, vendors, or the public
• 19% observed misreporting of hours
• 21% observed lying to employees
• 55% observed one or more acts of misconduct

The numbers for business and government are about the same across the board. Business reports 56% observations of misconduct and government 57%. Interestingly the incident of financial fraud seems to be noticeably higher in non-profits (8%) than in either business (5%) or government (5%).

The report goes on to say that when nonprofit employees saw ethical misconduct, 38% of the time they said nothing. They did not report the observed transgression to management.

• 66% of the time they did not report environmental violations,
• 49% of the time they did not report misreporting of hours worked, and
• 31% of the time they did not report stealing.

The primary reasons for staying silent include:

• 50% did not believe corrective action would be taken
• 42% feared retaliation from management or peers (a drop from 64% in 2005)
• 30% would have to report to the person involved.

The report is not all bad. The data show that attention to this issue by creating a Code of Conduct (ethical code), engaging in ethics training, creating a hotline for reporting, and others dramatically decreases incidents of misconduct.

Overall this report shows that people in the nonprofit sector fall prey to the same shortcomings and temptations as those in the for-profit sector. People are people regardless of their context. Ethics are important regardless of the context.

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Tags: nonprofit, ethics, ethics for the real world, clint korver, Ethics Resource Center,