principles practices

Principles & Practicesfor Nonprofit Excellence

A guide for nonprofit board members, managers and staff

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Copyright © 2010 by the Minnesota Council of Nonprofits. All rights reserved. No part of this publica-tion may be reproduced or transmitted in any form or by means electronic or mechanical without thewritten consent of the Minnesota Council of Nonprofits.

The Minnesota Council of Nonprofits (MCN) is the statewide association of more than 1,850 Minnesotanonprofit organizations. Through its Web site, publications, workshops and events, cost-saving programsand advocacy, MCN works to inform, promote, connect and strengthen individual nonprofits and thenonprofit sector.

Principles & Practicesfor Nonprofit Excellence

A guide for nonprofit board members, managers and staff

IN 1994 THE MINNESOTA COUNCIL OF NONPROFITS (MCN) became the first state asso-ciation of nonprofits to develop a set of accounta-bility principles and management practices. Thisrevised edition completely updates those originalstandards while remaining true to MCN’s long-standing goal of open access to our comprehen-sive policies for strong public accountability.

The Principles and Practices for NonprofitExcellence are based on the fundamental valuesof quality, responsibility and accountability. Theten characteristic accountability principles distin-guish the nonprofit sector from government andthe business sector. The 133 management prac-tices provide specific guidelines for individualorganizations to evaluate and improve their oper-ations, governance, human resources, advocacy,financial management and fundraising.

This document has three intended purposes. Thefirst is to provide individual organizations strivingfor excellence with a tool for strategic planningand operational evaluation relative to the rest ofthe nonprofit sector. The second is to support thegrowth and quality of the sector. The third is toincrease public understanding of the role andcontributions of the nonprofit sector.

The Principles and Practices for NonprofitExcellence are not meant for use by funders orgovernment to evaluate nonprofit organizations,nor are they intended as a substitute for the wis-dom of directors or trustees of individual organi-zations. Given the blurring of the lines betweenthe three sectors of the economy and the enor-mous growth of the nonprofit sector, this docu-ment is designed to support the effective function-ing of our sector by recommending specific bestpractices.

This revised edition of the Principles and Practicesfor Nonprofit Excellence was developed by acommittee representing the diversity of the non-profit sector, with extensive input gathered fromstatewide community meetings. In revising theoriginal version, the committee specifically soughtto lay out essential characteristics that are distinctexpectations of public engagement and respon-siveness, not simply disclosure. The new Role inSociety principle puts in the forefront practicesthat address what Paul Light of New YorkUniversity and the Brookings Institution describedas the need for nonprofits to work at excelling attheir most important attributes — that is, tobecome more “nonprofit-like” as opposed tobeing more business-like or bureaucratic.

Every nonprofit organization needs a strong found-ation of compliance and a broad organizationalawareness of laws and regulations related tofundraising, licensing, financial accountability,human resources, lobbying, political advocacy andtaxation. The Principles and Practices presumethat each organization is in compliance withapplicable laws, including Minnesota Chapter317A (the Minnesota Nonprofit Corporation Act);relevant sections of the Internal Revenue Code;and other federal and state laws dealing withemployment, occupational health and safety.

Minnesotans join together throughout the state toform associations and organizations of everytype. The Principles and Practices for NonprofitExcellence are of particular interest to 501(c)(3)organizations. However, the information and con-cepts apply broadly to all types of nonprofitorganizations. Because of the sector’s diversity bysize, region and activity area, each organizationmust determine whether or not an individual prac-tice is appropriate for its current situation.

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Introduction

P r i n c i p l e s a n d P r a c t i c e s f o r N o n p r o f i t E x c e l l e n c e

Nonprofit organizations are essential to the vitali-ty of communities. They enrich quality of life, epit-omize the highest societal values and strengthendemocracy. Volunteers, board members andemployees become involved with a nonprofitbecause of the organization’s public benefit mis-sion. Therefore the continued success ofMinnesota’s nonprofit organizations requiresbroad public support and confidence. This docu-ment publicly testifies the nonprofit sector’s com-mitment to excellence — always for the benefit ofsociety.

The critical role of nonprofits in democratic soci-eties underscores the importance of knowing howto form, govern and manage these organizations.The growth and progress of the nonprofit sectordepends on developing and improving this bodyof knowledge. Since its founding by Minnesota’snonprofits, MCN has provided research, educa-tion and technical assistance to strengthen non-profit management and governance. ThePrinciples and Practices will form an ongoingframework for MCN’s trainings, publications andother educational materials. MCN’s Web site willalso provide access to templates, samples andtechniques to help organizations easily and cost-effectively implement the Principles and Practices.

