Monday, July 14, 2008

Mind The Gap ...

It's sometimes said that trustees of nonprofits check their brains at the boardroom door. Otherwise sophisticated men and women - people who are successful in business, or who can manage money or who bring critical skills to an organization don't apply the same rigor to nonprofit governance as they do to their own business affairs.

There may be occasional good reason to place that charge on board members. I have seen dereliction from both the perspective of the consultant advising boards as well as from the vantage point of a person with long experience serving on nonprofit boards. One reason board members may act casually is because they trust management to do the real work and they rely heavily on the information management gives them - or doesn't.

This brings me to ACORN, the national association of community organizers. On its web site - but only after national press attention apparently forced it - Maud Hurd ACORN's president issued this statement:

“ACORN now begins a new chapter as its founder and chief organizer, Wade Rathke, is moving on from the organization he founded in 1970. The ACORN Board recently learned that Wade’s brother, Dale, misappropriated organization funds eight years ago, and as a result, the Board decided it was in the best interests of ACORN for Wade Rathke to step down as Chief Organizer. Eight years ago an enforceable restitution plan was obtained. Regular payments have been made over the intervening years, and arrangements are now in place to return the rest of the misappropriated funds."

The operative phrase here is of course "recently heard." How could it be that the board members just learned of an eight-year old crime? One answer is management did not tell them. A second answer is that in relying on management's good faith nobody asked any questions. But even when questions are asked there is no guarantee that the truth will out.

Having recently gone through a financial crisis as treasurer of a nonprofit I know first hand how hard it can be for a trustee to really know what's going on. Each month the finance committee of this organization received detailed financial information and each month I would ask management the same question: "any surprises?" And each month I was assured there were none. Until in the dog days of last summer a million dollar short fall turned up. Luckily - after a thorough and costly forensic investigation - incompetent accounting and not crime turned out to be the root cause.

If I had known what questions to ask, I'd have asked them. I suspect that would have been true of ACORN's board as well. Boards don't always know what questions to ask and managements are sometimes not forthcoming. Mind the gap .

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