It’s okay to trust, but still verify
I just heard another sad tale today of a nonprofit that ended up in a financial pickle that almost ended its vital community programs.
Apparently the executive director took on a grant obligation which required a big match and the board took the exec’s word that the money was there to back up the obligation.
While it is the rare day that I find myself quoting Ronald Reagan, here goes: “Trust but Verify.”
The relationship between a Board and its CEO would be pretty broken if there weren’t high degrees of trust both ways. Yet for a Board to be truly exercising its fiduciary role, it can’t always rely on the word of its staff. It’s a sorry thing to have to say that, but even the most trustworthy person may find his or herself (or a family member) in a situation that they believe merits directly bending the truth or using silence to avoid disclosing a problem.
There was absolutely no personal gain in this case and nothing illegal. But how many times have you read a newspaper story about the loyal employee, the one that everyone trusts implicitly, who turned out to have been embezzling money all those years. (Often to support gambling addictions – we’ve had too many of those in our state). And think “that can’t happen to us.”
Instead, think about how that might happen to you and take some preventive action.
In their PolicyGovernance (R) model, John & Miriam Carver suggest three ways that Boards can monitor the situation at their organization:
1. Ask for a report from staff
2. Engage someone from outside the organization to conduct a review (e.g. your auditor), or
3. Inspect it yourself.
Every Board needs to make sure that they are judiciously using ways 2 & 3 in addition to relying on staff reports. It’s a heck of a lot wiser to trust, when you’ve got the independent verification that everything is hunky dory.