Note to Readers: Please be aware that certainwords have particular meanings in this document:

• “Must” is used to describe practices requiredby state or federal law, and is noted with thissymbol ; the online version of thePrinciples and Practices (located atwww.mncn.org) includes direct Web links torelevant federal and state statutes and report-ing forms.

• “Should” is used to describe highly recom-mended practices.

• “Constituents” describes people with a stakein the success of the organization, and mayinclude members, neighbors, clients, volun-teers and contributors.

M i n n e s o t a C o u n c i l o f N o n p r o f i t s

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Role in Society Nonprofit organizations provide unique opportu-nities for individuals to combine their energy, tal-ents and values for community improvement andenrichment. Nonprofits are obligated to under-stand their role as entities that engage andinspire individuals and communities for publicbenefit, and to conduct their activities with trans-parency, integrity and accountability.

GovernanceA nonprofit’s board of directors is responsible fordefining the organization’s mission and for pro-viding overall leadership and strategic directionto the organization. Each nonprofit board should:1) actively set policy and ensure that the organi-zation has adequate resources to carry out itsmission; 2) provide direct oversight and directionfor the executive director and be responsible forevaluating his/her performance; and 3) evaluateits own effectiveness as a governing body, as agroup of volunteers, and as representatives of thecommunity in upholding the public interest servedby the organization.

PlanningOrganizational planning sets the overall direc-tion, activities and strategies a nonprofit employsto fulfill its mission. Nonprofits have a duty toengage in sound planning, define a clear visionfor the future, and specify strategies, goals andobjectives for plan implementation. Planningshould incorporate input from constituents andshould be intentional and ongoing to successfullyposition the organization to achieve its goals.

Transparency and AccountabilityNonprofits have an ethical obligation to their con-stituents and the public to conduct their activitieswith accountability and transparency. Nonprofitsshould regularly and openly convey informationto the public about their mission, activities,accomplishments and decision-making processes.Information from a nonprofit organization shouldbe easily accessible to the public and should cre-ate external visibility, public understanding andtrust in the organization.

FundraisingNonprofit organizations provide opportunities forindividuals and institutions to voluntarily con-tribute to causes of their choosing. Nonprofitfundraising should be conducted according to thehighest ethical standards with regard to solicita-tion, acceptance, recording, reporting and use offunds. Nonprofits should adopt clear policies forfundraising activities to ensure responsible use offunds and open, transparent communication withcontributors and other constituents.

Financial ManagementNonprofits have an obligation to act as responsi-ble stewards in managing their financialresources. Nonprofits must comply with all legalfinancial requirements and should adhere tosound accounting principles that produce reliablefinancial information, ensure fiscal responsibilityand build public trust. Nonprofits should use theirfinancial resources to accomplish their missions inan effective and efficient manner and shouldestablish clear policies and practices to regularlymonitor how funds are used.

The Principles for Nonprofit Excellence


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Human Resources The ability of an organization to make effectiveuse of the energy, time and talents of its employ-ees and volunteers is essential to accomplish theorganization’s mission. Nonprofit organizationsshould place a high priority on exercising fairand equitable practices that attract and retainqualified volunteers and employees. Nonprofitshave an obligation to adhere to all applicableemployment laws and to provide a safe and pro-ductive work environment. Each nonprofit organi-zation should establish specific policies and prac-tices that promote cooperation and open commu-nication among employees, volunteers and otherconstituents so that they can effectively worktogether to advance the organization’s mission.

Civic Engagement and Public PolicyNonprofit organizations play a central role in thedemocratic process by providing a means forindividuals to deliberate on public policies anddecisions that affect them. To the extent possible,nonprofit organizations should engage con-stituents in public policy and advocacy activitiesas a means to fulfilling their missions and promot-ing community interests. Open communicationand consultation between policy makers and con-stituents of nonprofit organizations contribute towell-informed policies and the effective implemen-tation of them.

Strategic Alliances The effectiveness of nonprofit organizationsdepends on successful relationships with othercommunity institutions. Regardless of form — part-nership, collaboration, cooperation or coordina-tion — these relationships, or strategic alliances,can serve a variety of purposes, includingresource sharing, policy influence and improvedoperational efficiency. They strengthen both thecapacity of individual organizations and the sec-tor as a whole. Nonprofits should be open tostrategic alliances and, when appropriate, shouldpartner with other organizations to strengthentheir capability to achieve desired results.Nonprofits should initiate and promote coopera-tion and coordination between a variety of enti-ties to avoid unnecessary duplication of servicesand to maximize the resources available to thecommunities they serve.

