How is Non-Profit Accountability Ensured?

Non-profit accountability is ensured through a variety of mandatory and voluntary means. Governments may require that certain documentation be made publicly available, and many non-profit organizations choose to make additional information accessible. Funders often require proof that their money has been spent as they intended. Both of these aims are supported by the encouragement of a culture of transparency in the non-profit sector. For example, in the United States, many non-profit agencies choose to follow the regulations set forth for publicly traded companies in the American Competitiveness and Corporate Accountability Act of 2002, also called the Sarbanes-Oxley Act.

When people speak of non-profit accountability, they often mean financial accountability in specific. Non-profit tax exemptions are one of the major ways a non-profit saves money, and many governments require that documentation of this status be readily available for public inspection. Depending on where a non-profit organization is located, the same may be true for annual tax returns and other financial documents such as audits.

The integrity of an audit is another measure of non-profit accountability. An outside audit ensures the highest level of accountability, but may not be required by law. Many non-profit agencies, however, conduct internal audits as a way of showing the public that they are accountable for their financial status. Those non-profits that follow the Sarbanes-Oxley Act regulations ensure that internal auditors are members of the organization's Board of Directors, have financial competency, and are not being compensated for their services. Non-profits also rotate their auditing team every five years and avoid making loans to their executive officers.

Non-profit accountability also extends beyond showing how much money was spent on provision of services and other expenses to preserving the integrity of the organization's mission. Many non-profit organizations collect and publish data on the nature and impact of their work. This assures donors not only that their money is being put to its intended use, but also that the non-profit is generating positive, concrete results. Truthful and accurate solicitations for funds also speak to a non-profit agency's accountability.

Other indicators of non-profit accountability include the existence of a code of ethics, a conflict of interest policy, and a strong confidentiality policy at the organization in question. Responsiveness to questions or concerns is also a measure of accountability. This applies both to "upward" responsiveness to funders and regulatory agencies and to "downward" responsiveness to clients and the community served by a given non-profit organization.