Wondering about COVID’s impact on nonprofit boards? Then take a look at our new report, How COVID affected nonprofit board practices. It is based on a survey of 119 nonprofit board and staff leaders at dozens of organizations in Connecticut, Rhode Island and Massachusetts.
We collaborated with our colleague Mike Burns at BWB Solutions to survey each of our clients and followers on how nonprofit boards have responded to disruptions cause by COVID since the shut down in March.
Changes in meeting format
The most striking COVID impact on board practices reported was the rapid transition to online meetings. Board meetings via video conferencing were rare before COVID, but are nearly universal now. About a fifth of respondents expect to continue all virtual meetings after COVID restrictions end. Up to half expect to use some hybrid of video conferencing and in-person meetings in the future.
Changes in practice
While the majority reported little or no change in the board’s overall effectiveness, a sizeable minority said that board work had improved since the onset of the crisis. A number of respondents reported that their boards had put fundraising and planning projects on hold during the shutdown.
We thought we would see some panic about COVID’s impact on boards and the nonprofits they serve. While almost equal numbers reported the likelihood of reducing or expanding programs or operations, board members tended slightly more to reductions while CEOs leaned slightly toward expansion. Very few expected to go out of business or merge with another nonprofit.
Mike Burns of BWB Solutions co-authored the report with Gayle L. Gifford and Jon Howard of Cause & Effect, Inc. We recommend that boards and executives reflect on what they can learn and adapt from changes in board practice since COVIC. We further call on boards to challenge all core assumptions to better prepare for future disruption.
How is your board doing? And other boards in New England. Would you like to know? Then please take this board coronavirus survey. Click here for survey.
Board service is challenging in the best of times – and these are not the best of times.
Cause & Effect Inc. and BWB Solutions have partnered to survey non-profit board leaders and chief executives in New England. With your response, we can better understand and record how the pandemic has affected the process and practices of your board. By sharing your insights and experiences, we’ll all do better in the challenging times ahead.
Taking a good look at someone else’s unfortunate situation before a scandal happens could head off a problem for your organization tomorrow.
Asking tough questions today can save deep trouble down the road.
Our local news has brought us more nonprofit scandals in the last few months – financial mismanagement, executive directors run
amok, programs ruined.
If this has happened in your area, consider this is an important learning moment for your board of directors. At your next board meeting, schedule some time to talk about the scandal and how vulnerable your organization might be to a situation like this.
Here are five questions to get your discussion started.
- What temptations led to this situation?
- Could this happen in our organization? How?
- What would our board have done in this situation?
- How can we prevent this from ever occurring here?
- How can we support and enable courageous questioning by our board members?
If you take our advice, we’d love to know how this conversation went for your board.
What other questions would you add to our list? Drop us an email.
For more on this topic, read
The July 2019 news brought another case of employee theft. The Executive Director, Controller and a business partner of the Boston Center for Adult Education have been charged with stealing $1.7 million over the last seven years. Time to share this advice. once again.
Another news release about significant employee theft at a nonprofit rolled across my desk. A quick internet search on embezzlement at nonprofits turned up a myriad of cases. Time to talk to an expert in the field.
An attorney by trade, Michael has been in the insurance business for 20 years. We had a long discussion about many aspects of risk management at nonprofits, specifically in the area of employee theft.
GG: What can you tell me about employee theft at nonprofits?
MS: Employee theft is one of the most common areas of risk for nonprofits. Unfortunately, nonprofits don’t always have the level of controls that many private companies have.
According to a 2014 report by the Association of Certified Fraud Examiners*, Nonprofits across the US lose approximately 5% of annual revenues to fraud.
GG: Could you tell me some of the ways this happens.
MS: Unfortunately, there are lots of ways this can happen. Bookkeepers often create dummy invoices, ghost vendors or kickback schemes.
Take kickback schemes. In this case, an employee at the nonprofit works out a deal with the vendor. Let’s say the employee orders supplies, say 100 of some item. The vendor only ships 80 of that item and then kickbacks part of its profit to the employee on the 20 items that were not shipped. While the amount might be small, this type of theft adds up over time if it’s never caught.
Other types of employee theft are very innovative. For example, the office is being renovated so the employee slips in their own bills for renovation supplies for their own property. An employee can prepare dummy invoices, where the check is written to themselves and then fudged later. This happened at Roman Catholic Diocese in NYC where a long-time, trusted employee in the accounting department, who was obsessed with purchasing expensive Madame Alexander dolls, was arrested in 2012 for embezzling more than $1 million over seven years.
GG: So what can an organization do to protect itself?
M.S. While criminal background checks are important, unfortunately, about 87%* of fraudsters have never been charged with a prior offense and that holds for both for profit and nonprofit organizations.
Nonprofit organizations need to be vigilant and take preventative measures to minimize the risk of theft or catch it early.
It is pretty hard to spot an executive director engaged in this type of activity. Never let one person be in charge of everything.
For example, make sure that you segregate duties for the folks paying bills and those handling money, have surprise audits, make sure that you have counter signatures on checks, and conduct fraud training for your employees.