Evaluation Nonprofit organizations have proven to be highlyeffective at a wide variety of tasks that benefitsociety. An essential responsibility of every non-profit organization is to assess the impact of itsactions and to act upon this information. The pub-lic has a stake in nonprofit performance and isentitled to information regarding organizationalresults. Nonprofits should regularly measure theirperformance against a clear set of goals andobjectives. They should share this informationwith their constituents and the public and use it tocontinually improve the quality of their processes,programs and activities.

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Role Recognition

1) Nonprofits should recognize that their rolein society differs from that of governmentand business. Nonprofits have a specialability to organize the energy and ideas ofa community to achieve together what indi-viduals cannot achieve alone. By tappinginto the values, interests and relationships ofindividuals, nonprofits can mobilize theirsupporters and the larger community to real-ize their vision. Unlike government entities,nonprofits can focus on very local, specificor new matters and need not wait for com-munity wide consensus to begin their work.Nonprofit organizations emerge fromexpressed community needs and are notrestricted to the marketplace priorities andconstraints that define success for the for-profit sector.

2) Nonprofits should provide opportunities forindividuals to engage in activities and con-versations that widen their circle of connec-tions beyond family and friends to othercommunity members.

3) Nonprofits should encourage the develop-ment of emerging leaders and provideopportunities for individuals and the commu-nity as a whole to sharpen and strengthenleadership skills.

4) Nonprofits should work to build trustbetween communities and to bridge relation-ships among diverse constituencies.

Public Accountability

5) Nonprofits must publicly account for theirfinances, governance, disclosure practicesand programs.

6) Nonprofits should be inclusive in their activi-ties — remaining open to new participantsand ideas as well as external input — andconduct them in ways that are transparent,flexible and responsive to change.

7) Nonprofits should identify their constituents— the people who benefit from, are affect-ed by, are keys to the success of, and/orshare the values implicit in their work.

8) Nonprofits should conduct their activitieswith procedural fairness in decision makingfor constituents and the community.

9) Nonprofits should provide opportunities forpeople from the community to hold otherpublic or private institutions accountable.

Role in Society Nonprofit organizations provide unique opportunities for individuals to combine their energy, talents andvalues for community improvement and enrichment. Nonprofits are obligated to understand their role asentities that engage and inspire individuals and communities for public benefit, and to conduct theiractivities with transparency, integrity and accountability.


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Board Composition

1) Nonprofit boards should be comprised ofindividual volunteers who are committed torepresenting the best interests of the organi-zation and its mission.

2) To ensure broad public participation, vitalityand diversity, board members should servefor no more than nine consecutive years.

3) To allow for sufficient deliberation and diver-sity of perspectives, nonprofit boards shouldconsist of no fewer than seven individuals.

4) Nonprofit boards must have a chair and atreasurer, and should have a vice-chair andsecretary. No one should occupy more thanone officer position in the same organiza-tion at the same time.

5) If staff membership on the board is deemednecessary, inclusion should be limited to theexecutive director, who should not serve asthe chair, vice-chair, secretary or treasurer.

Board Characteristics and Qualifications

6) Nonprofits should strive towards board rep-resentation that reflects the organization’sconstituents.

7) Board members should be committed to themission and dedicated to the success of thenonprofit.

8) Board members should actively develop anunderstanding of the mission, ongoing activ-ities, finances and operating environment ofthe organization.

9) Board members should value diversity andunderstand the role of participation andinclusion in the future success of the organi-zation’s work.

10) To demonstrate their personal stake in theorganization, board members are expectedto volunteer time, raise external funds andmake financial contributions to the nonprofit.

Board Responsibilities

11) Board members should be provided with aclear job description, orientation to the workof the organization and ongoing training,and should fully understand their roles andresponsibilities to the organization and tothe public.

12) Board members should understand the con-tent and significance of the organization’sfinancial statements and audit.

13) Boards should hold quarterly meetings (at aminimum) and expect regular attendance ofmembers.

14) Board members are responsible for keepingsuitably informed so they can actively partic-ipate in decision making.

(Governance continued on next page)

GovernanceA nonprofit's board of directors is responsible for defining the organization's mission and for providingoverall leadership and strategic direction to the organization. Each nonprofit board should: 1) actively setpolicy and ensure that the organization has adequate resources to carry out its mission; 2) provide directoversight and direction for the executive director and be responsible for evaluating his/her performance;and 3) evaluate its own effectiveness as a governing body, as a group of volunteers, and as representa-tives of the community in upholding the public interest served by the organization.

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15) Boards should organize committees as need-ed to effectively structure their roles andresponsibilities.

