audit comitttees

Errors That Can Cloud Nonprofit Board’s Decision Making–Tread With Care

Errors That Can Cloud Nonprofit Board’s Decision Making–Tread With Care

By Eugene Fram            Free Digital Image

In this age of information overload, nonprofits need to continually scrutinize the quality and source of the material received in preparation for major decisions. Since directors often come without broad enough experience in the nonprofit’s mission arena, they may not be prepared to properly assess its progress in moving forward–and not equipped to make relevant comparisons with similar nonprofits.  In addition, naive or unscrupulous CEOs and highly influential directors may inundate their boards with information and data as a  distraction tactic to keep them busy in the “weeds,” reviewing what has been presented.  Board members need to avoid donning “rose-colored glasses” when assessing proposals from these sources.

I once encountered a nonprofit whose board was about to acquire a for-profit organization, headed by its founder.  Pushing for the “deal” were the nonprofit’s CEO and an influential board member who were not, it turned out, capable of the due diligence needed for a project of this complexity. But the board approved the acquisition without sufficient review.  When the acquisition was consummated, the founding CEO of the subsidiary refused to take directions from the CEO of the nonprofit. In addition, the normal financial settlement of the project requires that a portion of the price be withheld, in escrow, pending adequate performance.  In this instance, the nonprofit paid cash for the acquisition.  Based on  a lack of performance, the operation was finally closed with a substantial loss. (more…)

The Possibility Of Fraud – A Nonprofit Board Alert

The Possibility Of Fraud – A Nonprofit Board Alert

By: Eugene Fram              Free Digital Image

“According to a Washington Post analysis of the filings from 2008-2012 … of more than 1,000 nonprofit organizations, … there was a ‘significant diversion’ of nonprofit assets, disclosing losses attributed to theft, investment frauds, embezzlement and other unauthorized uses of funds.” The top 20 organizations in the Post’s analysis had a combined potential total loss of more than a half-billion dollars. *

One estimate, by Harvard University’s Houser Center for Nonprofit Organizations, suggests that fraud losses among U.S. nonprofits are approximately $40 billion a year. **

Vigilant nonprofit boards might prevent many of these losses. Here’s how:

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Unwritten Protocols for Directors Can Boost Nonprofits’ Effectiveness

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Unwritten Protocols for Directors Can Boost Nonprofits’ Effectiveness

By:  Eugene Fram                                        Free Digital Photo

Nonprofit boards are governed by a series of obligations —some are clearly defined as legal responsibilities such as financial actions. Others, however, are less clearly defined and relate to people who are, in some way, associated with the organization. Guidelines to these diverse interactions are not typically archived in policies but are important to the overall professionalism of the board. They include consideration of its: board structure, internal operations, recruitment methods and leadership style.

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People Problems Can Put Nonprofits at Risk

 

People Problems Can Put Nonprofits at Risk

By: Eugene Fram   Free Digital Image

Like the Streisand song lyric, nonprofit people who need people must first have the know-how to choose and cultivate those people! If not, the risks to a board can range from modest to substantial. It all begins with making the right choices and vetting board and CEO candidates.  Most nonprofit board members know that they are only required to make one hiring decision—the engagement of the CEO. This is a process that always involves some risk factors. Take the case of the university that has expended substantial amounts to engage a CEO. After a brief “honeymoon period” it was determined that the candidate lacked the requisite background to move the organization forward. His resignation was forthcoming, and with it, a disruption that was costly not only in dollars but in board/faculty morale and public confidence.

A nonprofit board is usually confronted with several people risks. Following are some that should be noted by board members. (more…)

How Can Nonprofits Accommodate To External Influences? Some Field Observations

 

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How Can Nonprofits Accommodate To External Influences? Some Field Observations

By Eugene Fram       Free Digital Image

Ruth McCambridge, editor of Nonprofit Quarterly, points out “Our organizational management, (board) styles and structures are affected by the four external influences.” See paraphrased bolded items below. (http://bit.ly/1HSwrZY) Following are some specific field observations I have encountered that, over several decades, support her model relating to external influences.

