Board Accountability

One of the journal articles assigned to our class was Placing the Normative Logics of Accountability in “Thick” Perspective by Alnoor Ebrahim, as published by the American Behavioral Scientist. In it there is a table that breaks board responsibilities regarding accountability into three areas:  governance, performance, and mission. When talking about board accountability, the conversation often surrounds board fiduciary responsibilities and internal controls for financial management. According to Ebrahim, establishing internal controls and financial oversight falls under the board's "governance" role.

Even though we would like to think fraud is not be a common problem among nonprofit organizations, unfortunately they are ripe for it. Part of this is due to increased trust among nonprofit boards and staff, and that laws such as Sarbanes-Oxley do not place the same restrictions and requirements on nonprofit organizations. This video by a nonprofit consulting group speaks to the issue of fraud in nonprofit organizations (minus the part at the very end where he talks about his kids listening to Cyrus and Bieber):

Referring back to Ebrahim's three areas of board accountability, I found it interesting that financial oversight was under governance, as opposed to performance. Financial oversight being tied to performance is definitely more of a for-profit practice. I wonder if, because it falls under board governance rather than performance, this is attributable for more variation in how financial oversight is handled in nonprofits. If it was tied to performance, maybe it would generate more motivation to have standard policies and procedures in place establishing internal controls and overseeing how money and bookkeeping are handled. But then nonprofits would cease to look much like nonprofits.

Most nonprofit boards have established financial oversight as part of their governance role, but are you also using sufficient internal financial controls? This subject can be taboo, especially for smaller nonprofits, because no one wants to turn to their fellow board members who are also their neighbors, kids' soccer coaches, church congregants, influential community members, etc. and say, I think we need more internal controls to make sure none of us commits fraud. However, now that a question about this has been added to the Form 990 - as referenced in the video - it can be a way to bring up the issue without sending the wrong message. You may think your nonprofit doesn't need this sort of red tape, but unfortunately statistics are showing otherwise.