16) Nonprofit board members are responsibleto make decisions in the interest of theorganization and no other party, includingthemselves. Each board should have a con-flict of interest policy that includes a disclo-sure form, which is signed by board mem-bers annually, and procedures for managingconflicts of interest and handling situationsin which public and private interests inter-sect.

17) Nonprofit board members are responsiblefor upholding the organization’s missionand using its resources wisely and in accor-dance with the law.

18) Board members are responsible for fullyunderstanding their legal and fiduciary obli-gations and carrying out their responsibili-ties in the following areas:• Planning• Policy approval• Annual review of the executive director’s

performance • Setting of compensation structure• Fundraising• Financial management

19) The board of directors, led by the boardchair, should annually evaluate itself througha survey to the board members and a sub-sequent discussion of the results with an eyetoward improving governance practices.

20) Board members should receive no monetarycompensation for their board duties otherthan reimbursement for board-relatedexpenses.

Governance (continued)


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Mission

1) A nonprofit should have a written missionstatement which is sufficiently specific toeffectively guide the overall aims and activities of the organization.

2) The mission statement should be linked tothe values of the organization and its visionfor the future.

3) As part of ongoing planning, and with inputprovided by the organization’s constituents,the mission statement should be evaluatedregularly by the board with regard to itsrelationship to the organization’s currentactivities.

Community Input

4) In planning for their activities, nonprofitorganizations should be responsive to com-munity needs and should solicit input from avariety of sources such as board, staff andcommunity members and other constituents.

5) Nonprofits should consult with their counter-parts to determine the need for services andthe best use of community resources.

Strategic Plan

6) The board of directors should establish arigorous process of setting clearly definedgoals and objectives to accomplish theorganization’s mission. This plan should bereviewed annually and a new plan shouldbe developed and adopted at least everyfive years.

7) Goals and objectives should be reasonablyattainable given staffing, resources, con-stituents and the number of people beingserved.

8) A nonprofit organization should periodicallyconduct an environmental scan that includesan evaluation of strengths, weaknesses,opportunities and threats as part of strategicplanning.

Operational Plan

9) A nonprofit organization should annuallycreate a written operational plan whichspecifies implementation of its activities.

10) The operational plan should include goalsand objectives that are set by the organiza-tion in order to positively benefit individualsand society.

11) The operational plan should clearly definespecific program, financial, personnel andevaluation activities; delineate timelines;and assign specific responsibility for imple-mentation.

12) The operational plan should be a usefulmanagement tool for evaluating activitiesand outcomes and should be tied to anapproved budget.

PlanningOrganizational planning sets the overall direction, activities and strategies a nonprofit employs to fulfillits mission. Nonprofits have a duty to engage in sound planning, define a clear vision for the future,and specify strategies, goals and objectives for plan implementation. Planning should incorporate inputfrom constituents and should be intentional and ongoing to successfully position the organization toachieve its goals.

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Accountability

1) A nonprofit must comply with all legallyrequired reporting procedures.

2) A nonprofit has an obligation to responsiblyuse its resources toward its mission and tobenefit the community. The organization’sboard should approve its financial audits,while the executive director and principalfinancial manager should attest to theaudits.

3) A nonprofit has a responsibility to establishand regularly determine clear performancemeasurements and to share those resultswith the public.

4) Each nonprofit has a responsibility toadhere to the established industry standardsthat apply to its particular activity area.

Accessibility

5) Boards of directors should provide informa-tion to the public that describes their deci-sions and decision-making processes. Theyshould make meeting agendas and descrip-tions of significant decisions available tothose who request them.

6) A nonprofit should provide its constituentswith ongoing opportunities to interact withthe board and management regarding itsactivities.

Public Information

7) A nonprofit should produce an annualreport (either printed or Web-based) thatcontains information on its activities andperformance. The annual report shouldinclude:

• An explanation of the organization’s mission, activities and results;

• An explanation of how individuals can access its programs and services;

• Overall financial information, including income and expense statement, balance sheet and functional expense allocation; and

• A list of board members, management staff and contributors.

8) Each nonprofit organization must also makecertain data available to the public, includ-ing:

• IRS Form 990 for the previous three years, including clear statements of program service accomplishments in Part III; and

• IRS Form 1023, Application for Recognition of Exemption.

9) A nonprofit should provide multiple meansfor contacting the organization to requestinformation or provide input.

Transparency and AccountabilityNonprofits have an ethical obligation to their constituents and the public to conduct their activities withaccountability and transparency. Nonprofits should regularly and openly convey information to the pub-lic about their mission, activities, accomplishments and decision-making processes. Information from anonprofit organization should be easily accessible to the public and should create external visibility,public understanding and trust in the organization.

