Oversight: What’s a Nonprofit Board to Do

Last week, our local newspaper ran a front page story “exposing” a local foundation’s questionable spending practices.

Here are some of the details I pulled from the foundation’s 2013 990 report:

• Total assets of $8.99 million.
• Total grants (to other groups) of $235,352 (that’s 2.6% of assets).
• Total compensation (to board, CEO and staff) of $296,402. Even though the Foundation has no direct programs, that’s $61,050 MORE than it grants.

After the foundation’s president died, board members “discovered” the foundation had bought the president a $45,000 Lincoln Town Car and that back in 2000, the foundation paid $69,000 for a Cadillac for its president.

“The financial information the board is furnished with is a very collapsed version of a balance sheet and income statement,” one trustee said. “There’s a dollar figure on there and financials, but we were given no breakout.”

Over the years, I’ve served as a paid staffer of foundations as well as a board member of other nonprofits ... this “misbehavior” angers me because it damages the public image and trust of all other foundations and nonprofits.

My questions about this foundation:

• Where was board oversight?
• Why did the board accept such limited financial reports?
• Why did their apparent trust in the executive override their fiduciary responsibilities?

Assuming the board reviewed the organization’s 990 report, why did they not see the red flags that the organization’s total compensation exceeded its charitable grants?

If you serve as a trustee or director of a non-profit, are you “guilty” of the same behavior? Or, do you and other board members trust but verify your execs and ask for details?

If you are a nonprofit executive, do you urge your board members to fulfill their fiduciary role? Do you raise questions? Do you share detailed financial information? Are you protecting the credibility of the nonprofit? If not, why not?

PS. Last week, the foundation board met and voted not to pay its new president and not to pay board members for their service.


NOTE: After writing this post, news broke alleging “lavish spending” by the Wounded Warriors Project. I’m not sure the allegations are true but the stories speak to the importance of boards carefully monitoring what is going on within their organizations.