The following is an excerpt from a tome written by a relatively grumpy but perhaps right-on individual who became frustrated and perhaps more with their nonprofit experience. The excerpt below is focused on nonprofit governance. The observations are thoughtful and should be worth consideration, perhaps annually, by nonprofit boards. After reading, ask yourself how true any of this is for your board.
One of the first things I wanted to better understand after I left the industry was nonprofit accountability and oversight.
Upon request, nonprofits are required to provide copies of their three most recently filed annual returns (IRS Form 990) and the organization’s application for tax-exemption. There are tons of laws they must follow, but that is it for transparency. Everything else is just ‘suggested, but not required’ for organizations funded by public money, serving vulnerable people in our community.
Some of the things that are rarely even suggested, and definitely not required are detailed financial information made available to the public, reviews of expenditures and travel policies, conflict of interest policies, financial management polices, executive compensation policies and routine audits. And checks to make sure the people served are being treated with dignity and respect, my initial complaint.
Most people who start a nonprofit are just regular people who see a need and want to help. Understandably, they might not have all the needed skills to run an organization. They might hire people who do or gain them over time. There is honor in that. If someone wants to feed a hungry person or offer free tutoring right now, they should not be forced to get a degree or some expensive certification. We have great people in our communities with real world experience, who give their blood, sweat, and tears every single day. These people should be the ones on the front lines.
But this habit of people with no experience founding full-on organizations can lead to a bunch of obvious problems. The main one is the possibility of unqualified people being in charge of other people’s welfare. This is where there is lots of room to take advantage of the gap in oversight.
Suddenly unqualified and irresponsible people might have access to large amounts of money they may have never seen otherwise. A Board of Directors is usually the group providing that oversight to keep things in check. That comes with serious responsibilities and real consequences. Some Boards can be personally held liable for financial impropriety. However, when change needs to happen it can literally take years to do with all the red tape, and assumptions of the good and personal relationships that are often involved.