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Solicitation of Community Input

10) Nonprofit organizations are encouraged tohold public meetings to gather and distrib-ute information about their approaches,goals and effectiveness in carrying out their missions.

11) Nonprofits should openly gather andexchange information on lessons learnedand best practices with other nonprofits topromote overall effectiveness and accounta-bility within the sector.

12) Nonprofits should actively work with otherorganizations to avoid duplication of services.

Fairness and Equity Practices

13) Information regarding fees and servicesshould be made readily available to thepublic. When charging for services, non-profits have an obligation to price equitablyand to take into account the consequencesof denial of services due to an individual’sinability to pay.

14) Nonprofit employees should have a mecha-nism for reporting misconduct which protectsthe individual making the report from anypunitive repercussions.

15) Nonprofits should ensure non-discriminatoryservice to their constituents.

16) Nonprofits should ensure confidentiality totheir constituents.

Transparency and Accountability (continued)

Accountability to Donors

1) Nonprofits must comply with all federal,state and local laws concerning fundraisingpractices, including registration and annualreporting with the Office of the MinnesotaAttorney General.

2) Nonprofit organizations are responsible forconducting their fundraising activities in amanner that upholds the public’s trust instewardship of contributed funds.

3) Fundraising communications should includeclear, accurate and honest informationabout the organization, its activities and theintended use of funds.

4) Nonprofits must use funds consistent withdonor intent and comply with specific condi-tions placed upon donations.

5) Nonprofits must send a written acknowl-edgement to all donors who make a “quidpro quo” donation (that is, a payment madepartly as a contribution and partly for goodsand/or services) in excess of $75 andshould also send a written acknowledge-ment to all donors who made contributionsof $250 or more in cash or property in theprevious calendar year.

6) Nonprofits should strive for a balancebetween publicly recognizing charitablecontributions and maintaining donor confi-dentiality when requested. Nonprofits mustnot share, trade or sell contact informationfor any donor without prior permission fromthe donor.

7) Nonprofits should regularly communicatewith contributors regarding their activitiesand should make such information availablethrough public and private media (includingWeb sites, emails, newsletters, press releas-es to major and community media outlets,and free or paid advertising).

Policies

8) A nonprofit’s board of directors has overallresponsibility for raising sufficient funds tomeet budgeted objectives.

9) Nonprofits should adopt clear policiesregarding the acceptance of personal giftsfrom any constituent to staff members, boardmembers, and volunteers.

10) A nonprofit has an obligation to declinefunds or in-kind donations that would bringabout adverse conditions for the organiza-tion or its constituents and gifts given forpurposes outside the scope of its mission.


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FundraisingNonprofit organizations provide opportunities for individuals and institutions to voluntarily contribute tocauses of their choosing. Nonprofit fundraising should be conducted according to the highest ethicalstandards with regard to solicitation, acceptance, recording, reporting and use of funds. Nonprofitsshould adopt clear policies for fundraising activities to ensure responsible use of funds and open, trans-parent communication with contributors and other constituents.


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Fundraising (continued)11) Nonprofits should apply a high percentage

of each dollar raised to programs and servic-es in accordance with practices of compara-ble organizations, state statutes and represen-tations made to contributors and the public.

12) Compensation for fundraising personnel andcontractors should not be based on a per-centage of funds raised or other commis-sion-based formulas.

13) A nonprofit should closely monitor any individual or organization that solicits fundson its behalf to ensure adherence to donorintent as well as accountable fundraisingpractices.

14) If using contracted or professional fundrais-ers, nonprofits should ensure such fundrais-ers are registered with the Office of theMinnesota Attorney General.

Functions

1) Individuals responsible for an organization’sfinancial reporting should prepare and ana-lyze consistent, timely and accurate finan-cial reports on at least a quarterly basis.

2) A nonprofit should ensure separation offinancial duties to serve as a checks andbalances system to prevent theft, fraud orinaccurate reporting to the greatest extentpossible. This system should be appropriateto the size of the organization’s financialand human resources.

3) Nonprofit organizations should adopt writ-ten financial procedures to monitor majorexpenses, including payroll, travel, invest-ments, expense accounts, contracts, consult-ants and leases.

4) Nonprofits should periodically assess theirrisks and purchase appropriate levels ofinsurance to prudently manage their liabili-ties.

5) A nonprofit’s board of directors or itsdesignees should set compensation for theorganization’s executive director and stayinformed of compensation levels for otherkey personnel.

6) A nonprofit’s board should strictly prohibitfinancial loans to board members, the exec-utive director and other key personnel.

