Nonprofit organizations have an opportunity to ensure the proper ethical training of its employees and managers. Moreover, business schools should prepare future nonprofit leaders for business challenges as well as the ethical challenges they will face as nonprofit leaders. Nonprofits have a responsibility to the causes they serve to act within the best interests of the organization. However, research has shown an inverse relationship between nonprofit ethical standards and the level of fraud within these organizations.

Current Ethical Standards in Nonprofits

Nonprofit World (2007) reported that ethical misconduct is at its highest level with over half of surveyed employees admitting to witnessing an ethical violation or lapse within a year. Standards set by Sarbanes-Oxley legislation do not fully apply to nonprofit organizations. There are only two stipulations within Sarbanes-Oxley that apply to nonprofits: protection for whistleblowers and document retention (Jackson, 2005). Although governance for nonprofits do not fall completely under the Sarbanes-Oxley guidelines, there are still federal, state, and local laws that must be followed.

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