Fiduciary Funnelvision (Jun 05)

Print Share on LinkedIn More

I know that it does not always seem like it when we are buried in our day-to-day routines, but a good board that knows how to make the most of its duties is worth its weight in gold. On the other hand, a board that doesn’t know how to act wisely on what is in front of it, or to assess the implications of its actions, can be disastrous.

By the way, on the topic of boards, I think that some people like saying the word “fiduciary” without really taking its full meaning to heart. Perhaps they think it makes them sound smart and focused on what really matters — the money. But, half the time I don’t think that they have a very clear idea about all that “fiduciary responsibility” entails. It literally means a “thing held in trust.”

In other words, we don’t own the money we work with or the institutions we work in. We are stewards. It can be a complex business to judge if a community we act to benefit is being best served by the way the dollars and people involved are being gathered and deployed. I don’t often see boards designing their conversations around this idea. Too often the “fiduciary” conversation devolves to whether or not the corporation is best served.

In nonprofits, being a good fiduciary requires us to consider all of the current and future potential consequences of our resource decisions (to the best of our ability) and to consider how a decision we make affects the larger effort we are a part of (few of us work in any field of endeavor where we are the lone actor). So, you have a tall order indeed. There is a saying in systems thinking circles — “morality is foresight.” This is a concept well worth thinking about in nonprofit governance.

This is what “the common good” is all about. This extra load of consideration is why we have our tax-exempt status — in theory anyway. Fiduciary responsibility is more than a monitoring function and it looks at more than the financial bottom line.

Nevertheless, having a grip on the finances is critical. Every nonprofit that brings in more than $25,000 a year in revenue is required to file a 990 report with the IRS. Additionally, many nonprofits are required to undergo organization-wide audits. How does your board approach these duties? Do they know how to make the most of these joyous occasions?

There are actually some real benefits to be gained from these processes if they are done well. Conversely, there are more and more risks in approaching them with a “get in and out quickly” point of view. Information is just too readily available and the media likes charity scandals too much right now for you to depend upon a small radar screen being your salvation.

So, I have attached two articles that I would encourage you to share with your board on the Pollyanna-like topics of “Making the Best Use of the Auditing Process” and “Making the Best Use of the IRS Form 990.”

The writers are stellar figures in their fields and well worth the price of admission. These articles were published in the latest special issue of NPQ on the nonprofit regulatory environment.