7) Board members should clearly understandhow to read and interpret financial state-ments.

Compliance

8) Nonprofit organizations must comply withall financial regulations, such as withholdingand payment of federal, state and SocialSecurity taxes and the management and useof restricted funds.

9) Nonprofit organizations should complete theannual IRS Form 990 in a timely, accuratemanner and include specific informationabout the relevant year’s activities and out-comes. The organization’s board should beprovided with a copy of the completed IRSForm 990 in a convenient, timely manner. Ifa nonprofit’s total revenues for the previousfiscal year exceed $750,000, it must ensurethat its financial statements are audited, cer-tified and prepared in accordance withsound accounting practices.

10) The board should designate an audit com-mittee to hire the auditor, oversee the auditprocess, meet with the auditor to review theaudit’s content and present the audit to thefull board for its review and approval.

11) Nonprofit organizations should have sys-tems in place to protect individuals whoreport financial misconduct from any nega-tive repercussions for doing so.


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Financial ManagementNonprofits have an obligation to act as responsible stewards in managing their financial resources.Nonprofits must comply with all legal financial requirements and should adhere to sound accountingprinciples that produce reliable financial information, ensure fiscal responsibility and build public trust.Nonprofits should use their financial resources to accomplish their missions in an effective and efficientmanner and should establish clear policies and practices to regularly monitor how funds are used.


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Openness and Fidelity

12) A nonprofit organization must openly com-municate the annual reporting informationcontained in its IRS Form 990 to constituentsand others who request such information.

13) Nonprofit organizations should work dili-gently to avoid recurring deficits and tosecure appropriate levels of funding to carryout their missions and activities.

14) Nonprofits have a legal obligation toexpend funds responsibly in compliancewith conditions attached to funding.

15) A nonprofit organization has a responsibili-ty to ensure that its assets are used solely forthe benefit of the organization and not forpersonal or other gains. It should have aclear conflict of interest policy that is annual-ly signed by board members and activelyenforced by the officers of the board.

Financial Management (continued)


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Employment Policies

1) Nonprofits must comply with all federal,state and local employment laws when hir-ing and employing personnel, includingwithholding and payment of payroll taxes.

2) Nonprofits should employ skilled individualswho are suitable for the positions they occu-py and are committed to the goals, valuesand objectives of the organization.

3) Nonprofits should strive toward employingindividuals who reflect the diversity of theirconstituency.

4) Nonprofits should continually work to pro-vide a safe and healthy work environment.

5) Nonprofit organizations should adopt a setof specific policies and procedures for man-aging employees and volunteers.

6) Nonprofits should establish a clear conflictof interest policy for employees that includesdisclosure of relationships, nepotism andinterested party transactions.

7) Nonprofits should adopt specific grievanceprocedures for personnel with protectionsfor reports of violations of organizationalpolicy or applicable laws.

8) Nonprofits should have mechanisms, includ-ing succession plans, to handle transitions inleadership and other key positions.

9) Nonprofits should conduct backgroundchecks on employees and volunteers, partic-ularly if their positions involve working withchildren or vulnerable adults, performingfinancial duties or serving in other sensitiveareas.

Training, Development and Retention

10) Nonprofit organizations should provide per-sonnel with clear, current job descriptionsand the resources they need to producequality work.

11) Nonprofits should support the educationand development of and opportunities forgrowth and advancement of personnel.

12) Nonprofit boards have an obligation to bal-ance internal equity with market-based andlivable compensation for all employees.

13) To the extent of their ability, nonprofitsshould provide personnel with adequatebenefits and the opportunity to financiallycontribute to retirement plans.

14) Nonprofit organizations should be open toinput from personnel regarding the organi-zation’s activities and results on a continualbasis.

15) Nonprofit personnel should receive perform-ance evaluations on at least an annualbasis.

Human Resources The ability of an organization to make effective use of the energy, time and talents of its employees andvolunteers is essential to accomplish the organization's mission. Nonprofit organizations should place ahigh priority on exercising fair and equitable practices that attract and retain qualified volunteers andemployees. Nonprofits have an obligation to adhere to all applicable employment laws and to providea safe and productive work environment. Each nonprofit organization should establish specific policiesand practices that promote cooperation and open communication among employees, volunteers andother constituents so that they can effectively work together to advance the organization's mission.


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Promoting Participation

1) When possible, nonprofits should assist theirconstituencies in developing skills and learn-ing about opportunities for public and civicengagement.

2) Nonprofits should promote nonpartisanefforts to encourage voting and other partic-ipation in federal, state and local policymaking.

