Once Again! What Does Nonprofit Board Oversight Mean?
I have a daily (7 days a week) subscription to Google Alerts on “Nonprofit Management” and “Nonprofit Governance.” Every week, three or four nonprofit case stories surface, in these listings, related to inadequate oversight by nonprofit boards of directors. Many of the cases result six or seven figure dollar losses to the nonprofits. Following is my personal list of what reasonable board oversight means to attempt to help nonprofit boards of directors to avoid such losses.
- At least half the board should be able to analyze the monthly or quarterly financial statements. Have voluntary information sessions available for those who do not have the skills.
- Make certain that an external audit is conducted at least every two years, and the board is involved in the selection of the external auditor from a list of two or three suggested by board members and/or management. [i]
- Be alert to the system used for developing new programs. Be wary when new programs are described such as “mindboggling.”
- Be certain the organization has either a comprehensive assessment committee, finance committee, and/or audit committee. (Some states require nonprofits to have an audit committee once the organization has a certain annual revenue.)
- Be alert to the development process for filing critical reports –Examples: 990s, employee tax withholdings and both state and federal tax reports.[ii]
- Make certain the board has developed or is developing a current strategic plan.
- Make certain that the organization has a knowledgeable CFO. No board member should have to worry about the safety of the organization’s assets.
- Be especially alert when financial reports are frequently late or one or more directors perceive financial personnel are inadequately skilled.
- If you don’t understand something, be ready to raise questions, even if the question appears to be “dumb.”
- Nonprofit transparency is critical in the 21st century. “Trust But Verify.”
My Blog Site: http://bit.ly/yfRZpz
[i] For guidance in this process see: Eugene Fram & Bruce Oliver, (2010)“Want to Avoid Fraud? Look to Your Board,” Nonprofit World, pp.18-19.
[ii] For more details, see the third (2011) edition of “Policy vs. Paper Clips.” Available on Amezon.com in paperback or Kindle format.
My Blog Site: http://bit.ly/yfRZpz
Nonprofit Management 
Dr. Fram,
I love reading your blog! I have been serving on nonprofit boards for years and I also work with about 50 nonprofits a year. I laughed when I read, “Once Again?” It seems boards often forget the basics of oversight. Your list is spot-on as usual!
One thing I have shared with boards is “Four Questions to Ask When the CEO Presents a New Program/Service”. They are:
1. Does this meet our mission?
2. How will we pay for this on an ongoing, sustained basis?
3. Who will benefit? {Since boards should be gatekeepers of resources we need to know if we authorize a new service and program how many of our target constituents will benefit? Thus, do we want to authorize expenses and staff time?}
4. How will we measure the impact/outcomes?
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Thanks for your comment. We re clearly on the same page.
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