Artificial Intelligence in Nonprofits: Practical Applications and Legal Considerations
Artificial intelligence (AI) is transforming the nonprofit sector by enhancing efficiency, improving decision-making, and increasing impact. As nonprofits integrate AI, they must navigate legal and ethical challenges to ensure compliance and fairness. This blog explores practical AI applications for nonprofits and key legal considerations they should keep in mind.
Practical Uses of AI in Nonprofits
AI technology supports nonprofits in various ways, including:
- Fundraising Optimization: AI can analyze donor behavior, predict giving trends, and personalize outreach efforts to boost engagement and contributions.
- Volunteer and Donor Engagement: Chatbots and AI messaging platforms can provide timely updates, answer questions, and streamline communication.
- Program Efficiency: AI can manage administrative tasks like scheduling, reporting, and resource allocation, allowing staff to focus on mission-critical activities.
- Enhanced Accessibility: AI transcription and translation services can make nonprofit resources more accessible to diverse audiences.
Legal and Ethical Considerations
While AI offers significant advantages, its use also raises ethical and legal concerns, particularly in data protection, intellectual property, and regulatory compliance.
- Data Privacy and Protection
AI and data privacy go hand in hand, especially since nonprofits collect and process sensitive information like donor, volunteer, and beneficiary data. Traditionally, a nonprofit employee handled this information, ensuring confidentiality through nondisclosure agreements and locked file cabinets. Today, digital storage is the norm subject to individual states’ data protection laws. One of the most notable is the California Privacy Rights Act (CPRA) of 2020, which establishes data privacy standards across the U.S.
While Washington State does not have a comprehensive data privacy law, nonprofits operating in Washington may still be subject to other privacy laws and federal regulations, including:
- Health Insurance Portability and Accountability Act (HIPAA): Applies to nonprofits handling health information;
- Federal Trade Commission (FTC) Rules: Which prohibit false advertising; and
- CAN-SPAM Act: Which governs email marketing practices.
AI presents two primary data privacy risks for nonprofits: Data security and data disclosure. To address issues with data security, nonprofits must ensure AI tools align with industry security standards. This ensures that the nonprofit will not needlessly risk the data that is stored.
Nonprofits must be aware that when using AI there may be improper disclosure of data input because any information entered into an AI system may be stored and used in future outputs. For example, if a health-related nonprofit puts sensitive medical data into an AI tool, that nonprofit may inadvertently violate HIPAA regulations because that information has been disclosed to an improper party. Similarly, uploading donor lists to AI systems could expose confidential information, potentially voiding trade secret protections.
- Bias and Fairness in AI Algorithms
AI systems can unintentionally reinforce biases, leading to unfair treatment of certain groups. Currently, California, Colorado, and Illinois have enacted legislation to regulate AI decision-making. Even when laws do not require human oversight of AI-generated outcomes, nonprofits should still review AI results for accuracy and fairness to avoid ethical and legal issues.
AI functions like an advanced calculator. It processes information based on large language models and algorithms, much like a calculator processes numbers and mathematical operations. If AI is trained on biased data or flawed algorithms, its results may be inaccurate or discriminatory.
- Intellectual Property and AI-Generated Content
AI-generated content presents intellectual property challenges with few solutions. Under current law, AI generated works typically do not qualify for copyright protection unless they include significant human input.
Additionally, feeding proprietary or confidential information into AI tools may expose trade secrets. To maintain trade secret protection, organizations must make reasonable efforts to keep information confidential. Disclosing sensitive data to AI systems could weaken legal protections.
- Regulatory Compliance and Accountability
AI can help nonprofits streamline compliance efforts, but it also introduces challenges. For example, some nonprofits use AI to record meeting minutes, a task traditionally handled by the organization’s Secretary. However, AI-generated transcripts may contain errors, making human review essential.
The best practice for AI generated material includes having a human review and approve any AI generated material. For example, the Secretary of the nonprofit should take notes alongside AI-generated minutes and reconcile discrepancies before presenting minutes for board approval. This same human review should be used for AI-generated grant proposals, fiscal sponsor reports, and other materials should be carefully reviewed for accuracy.
Nonprofits should establish policies governing AI use, ensuring transparency and ethical decision-making. Proactive compliance not only reduces legal risks, it also strengthens public trust, and ensures responsible AI adoption.
Conclusion
AI is a powerful tool that can help nonprofits operate more efficiently, stretch limited resources, and enhance their impact. However, organizations must carefully assess compliance risks and AI-generated outputs for biases and accuracy. While AI presents challenges, its potential benefits are large; nonprofits should evaluate any risks from use of AI with the potential benefit that is derived and make an educated decision about AI’s use for their organization.
If you have any questions, feel free to contact me at adan@apexlg.com.
This blog is for general informational purposes only and does not constitute legal advice. This article or contacting Apex does not create an attorney-client relationship. If you have any questions or would like to learn more, please contact us or visit our blog.
- CPRA was an amendment to the California Consumer Privacy Act of 2018 (“CCPA”), the use of CPRA or CCPA is often interchangeable.
- Check out this blog to understand more about trade secrets https://apexlg.com/making-your-intanglibles-tangible-part-3-trade-secrets/
- There are exceptions to this, there is a whole blog on this and it is outside of the scope of this blog.
- RCW 19.108.010(4)