3) Organizations whose constituencies areaffected by government actions have anobligation to provide public forums for dis-cussion and information about the effects ofall the various policy choices.

Advocacy and Public Policy

4) Nonprofit organizations should take appro-priate public positions on relevant issueswhile working and communicating withother organizations to inform the publicabout these issues.

5) Nonprofits should maintain a sound under-standing of the current public policy environ-ment in their activity area and the resultingimpacts on the communities they serve.

6) If engaged in public policy and advocacyactivities, nonprofits should adopt a writtenpolicy that clarifies the scope of the work aswell as the time and resources to be allocat-ed to those activities.

Lobbying

7) Nonprofits that engage in lobbying activitiessubject to state and federal reportingrequirements must file accurate and timelyreports on their lobbying activities and com-ply with all laws governing politics and elections.

8) Federally funded nonprofits that engage inlobbying activities must organize their leg-islative work so that no federal funds areused for this purpose.

9) Nonprofits should join together around policy issues to strengthen their impact onpublic policy.

Civic Engagement and Public Policy Nonprofit organizations play a central role in the democratic process by providing a means for individu-als to deliberate on public policies and decisions that affect them. To the extent possible, nonprofit organi-zations should engage constituents in public policy and advocacy activities as a means to fulfilling theirmissions and promoting community interests. Open communication and consultation between policy mak-ers and constituents of nonprofit organizations contribute to well-informed policies and the effective imple-mentation of them.


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Strategy

1) Nonprofits should be open to new strategicalliances to achieve organizational goalsand strengthen connections with constituentsand others in the communities they serve.

2) Decisions regarding strategic alliancesshould be consistent with the strategic goalsof the participating organizations.

Coordination

3) Nonprofits should stay aware of and coordi-nate with other organizations providing similar or complementary services in theircommunities.

4) The work of nonprofits can exist in bothcooperative and competitive environments.Having a variety of nonprofit organizationsis positive and healthy for a community as itprovides for a continuum of approaches,leadership opportunities, individual choicesand customization at the local level.

5) Nonprofits should work to establish commu-nication channels, mutual understandingand natural alliances among government,nonprofit and for-profit sectors to takeadvantage of the total resources of the com-munity.

6) When possible and appropriate, larger non-profits should assist smaller nonprofits in thecommunity through alliances and sharing ofresources and expertise.

Strategic Alliances The effectiveness of nonprofit organizations depends on successful relationships with other communityinstitutions. Regardless of form — partnership, collaboration, cooperation or coordination — these rela-tionships, or strategic alliances, can serve a variety of purposes, including resource sharing, policy influ-ence and improved operational efficiency. They strengthen both the capacity of individual organizationsand the sector as a whole. Nonprofits should be open to strategic alliances and, when appropriate,should partner with other organizations to strengthen their capability to achieve desired results.Nonprofits should initiate and promote cooperation and coordination between a variety of entities toavoid unnecessary duplication of services and to maximize the resources available to the communitiesthey serve.


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Responsiveness

1) Nonprofits should commit to effective andefficient delivery of services and shouldalways strive to improve processes, pro-grams and results.

2) Nonprofits should have a regular system forinvestigating ways to improve their services,programs and internal processes in order tobest serve their constituents.

3) Nonprofit programs should take intoaccount and respond to the experience,needs and satisfaction of the constituentsthey serve.

4) Nonprofits should conduct program evalua-tions in ways that are culturally sensitiveand appropriate for the community served.

Measurement

5) An organization’s measurement systemsshould be practical and useful to improveongoing processes, activities and results.

6) An organization’s measurement systemsshould be used to evaluate organizationaleffectiveness and inform its operational plan.

7) Performance measures should be realisticand appropriate to the size and scope ofthe organization and its constituents.

8) Measurement should include information onsatisfaction, activities, results and communityinput.

9) Performance measures should be specificand based on evidence gathered before,during and after program development andimplementation.

10) Measurements may include both qualitativeand quantitative data.

11) Measurements should include data on effi-ciency and effectiveness.

12) Nonprofit organizations should contract withother organizations or consultants to serveas external evaluators when appropriateand feasible.

End Uses

13) Evaluation information collected from indi-viduals must be kept confidential unless theygive consent for its release.

14) Nonprofit evaluation should be ongoingand should include input from a wide vari-ety of constituents, service recipients andvolunteers.

15) Nonprofits should be open to hearing fromand having comprehensive discussions withmembers of the public who may questionthe organization’s effectiveness.

16) Nonprofits should use evaluation results toimprove programs and activities and incor-porate the results into future planning.

17) Nonprofits should communicate evaluationresults to a broad range of constituents.