The nonprofit’s mission field: McCambridge points out that arts organizations have dual have leadership models—artistic and business. However, unless specified which has final authority, the system can lead to continual conflict between the two; the artistic leader wanting the most authentic productions and the business leader concerned with budget realities. The final authority is often determined by which leader has the CEO title. (more…)

Developing A Sustainable Nonprofit–Post Covid-19

 

Developing A Sustainable Nonprofit–Post Covid-19

By: Eugene Fram         Free Digital Image

An analysis of the current pandemic environment should be a clarion call for nonprofit board members. It can be summarized in a couple of sentences:

Great crises tend to bring profound social changes, …. . We seem to be at another point when society will make adjustment for good or ill. * 

As nonprofit board members or managers, are you ready to identify and confront these adjustments as they already have developed or will challenge your nonprofit within the next 10 years? Hopefully, a large portion of nonprofit boards will accept the challenge and begin strategic planning for the post Covid 19 period now!   (more…)

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

Measuring Nonprofits’ Impacts: A Necessary Process for the 21st Century

By Eugene Fram      Free Digital Image

Nonprofit boards and CEOs in the United States are being overwhelmed with requests from foundations and governmental agencies to move from providing outcome data to providing impact data. One nonprofit with which I am well acquainted has been required to reform its IT program to meet the requirements of a local governmental IT program, so that impacts can be assessed. It will be interesting to see how this scenario plays out.

Unfortunately, outcomes and impact are often unrelated, which is why a program that seems to produce better outcomes may create no impact at all. Worse, sometimes they point in opposite directions, as can happen when a program works with harder-to- service populations resulting in seemingly worse conditions, but (has) higher value-added impact. … Rigorous evaluations can measure impact (to a level of statistical accuracy), but they are usually costly (a nonstarter for many nonprofit), difficult and slow. * But how do the medium and small size nonprofits measure actual results in the outside world such as enhanced quality of life, elevated artistic sensitivity and community commitment? (more…)

Maintaining World Class Integrity in a Nonprofit Boardroom: Guides for Action

Identify Nonprofit Staff Groups To Help Drive Organizational Change

By Eugene Fram      Free Digital Image

Nonprofit executive directors tend to think of the staff professionals as individual contributors. These individuals are persons who mainly work on their own and but increasingly also have to contribute as team players – for instance, counselors, health care professionals, curators and university faculty. However, many executive directors fail to recognize that these individual contributors can be grouped according to identifiable types, with differing work-value outlooks. Each group needs to be motivated differently to drive change in today’s fast moving social, political and technological environments. Nonprofit board members can use these groupings in their responsibilities for overseeing promotable staff members.    (more…)

The Nonprofit CEO–How Much Board-Trust Is Involved?

 

The Nonprofit CEO–How Much Board-CEO Trust Is Involved?

By; Eugene Fram   Free Digital Image

The title, CEO for the operating head of a nonprofit, clearly signals to the public who has the final authority in all operating matters and can speak for the organization.*  .

The CEO designation calls for an unwritten trusting contact with the board based on mutual respect, drawing from the symbolism that he or she is the manager of the operating link between board and staff. It is a partnership culture. However, a solid partnership does not allow the board to vacate its fiduciary and overview obligations. The board has moral and legal obligations to “trust but verify” and to conduct a rigorous annual evaluation of outcomes and impacts CEO has generated for the organization.

While the trust the board has in its chief operating officer can’t be described in exact quantitative terms, viewing it through the lens of a set of CEO and/or Board behaviors can give an idea that a significant level of trust is involved in the relationship.

Following are some of the behaviors that signify a trusting partnership is in place: (more…)

The Nonprofit CEO–How Much Board-CEO Trust Is Involved?

 

 

The Nonprofit CEO–How Much Board-CEO Trust Is Involved?

By; Eugene Fram   Free Digital Image

The title, CEO for the operating head of a nonprofit, clearly signals to the public who has the final authority in all operating matters and can speak for the organization.*  .

The CEO designation calls for an unwritten trusting contact with the board based on mutual respect, drawing from the symbolism that he or she is the manager of the operating link between board and staff. It is a partnership culture. However, a solid partnership does not allow the board to vacate its fiduciary and overview obligations. The board has moral and legal obligations to “trust but verify” and to conduct a rigorous annual evaluation of outcomes and impacts CEO has generated for the organization.

While the trust the board has in its chief operating officer can’t be described in exact quantitative terms, viewing it through the lens of a set of behaviors can give an idea of whether it is excellent, good or nonexistent.

Following are some of the behaviors that signify a trusting partnership is in place: (more…)