A 2012 Agenda for Nonprofit Audit Committees

A 2012 Agenda for Nonprofit Audit Committees

By: Eugene Fram

Nonprofit audit committee members might want to view a video presentation at the Corporate Board Member Website (June 9th) for a list of top issues being faced by for-profit audit committees.  Catherine Bromillow, PwC Center for Board Governance, presents the list. 

Following, in her order of importance (high to low), are those that I feel can apply to nonprofit organizations.

RISK MANAGEMENT – Focusing on the known risks and estimating the unknown ones.  For example, how will the greater use of psychiatric drugs impact nonprofit counseling organizations?

INCREASED USE BY REGULATORS – What use will the IRS make of the governance information now being collected annually via the expanded 990 Forms?  Do volunteer directors know the potential impact of the Intermediate Sanctions Act?

CHANGES IN REGULATIONS & ACCOUNTING STANDARDS – What impact, if any, will Dodd-Frank have on nonprofits?   (Although not directed to nonprofits, Sarbanes-Oxley has had some indirect impacts.)  What changes in accounting standards need to be reviewed by a nonprofit audit committee?

TURBULENT ECONOMIC CONDITIONS – What plans are in place to survive more turbulence in the world economy? 

INTERNAL CONTROL STRUCTURE – How does the internal control structure need to be changed after a merger or acquisition transaction between two nonprofits?

TAX COMPLEXITY- How do changes in state or federal tax regulations impact a nonprofit organization’s business plan?

OPERATION COMPLEXITY – For those nonprofits that operate from multiple sites, the audit committee needs to understand key issues for each site.  Visits to all sites by the committee or individual directors are important.

COMMITTEE EFFECTIVENESS – With frequent rotating membership, how do nonprofit audit committees go about improving their operations?

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Nonprofit CEO Board Chair Relationships – Anything Works

Nonprofit CEO Board Chair Relationships –Anything Works!!

A recent NPQ Nonprofit Newswire (March 13th 2012), report concludes, that to build good nonprofit CEO-board chair relationships, “Task lists and job descriptions often propose a “one size fits all” recipe for the CEO-Board chair relationship, (but the lists have little to do with real world effectiveness.)” (more…)

Nonprofit chief executives should have a title, President/CEO

Nonprofit chief executives should have a title, PRESIDENT/CEO

By Eugene Fram

When nonprofit organizations reach a budget level of over $1 million and have about 10 staff members it is time to offer the chief operating officer the title of PRESIDENT/CEO.  In addition, the title of the senior board volunteer should become CHAIRPERSON OF THE BOARD, and the title of EXECUTIVE DIRECTOR needs to be eliminated.   Experience has shown that with a reasonably talented PRESIDENT/CEO at the helm, he/she can provide the following benefits:

  • Build a trust culture between board, management and staff.
  • (more…)

Assessing Nonprofit CEO Performance

Assessing Nonprofit CEO Performance

By Eugene Fram

CEO assessment should be very thorough and take place annually.  That doesn’t mean that it always has to take place at one time.  In some situations, assessment occurs throughout the year, depending on how the committee members decide to divide their tasks.

After completing the entire review, the assessment committee should make its report to the full board.   If the review takes place periodically throughout the year, board updates follow a similar pattern.

How Is Trust Developed Between The Nonprofit Board Chair And The Chief Executive?

How is trust developed between the nonprofit board chair and the chief executive?

By Eugene Fram

First, in order to maintain trust between the board chair and CEO, the chair must be certain that the evaluation of the organization and the performance evaluation of the CEO are inclusive, i.e., cover a balance of the most relevant outcomes.  Otherwise, the evaluation outcomes have the potential to damage the trust relationship that’s necessary to drive organizational growth.  (more…)


Can a board member ever hold a staff position in the same nonprofit organization?


By Eugene Fram

Sometimes a board member acts not as a director but as a different kind of volunteer.  For example, Director Z has a particular accounting skill and wants to utilize it to help the nonprofit.  The CEO agrees. 

In this instance the board member is not a board member, but a volunteer working under the direction of the CEO.  This distinction is easy to understand if you think about the example of a Boy Scout leader who also serves as a board member on a Boy Scout regional council. As scoutmaster, he follows scouting guidelines and directives provided by the organization’s professionals. As a council director, he helps to set policy for the Scout movement in the geographic area.  In only one instance does he act as a director. 

Whether or not he/she should receive a payment for the work is subject to various state law nonprofit laws and approval of the board.

Source: Policy vs. Paper Clips, Third Edition, 2011, pp.231-232.



How does a president/CEO turn down advice about operations or internal structure from the board.

by Eugene Fram

With difficulty.  It all depends on the type of culture that has been established by the board.  Ideally, the president/CEO should be comfortable saying, (more…)



The Special Relationship:

Nurturing the CEO-Board Chair Bond

By Eugene Fram

Here are tips to assure the best possible partnership between the board chair and CEO.

Keeping boards focused on strategic issues is a major challenge for nonprofit leaders. One problem is that (more…)

Designating a ‘Lead Trustee” Can Help Boards Improve Their Operations

Designating a ‘Lead Trustee’ Can Help Boards Improve Their Operations

Originally published by the Chronicle of Philanthropy, June 2, 2011, p. 34

By Eugene H. Fram

Few nonprofit boards do a great job of overseeing their organizations. Both nonprofit board members and CEO’s share that concern: Asked to rank their performance with academic-style grades by the nonprofit group BoardSource, chief executives gave their boards a C+, while board members gave themselves a B. (more…)

Your Dysfunctional Nonprofit Board – What to Do

Is your nonprofit board operating on two cylinders instead of six cylinders
needed for our current turbulent economic times? The updated and expanded third edition of Policy vs Paper Clips (http://policy-vs-paper-clips.com) on nonprofit governance is one vehicle to help a board to remedy this operating gap.
Thousands of nonprofit executives and board members, by reading the first two editions, have: (more…)