Not-for-profits (NFPs) can be so focused on serving their cause that they don’t make time to put in place sound governance policies. BDO Assurance Partner Laurie Arena Rocha, CPA, and BDO Tax Exempt Senior Director Rebekuh Eley, CPA, presented the following tips for good NFP governance at the AICPA Not-for-Profit Industry Conference in June.
State the organization’s values in a written code of ethics
for board members and present it to them during the orientation
process. The code should become part of the not-for-profit’s
culture rather than a stale document that is easily forgotten.
Maintain a conflict-of-interest policy for board members
that requires periodic disclosures and consistent
monitoring. Some boards read the policy before every meeting,
and some have quarterly or semiannual reminders.
Develop a whistleblower policy. This should allow
everyone associated with the organization to come forward without fear
of retaliation.
Establish a document retention and destruction
policy. This should undergo legal review to make sure it
complies with state and federal laws, and requires regular compliance monitoring.
Carefully monitor expense reimbursement. This
should conform to the rules of Internal Revenue Code Sec. 62(a) and
follow IRS guidelines, requiring documentation and receipts for all
purchases over a specific dollar amount, which often is $25.
Maintain a gift acceptance policy. This also should
be reviewed by legal counsel, and potential gifts should be screened
to determine whether ethics, financial circumstances, or other
interests are compromised by the acceptance of the gift.
Review tax returns. All board members should be
allowed to review Form 990, Return of Organization Exempt From
Income Tax, before it is filed.
Develop a board compensation policy. Not-for-profit
board members should not be excessively compensated, Eley said. But in
some instances, she said, board members do receive stipends. Any
compensation should be documented and approved.
Oversee the independent review of financial
statements. Best practices call for an independent audit
committee that monitors financial practices and is involved in auditor
selection. Recruiting board members with financial expertise is
critical to this process.
Cultivate appropriate procedures for selecting and
monitoring grant recipients. Grant-making policies should
be made public to avoid the appearance of impropriety.
Develop and abide by an endowment spending policy.
This can help make sure investment is done responsibly.
Create and adhere to a fundraising policy. Although
this is seen in practice less frequently, Rocha advises having a
written policy that’s monitored for compliance and reviewed with
management annually to ensure that fundraising statistics are accurate
and tactics are ethical.
Disclose governing documents. This aids in transparency.
Review the size, structure, and independence of the
board. There should be at least five members, with at least
two-thirds of members independent, and with a diverse background,
according to Eley and Rocha.
Adhere to a meeting minutes policy. Minutes should
contain enough detail to determine the quality and extent of
discussion, and typically are reviewed and approved at a subsequent
board meeting.
—By Ken Tysiac (
ktysiac@aicpa.org
), a JofA senior editor.