Often the way many organizations catch the thief is to make the employee take vacation and then someone takes look at their work.
Know your employees. Keep an eye out when something seems out of line… be astute about suspected changes. Have a confidential hotline for employees to report suspicious activity within your organization.
GG: What if a theft happens anyway?
M.S. The good news is that an organization can transfer the risk by buying an insurance policy. For example, a crime insurance policy covers theft such as forgeries, alteration, counterfeit, burglary or robbery. Most mid-sized nonprofits could generally buy a policy for around $5000 for comprehensive coverage. A tiny organization could buy one for a few hundred dollars.
GG: Thank you Michael for opening my eyes to this uncomfortable world of employee theft. But both boards and executive directors need to be aware that not only can this happen, that it does with some regularity, even in our nonprofit sector. Be prepared.
*2014 Association of Certified Fraud Examiners: http://www.acfe.com/rttn/docs/2014-report-to-nations.pdf
As I was getting ready to write this post about the need for more moral capital on the board, the higher education scandal broke in the US. Sadly, thirty-eight people were taken into custody as of noon on March 12th in this bribery scheme.
What was the scandal? Wealthy and prominent parents from business and the media bribed administrators, coaches, test proctors and others to grease their kids into elite private colleges and universities. What, their large direct donations weren’t already enough?
Shamefully, this was done through Key Worldwide Foundation (KWF). KWF was a 501c3 public charity led by William “Rick” Singer who is pleading guilty to the charges against him.
According to its 2016 Form 990, KWF has just three directors. Singer served as President and CEO along with a secretary and one other director. (Their treasurer is not a director.)
Not only were the donors to KWF offering bribes for college placements, they were likely getting tax deductions for making those bribes through the nonprofit.
We can’t say it enough: you need a moral compass.
Every organization has to have a philanthropic or moral compass, most assuredly within the board. Yes, you have well-crafted bylaws, job descriptions, and director expectations. Yes, you reference ethics, the rule of law and conflict of interest. Really, all is crap if your directors or staff lack a moral core to do what is right.
People as capital
Yes, talking about people as capital seems contrary to discussing a moral guiding light.
Remember, I’ve previously pitched Professor Elizabeth Castillo and her typology of capitals. Using her list, you can begin valuing people for more than their financial capital when you consider what you need in the way of the human capital you recruit to your board.
For example, wealthy donors and connectors to other money aren’t the only desireables for your board. Open your doors to other people with assets that strengthen the board – e.g. intellectual, social, political, and cultural capital. And yes, moral capital.
Moral capital isn’t someone who can thread the needle of what is or isn’t ethical or legal. I want steadfast voices defending doing what is right. I want directors with justice in their hearts. DIrectors who are courageous enough to call out when something is bad, smells bad or just doesn’t feel right.
Our sector needs to stands strong for honesty, truth and transparency. We can’t afford to risk the public’s trust. Unfortunately, trust has been on a downward slide for many years.
How much moral capital sits on your board?
Are you struggling with recruiting your board of directors? Take a look at the newest addition to our Toolbox: Recruiting your board of directors.
First, what do you want of your board members?
- First and foremost, to be great governors (I hope that is first). When you consider the right composition of your board to exercise its role in governance, you’ll need a mix of members demonstrating attributes such as strategists, systems thinkers, nonprofit, issue and community knowledge, diverse worldviews, wise stewards, moral and ethical folks, collegial, disciplined, and courageous, among others.
- Second, we have come to expect that our board members should be leadership volunteers. As volunteers who help the organization move forward staff functions as appropriately called upon, look to recruit to the board individuals who will use their skills and connections in service to particular functions of the organization, such as government relations, or fund development, or expertise in marketing, communications or evaluation. The need for these volunteer skills is highly dependent on the number and types of professional staff in your organization and your business model.
Consider your board members as vital components of the human capital your nonprofit needs to function.
So, in developing a great board, you need to consider what you have set forth in your strategic plan and what it will take to get from here to there. What is the ideal profile of the board to achieve your desired future?
Second, where can you find these folks?
I’ve written before about the benefits of keeping a running list of board members. IMHO you can’t have too many candidates to choose from. To get there, look everywhere. Start with your donors and volunteers. Consider asking for help. Read the newspaper and local (or national) magazines or other sources to find the folks that suit your profile. Leave no stone un-turned.
Share your best recruitment stories with all of us. We’d love to hear from you.
Has boring put your board to sleep? Is it the arcane machinery of Roberts Rules? Pointless reports? Endless discussions? Trivial debates?
Here are five tools you can use to help transform sleepy board meetings from ennui to engagement.
- Move that table out of the room. Suddenly, you’re sitting in a circle with no head of the table to establish hierarchy and nothing to hide behind. If you can’t move the table, move the board members.
- Serve food. Sharing a meal creates human connections, starts conversations and sets the mood for a great meeting.
- Break into small groups. Especially on larger boards, many participants never say a word. You might be missing a brilliant insight. Small group discussion helps advance board thinking as members help each other refine and develop good ideas.
