Board Cafe

Short enough to read over a cup of coffee, Board Café has everything you need and want to know to help you give and get the most out of board service.

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Model Document Retention Policy for Nonprofits

Retention of documents related to lawsuits is one of only two provisions of Sarbanes-Oxley that are applicable to nonprofits. Nationally recognized nonprofit attorney Tom Silk wrote this Model Document Retention Policy on a pro bono basis for CompassPoint Nonprofit Services to use and to make available for all nonprofits.

This document management policy is designed to conform with the charitable laws of states which, like California, give the Attorney General an unusually long statute of limitations (10 years) within which to bring an action for breach of charitable trust.

Four items to note in particular: First, think about this as part of document management, rather than simply document retention; holding on to documents too long is an unnecessary expense. Second, there may be some documents that are worth saving for the community's sake or for the sake of clients that go beyond these legal guidelines. And third, remember that e-mail messages are documents that should conform to these guidelines.

DOCUMENT MANAGEMENT POLICY

For each document, add its location or where . . .

Model Whistleblower Policy for Nonprofits

Strengthened protection for whistleblowers is one of only two provisions of Sarbanes-Oxley that are applicable to nonprofits. Nationally recognized nonprofit attorney Tom Silk wrote this Model Whistleblower Policy for CompassPoint Nonprofit Services to use and to make available on pro bono for all nonprofits.

Board resolution: The board of directors approves the inclusion of the following statement in the Employee Handbook, and directs the Chief Executive Officer to ensure that it is given to and acknowledged by all employees. In addition, the Chief Executive Officer will ensure that whistleblower protection notification is posted in the workplace(s) as required by state law.

Notes: The Model Whistleblower Policy extends beyond the law by encouraging . . .

Sarbanes-Oxley and Nonprofits: Bogeyman in the Boardroom?

Somehow, all the publicity about Sarbanes-Oxley made it seem as if this legislation applied to nonprofits, too. But contrary to what is frequently thought (and said in nonprofit boardrooms!), Sarbanes-Oxley is not applicable to nonprofits, albeit with just a couple of exceptions. In other words, there are a couple of small points to note(templates later in this article), a lot to relax about, and a lesson to be learned in nonprofit leadership.

You may remember that this multi-component legislation (nicknamed SOX) was passed by the U.S. Congress in 2002 in response to a large number of for-profit scandals involving Enron, Tyco, WorldCom, Arthur Anderson, and others. Extreme fraud, conflicts of interest on boards, unethical executive compensation practices, and improper auditing led to the failure of these mega-companies and deep, negative impacts on consumers, shareholders, employees, and many other individuals and institutions.

In response, Sarbanes-Oxley set in place a number of required processes for publicly held corporations (corporations that issue stock to the public), of which the best known may be the requirement that the CEO personally vouch for the accuracy of financial statements and that the external audit firm be different from the firm providing financial consulting.

There are only two aspects of Sarbanes-Oxley that are applicable to nonprofits:

A 360-Degree Look at the Organization: Seeing Ourselves as Others See Us

Who should judge if a meal is good? The cook? The nutritionist? The restaurant critic? Aristotle had a good answer long ago: "The guest is a better judge of the feast than the cook."

There are 360 degrees in a circle, and the 360-Degree Look places the organization at the center of the circle and looks at it from the viewpoint of its many constituencies. In particular, the 360-Degree Look helps compensate for the board's limited view of how well the organization is functioning. There are several reasons for this limited view. First, board members often have only a little time each month to spend on their volunteer board commitments. Second, board members are often unfamiliar with the program area of the organization, whether that is pesticide research, early childhood development, or nursing home standards. Hopefully, board members do know about the needs and desire of the organization's constituents, but that may not be the case. Finally, board members often receive most or all of their information from the organization's executive -- not entirely a bias-free source.

Time for a Fresh Perspective?