Evaluation Nonprofit organizations have proven to be highly effective at a wide variety of tasks that benefit society.An essential responsibility of every nonprofit organization is to assess the impact of its actions and toact upon this information. The public has a stake in nonprofit performance and is entitled to informationregarding organizational results. Nonprofits should regularly measure their performance against a clearset of goals and objectives. They should share this information with their constituents and the public anduse it to continually improve the quality of their processes, programs and activities.


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THE PRINCIPLES AND PRACTICES FORNONPROFIT EXCELLENCE are meant to educatenonprofit board members, managers, volunteersand staff about the fundamental roles and respon-sibilities of nonprofit organizations. If broadlyadopted, MCN believes they will strengthen bothindividual nonprofits and the sector as a whole.They are not intended for use by funders or bygovernment to evaluate organizations nor arethey intended as a substitute for the wisdom ofdirectors or trustees of individual organizations.

The Minnesota Council of Nonprofits is very sen-sitive to the large amount of sometimes contradic-tory advice directed at nonprofits. MCN expectsthat the Principles and Practices will be useful tovirtually every nonprofit organization as they forma set of reference tools that can be adapted tomeet particular needs and circumstances.

The creativity and diversity of the nonprofit sectorand the significant variations in local conditionsmeans that some of the practices may not easilyfit every organization and will necessarily vary inapplication. In adapting and adopting thePrinciples and Practices, each organization willface dozens of specific choices about how toaccomplish its mission and structure its work,requiring extensive modification of the basic non-profit structure by board members and managers.Nevertheless, the nature of nonprofit activityrequires that organizations fully commit to publicaccountability and devote the time and attentionnecessary to be transparent and responsive to thecommunity.

MCN welcomes your feedback. Please let usknow how you applied the Principles andPractices for Nonprofit Excellence in your organi-zation. Additional information, links to tools andtemplates, and a feedback form are available onMCN’s Web site at www.mncn.org.

Advice for Users


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THE MINNESOTA COUNCIL OF NONPROFITSBEGAN THIS DOCUMENT on nonprofit account-ability at its 1993 Annual Conference. We contin-ued to develop it through community meetings,workshops and discussions throughout the state.Under the leadership of Dr. James P. Shannon,MCN joined with two organizations — theCharities Review Council of Minnesota and MAPfor Nonprofits — to convene discussions on non-profit standards and to develop principles ofsound nonprofit management and accountability.The first draft of the Principles and Practices forNonprofit Excellence was circulated to nonprofitand philanthropic leaders throughout Minnesotaand the United States in October 1994 and wasapproved by MCN’s Board of Directors inOctober 1998.

James V. Toscano and Marcia Nottinghamchaired the original Committee on NonprofitStandards, whose members included Judy Alnes,Angela Bies, Eve Borenstein, David Brown,Jennifer Gillespie, Betsy Jaros, Anne Long, JonPratt, Lois Schmidt, Laura Waterman Wittstock,Michael Wirth-Davis and Reid Zimmerman.

In 2004, James V. Toscano also led the charge torevise the Principles and Practices and was assist-ed by Stephanie Tribby-Walbridge with inputfrom nonprofit leaders, including Marcia Avner,Kate Barr, Shelly Dreyling, Christine Durand,Stephanie Haddad, Audrey Kintzi, Anne Long,Craig Luedemann, Nan Madden, Ellen McVeigh,Leslie Nitabach, Jon Pratt, Sondra Reis, Sheila

Smith, Melissa Stone, Bao Vang and ReidZimmerman. Copyediting of the revised versionwas provided by professional editor SteveGansen.

Thousands of copies of the draft of the revisedversion of the Principles and Practices forNonprofit Excellence were delivered to MCNmembers and the public via the Web and mail,and discussed in feedback sessions held inMinneapolis, St. Paul, Duluth, Mankato, GrandRapids and St. Cloud. The comments and sugges-tions gathered from MCN members and the pub-lic informed the final draft of the revised version,which was approved by the MCN Board ofDirectors on March 15, 2005.

Since the release of this revised version, a grow-ing number of associations of nonprofit organiza-tions throughout the United States have usedMCN’s Principles and Practices for NonprofitExcellence as the basis for similar documents intheir states. MCN has been pleased to give per-mission to adapt the Principles and Practices forNonprofit Excellence to statewide organizationsin Arkansas, Colorado, Connecticut, Iowa,Kentucky, Maine, Michigan, Mississippi andSouth Carolina. MCN will cooperate with theseassociations and others to develop and shareeducational tools and resources to strengthen theaccountability and effectiveness of nonprofitseverywhere.

An Updated History of the Principles and Practices