Did you know that when it comes to governance, the primary risk facing all nonprofits is the failure of directors and senior leadership to be sufficiently active and informed?
That was the takeaway from a panel discussion during a conference of the National Association of Attorneys General (NAAG) and National Association of State Charity Officials (NASCO).
Lack of board and senior leadership financial literacy exposes organizations to risk.
Board education directed toward financial oversight and financial risk detection goes a long way toward preventing state regulatory investigations as well as protecting against fines, fees and other onerous costs, including jeopardizing your organization’s reputation.
Assess your governance risks by answering True or False, (Note: Answers should apply to the majority of trustees, not just 1 or 2):
- Trustees address late completion of financial statements
- Trustees are active in monitoring and planning for program & organizational financial performance
- Trustees question large swings in income, expense, assets
- Trustees review cash flow projections on a regular basis and take action when necessary
- Trustees discuss major organizational risks and how to manage them
- Trustees discuss the auditor’s management letter
- Trustees distribute, review and sign off on the IRS 990
- Trustees are active in establishing all internal policies & cash controls
- Trustees abide by conflict of interest, whistleblower and fraud policies
- Trustees understand organization’s method of functional allocation (program, fundraising, management)
If you answered more than 30% of above “False”, board education should be a number one priority.
What are you doing to keep senior leadership and trustees active and informed? Let’s discuss your current situation and consider what’s needed to control your governance risks.