- Take notes on flip charts. Recording key points where members can see them as the meeting moves along assures board members they’ve been heard. Flip chart notes provide structure and a sense of progress through the agenda.
- Move people around. Too many board members never get to know their board colleagues. Move table tents at each meeting. A new perspective on the meeting space may also open the door to a fresh look at the board’s business.
What to do. What to do.
Revulsion, anger, sadness, resolve. All of these emotions have been filling my head since Charlottesville. Well, really for much longer but seeing Neo-Nazis and Klansmen in the streets made them very raw again.
I found myself weeping reading some of the first hand accounts coming through my Facebook feed. Fear. Bravery. Disbelief.
I’m continuing to accept the challenge of confronting the protections of my own white privilege as I hear the anguish from my friends and colleagues.
I’m still shaking my head as to why we are still here, still at this point in 2017.
I believe the US desperately needs a Truth, Reconciliation and Reparations Process to take a hard look at its storied past on race. Our school history books have merely skated over the brutal aspects of US history that includes genocide, slavery, racism, and war crimes. We must come to a common understanding of what we have perpetrated as both a government and a people before we can begin to put an end to this hate.
It’s also time for a hard hitting inclusion reality check for your own organization.
If you want to respond to Charlottesville, it’s long past time to put an end to the half-hearted attempts at inclusion in your organization. Yes, your non-discrimination policy was a nice start.
But where are the individuals of color on your board? On your staff? Among your client base? At your events? Among your partnerships? Who else are you leaving out?
What is staff’s response when a big donor makes a racist or bigoted remark? How will a fellow board member respond? It happens all the time. Shocking stories.
Get comfortable with discomfort, as a recent article in Nonprofit Quarterly advised.
I promise to remind you, to challenge you, to hold you accountable for fulfilling your espoused values.
There is much work to do. Let’s get to it.
The board’s role in approving the budget provides a great teaching tool for the difference between management and governance..
Okay board, what are you really approving?
In the typical organization, your Executive Director with her leadership team have crafted the budget to review with the board of directors. But when the budget gets to the board level, what exactly is the board approving? Is it that $10,000 printing expense? The $6,000 you are spending this year on electricity?
Here’s what a focus on governing would lead you to consider:
Does your spending match your priorities?
Your budget is a reflection of your annual plan. It shows what investments you are making in the organization. Have you decided that you want to grow your education program, yet your advocacy work is eating up all the personnel? Or was this the year you decided you had to deal with your antiquated technology, but there are no dollars included in the budget to support this work.
Can you pay the bills?
This can be determined in many ways. First and foremost, does the income projected for the year cover the expenses you have outlined? Does your income receipt and expense spending schedule cause cash flow problems at various times of year? If you’ve decided to take on a deficit, what is the implication on your financial reserves this year, and into the future?
Are you spending donor restricted dollars as required?
This is a subset of the above. It may look as if you have a lot of revenues coming in this year, but cash is not always fungible in nonprofits. That grant that doesn’t arrive until the third quarter and can only be spent forward could leave you with a deficit in your unrestricted assets. Or your expenses are meeting the promises of those grants. Or are revenues meant for your capital campaign hiding income shortfalls in your operating budget?
How much risk are you accepting in your income projections?
What is the data behind those revenue projections? Is there a well-defined plan based on past experience and carefully projected new revenues? Do you have the capacity to execute the level of effort behind those growth numbers? Or are you carelessly plugging holes with fictional new revenues because you don’t want to cut expenses that really should be cut.
What are the implications of compensation and benefit increases in the budget?
While I’m not one to want to deny staff well-earned pay increases, I also know that when you raise salaries you are fixing personnel at a higher level for years to come. On the flip side, did you budget staff increases but forget to make any provisions for an increase in compensation for your Executive Director or leadership team? Remember to document the level of your ED’s compensation based on market and any other considerations to justify should the IRS inquire.
What’s Plan B?
If you don’t make your revenue projections, when and what do you start cutting? Do you have another solution, say a line of credit? How much debt are you willing to take on?
Are you following your spending policy?
If you’ve got investment income, what is your policy for moving earnings into your operating budget? Are you staying in those guidelines or making an exception? Why? What are the long-term implications of this decision?
Is there anything suspect or unjustified among the line items?
Theft does happen. More than we want to imagine. So a quick check on growth in expenses from one year to the nest should pop out anything that seems highly unusual and may need a second look. If there is a completely new line item, its okay to ask how that was calculated and if other options were considered. And it doesn’t always happen through pilfering, but also in the forms of inexplicable payrolls, unabating troughs in graphs related to finance, etc. It is always a good idea to hire a payroll company like Fort Collins PEO services to make the company immune against these perpetrations.
Do you have a overhead to program spending ratio? Is the budget within that guideline?
Yes, overhead ratios are highly controversial in this sector. Yet for organizations that submit to charity watchdogs or participate in state or federal payroll deduction programs, there are ratios you need to stay within. If you are part of an international federation, there may be nationally mandated limits in other countries that influence your spending ratios. Does a full cost look at your budget meet those guidelines?
What else? What does your board consider when it reviews the budget?