Demonstrating Good Stewardship
There are a few qualities which are highly correlated with good
stewardship. If you want to take a self-assessment, look for
these features:
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Digging Deeper: Governance & Transparency
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Governance: Having in place policies and procedures which
set the expectations for actions, like rebalancing, the criteria
for selecting investment managers, delegation of authority.
Furthermore, a set of pre-ordained contingency plans within
accepted policies can allow a charity to be nimble when
reacting to time-sensitive needs, but not forced into poor
decisions by ad hoc crises.
Transparency: Every organization has some items they need
to keep confidential (employee records, donor information),
but total secrecy is a rare requirement for charities. Promoting
transparency by disclosing operational details can demonstrate
high accountability and a commitment to fixing mistakes or
making improvements.
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Legal Compliance: Obviously, a charity which has trouble
meeting the legal requirements of the various laws (the NYS
Non-Profit Revitalization Act, UPMIFA, etc.) should be held
under higher suspicion.
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Independence: Charitable institutions typically have multiple
professional engagements, simultaneously watching each
other to catch mistakes and avoid conflicts of interest. For
instance, it may be problematic if your audit firm is also
acting as your investment advisor. Having independent
operators servicing your plan, with a clear delineation of
duties, promotes independent and comprehensive decision
making. Demonstrated independence via utilization of
multiple vendors (including auditors, investment managers,
and investment consultants) can ensure a higher standard of
both loyalty and care.
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Low costs: Every fee paid to a vendor diminishes the potential
advancement of the charity’s mission. Excessive salaries to
employees represent an abuse of charitable donations. There
are many charities which abuse the goodwill and donations of
everyday people, but there are an equal number of charities
which keep external costs and internal spending in check.
Longevity: Sadly, some untrustworthy charities exist to
collect donations from generous individuals rather than serve
the advancement of the charity’s supposed mission. On the
other hand, some charities exist for decades because of a
demonstrated ability to meet their goals and value to donors.
The longevity of a charity should give donors the ability to
benchmark their history of supporting their given mission.
Budgeting: A good steward acknowledges its resources and
budgets them accordingly. A long term, stable budget can
set expectations for the community partners.
Solid returns – It is no coincidence that good practices are
highly correlated with good results. After all, fortune favors
the prepared.
Let’s revisit the above qualities or visible components of stewardship
and focus on the first two: Governance & Transparency.
Quoting Wikipedia, governance refers to “all processes of governing,
whether undertaken by a government, market or network, whether
over a family, tribe, formal or informal organization or terri ѽ