In a 360-Degree Look, the board and the staff management team seek feedback from those who stand around the outside of the circle as well as inside it: clients, the community, volunteers, donors, funders, and staff. While such a project might be seen as threatening or overly time-consuming by staff, it's an infrequent project, done perhaps every five years, or when a fresh perspective is wanted. Having it led by a board-staff task force can alleviate staff fears and create a precedent for such board-staff teams. Like any project, a 360-Degree Look can get bigger and bigger; keep it modest and do-able.

The following steps can be considered as examples of ways to obtain . . .

Speed Up the Board Recruitment Process!

Imagine getting excited about volunteering for something, and then waiting six or seven months before you actually get to do it. Can we accelerate the process by "pre-qualifying" candidates?

One of the most frustrating parts of board recruitment is the length of time -- often months -- between talking with a prospect and then bringing him onto the board . . . months during which the candidate usually becomes less interested. For instance, a person might be tentatively asked in January, discussed by the governance/nominating committee in February, have her name brought to the board for discussion in March, officially interviewed/asked in April, elected by the board in May, and her first board meeting is in July! Some boards . . .

The Secret to a High Impact Annual Report

We nonprofits often put a great deal of time and effort into our annual reports, especially compared with how briefly most recipients will look at them.

"The annual report is a comic book," a nonprofit executive once told me. "They look at the picture and glance at the words." The secret reality is that people do only four things with a nonprofit annual report. They:

  • Read The Letter (typically from the executive director and the board chair)
  • Check to see if they're listed (if they're a donor)
  • Read the captions on photos
  • Look at the financials to see how big you are and if you had a surplus or a deficit.

You know it's true! Yet (with the exception of The Letter) these are the areas that are often done at the last minute and without real thought.

So this year, do it differently:

Nonprofit Embezzlement: More Common and More Preventable Than You Think

"I was on the board of a national social justice organization for three years. The Development Director discovered that the "external-auditor-turned-internal-accountant" had been embezzling funds by stealing checks and using the "stamp signature" of the CEO. The day after it was discovered, the accountant shot and killed himself. He had also been embezzling from a church he volunteered for. The lesson I walked away from this tragic scene with was this -- as a board member did I do everything I could to prevent embezzlement? Why did I hesitate in saying anything when staff suggested it was a good idea to hire our auditor for internal work because 'he knew us so well'?" --Blue Avocado reader who asked to remain anonymous

Embezzlement -- fraud committed by employees and volunteers -- is especially painful in community nonprofits. Not only is real damage done to our organization, but we feel that our cause has been betrayed by someone we trusted and liked. We worry that donors and grantmakers will be less likely to give us money if they hear about it. And because embezzlement is so often kept quiet in nonprofits, we might think that we are the only ones to experience it. What are some of the most common types of nonprofit embezzlement and how to deal with them?

The Board Builds Its Sense of Self: Body-Building for Boards

Perhaps the single most important attribute of an effective board is also its most intangible: an independent sense of itself. This sense of self is the board's identity as a body rather than, for instance, as a loose collection of individuals who each finds ways to support the organization.

As individuals, board members act as supporters of the organization, and often see themselves as supporters of the executive director as well. They speak to the community on the organization's behalf: asking for donations, volunteer time, and support. In contrast, when acting as a BODY, the board speaks to the organization on the behalf of its constituency. And while individual board members are cheerleaders, the board as a whole is the sharp-eyed team owner: looking at both the season record and the bottom line, and evaluating the head coach.

Here are five easy ways to strengthen the board's sense of self:

A Board Member's Guide to Nonprofit Insurance

Many board members don't think about the organization's insurance until something adverse happens. As one Blue Avocado reader commented: "Insurance isn't sexy, but it's as essential as a roof over your head." In these tight times, it's tempting to make insurance a low priority, but this strategy can be penny wise and pound foolish. Blue Avocado asked Pamela Davis, president and CEO of the Nonprofits Insurance Alliance Group (and a Blue Avocado Steering Committee member) to give us the low-down on liability.

Q: Pamela, what are the most common insurance claims against nonprofits? How much do they end up costing?

Pamela: Almost all of the claims -- 90 percent-- reported by nonprofit . . .

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