How Nonprofits Can Develop an AI Policy: A Step-by-Step Guide

by Hedgeman Law Firm | Mar 24, 2025 | Business

In today’s AI-powered world, nonprofits must develop a clear AI policy to ensure ethical, effective, and responsible use of artificial intelligence. AI can streamline operations, improve donor engagement, and enhance service delivery, but without proper governance, it can also introduce risks such as bias, privacy concerns, and mission misalignment.

Benefits of AI for Nonprofits

AI offers significant benefits for nonprofits, including:

Better utilization of resources: Automates administrative tasks, freeing up staff time for mission-driven work.
Improved donor engagement: AI-driven personalization helps tailor outreach efforts.
Enhanced decision-making: AI analytics provide data-driven insights for fundraising and program development.
Cost savings: AI reduces manual work, cutting operational costs.
Scalability: AI tools enable nonprofits to serve more people efficiently.

Here’s a step-by-step guide for nonprofits to develop a strong AI policy:

Step 1: Define Your AI Goals and Use Cases

Before implementing AI, your nonprofit should define how AI will support your mission. Ask the following questions:

What challenges can AI help us solve? For example, AI can assist in automating grant application reviews, improving donor segmentation, or predicting community needs more accurately.
How can AI improve our operations, fundraising, or outreach? AI-powered chatbots can provide instant responses to donor queries, machine learning can enhance fundraising predictions, and automated content generation can personalize outreach efforts.
Which AI tools are already in use, and which ones should be considered? Conduct an audit of existing technology to identify gaps and opportunities for AI integration, such as CRM enhancements, AI-powered analytics, or automation software.

Clearly outlining AI use cases will ensure alignment with your nonprofit’s values and objectives.

Step 2: Establish Ethical Guidelines

Ethics should be at the core of any AI policy. Consider including:

Transparency: Ensure stakeholders understand how AI is used in decision-making by providing clear documentation and disclosures. For example, if AI is used to prioritize grant applications, explain the criteria it evaluates.
Fairness and Bias Mitigation: Avoid AI systems that reinforce discrimination by testing algorithms for biases, ensuring diverse training data, and regularly auditing AI decisions.
Accountability: Designate staff responsible for AI oversight and create a process for addressing concerns. This could be a compliance officer or an ethics review board.
Privacy and Data Protection: Securely store and handle data in compliance with legal standards such as GDPR or HIPAA. For instance, AI used for donor analytics should anonymize sensitive information.

Step 3: Develop Governance and Oversight Structures

Assign responsibility for AI governance within your nonprofit. This could include:

An AI Ethics Committee reviews policies and new AI implementations, ensuring alignment with the organization’s mission.
A Chief AI Officer or Technology Lead oversees AI tools, provides staff training, and ensures ethical implementation.
Regular Audits and Reviews evaluate AI performance and risks, such as assessing whether automated donor outreach is increasing engagement or if algorithmic biases have emerged.

Step 4: Ensure Compliance with Laws and Regulations

AI policies should adhere to:

GDPR, CCPA, and other data protection laws if you handle donor or beneficiary information, ensuring transparency in data collection and usage.
AI ethics guidelines from nonprofit regulatory bodies, such as the Partnership on AI’s best practices for responsible AI use.
Accessibility and inclusion standards to ensure AI benefits all users, such as ensuring AI-driven platforms support screen readers and multilingual functionality.

Step 5: Train Staff and Volunteers

Provide AI literacy training to ensure your team understands:

How AI is integrated into nonprofit operations. For example, training staff on how AI assists in donor management through predictive analytics.
Best practices for responsible AI use, such as verifying AI-generated content for accuracy before dissemination.
How to spot AI-related risks and biases, such as identifying whether AI-generated hiring recommendations exhibit unintended bias.

Step 6: Implement Transparency Measures

Communicate AI policies to donors, volunteers, and the communities you serve by publishing an AI ethics statement on your website.
Create an AI use disclosure statement on your website, similar to privacy policies, outlining how AI is utilized in engagement, decision-making, and operations.
Provide channels for stakeholders to ask questions or raise concerns about AI use, such as an AI oversight email or quarterly feedback sessions.

Step 7: Continuously Evaluate and Adapt

AI is rapidly evolving, so nonprofits should:

Regularly review and update AI policies to incorporate emerging best practices and regulatory changes.
Gather feedback from staff and stakeholders through surveys and direct engagement to assess AI’s effectiveness.
Monitor emerging AI trends and ethical considerations, such as developments in explainable AI (XAI) to enhance decision transparency.

Step 8: Sample AI Policy for Nonprofits

Below is a sample AI policy framework:

AI Use Statement: [Nonprofit Name] uses artificial intelligence responsibly to enhance operations, fundraising, and community engagement. AI will not replace human decision-making but will assist in improving efficiency and effectiveness.

Ethical Considerations:

AI applications will be transparent and reviewed for bias.
Donor and beneficiary data will be protected following all relevant regulations.
AI-driven decision-making will be monitored and adjusted as needed.

Governance:

An AI Ethics Committee will oversee AI implementation.
Regular audits will assess AI effectiveness and fairness.
Training will be provided to staff to ensure responsible AI use.

Step 9: Engage with the Nonprofit AI Community

Nonprofits can benefit from collaboration by:

Participating in AI ethics forums and nonprofit tech conferences such as NTEN’s Nonprofit Technology Conference.
Sharing AI best practices and challenges with other organizations through platforms like TechSoup or the AI for Good Foundation.
Staying informed about advancements in AI governance and responsible use by following reports from organizations like the Partnership on AI or the Center for AI and Digital Policy.

Developing a nonprofit AI policy isn’t just about compliance—it’s about leveraging AI responsibly to advance your mission while maintaining trust and transparency. By following these steps, your nonprofit can harness AI’s power while ensuring ethical and mission-driven implementation.

Need help crafting your AI policy? Reach out to Hedgeman Law, for expert legal guidance. Engaging with AI responsibly today will position your nonprofit for greater success in the future.